h
a
AMB Country Risk Report
August 18, 2015
Our Insight, Your Advantage.
Malaysia
Country Risk Tier
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment
of three categories of risk: Economic, Political and Financial
System Risk.
CRT-3
• Malaysia has moderate levels of economic and political risk
and a low level of financial system risk. A.M. Best considers
the majority of countries in Southeast Asia to be categorized
as CRT-3 or CRT-4. The exceptions are Micronesia and Papua
New Guinea, as CRT-5 countries, and Singapore, the sole
CRT-1 country.
Economic Risk
Moderate
Low
High
Very Low
• Gross domestic product (GDP) growth is expected to
slow from 6.0% in 2014 to a forecasted 4.8% in 2015. Lower
growth stems mainly from weaker tax revenues, lower
investments and lower export earnings due to the decline in
oil price. Growth over the medium term is expected in the
5.0% range.
Very High
Political Risk
Moderate
Iceland
Greenland
Finland
Sweden
Low
High
Norway
Estonia
Isle of Man
Very Low
Ireland
Lithuania
Very
High
Belarus
United
Kingdom
Netherlands
Liechtenstein
Czech
Republic
Austria
Switzerland
France
Ukraine
Slovakia
Luxembourg
Jersey
Bosnia & Serbia
Herzegovina
Bulgaria
Montenegro
Georgia
Macedonia
Armenia
Albania
Spain
Portugal
Gibraltar
Tunisia
Malta
Cyprus
Syria
Moderate
Lebanon
North Korea
Tajikistan
South
Korea
China
Afghanistan
Iraq
Israel
Japan
Iran
Jordan
Low
High
Algeria
Kuwait
Libya
Mauritania
Egypt
Saudi Arabia
Bhutan
Bangladesh
U.A.E.
Myanmar
India
Taiwan
Northern Mariana Islands
Hong Kong
Laos
Wake Island
Macau
Mali
Chad
Niger
Eritrea
Sudan
Very
High
Thailand
Yemen
Vietnam
Philippines
Cambodia
Benin
Nigeria
Ethiopia
Equatorial Guinea
Sao Tome & Principe
Somalia
Sri Lanka
Central Africa Republic
Togo
Brunei
Gabon
Congo
Palau
Malaysia
Singapore
Cameroon
Uganda
Kenya
Sumatra
Rwanda
Dem. Republic
Burundi
of Congo
Seychelles
Tanzania
azil
Malawi
Nauru
New Guinea
Indonesia
Namibia
Market Outlooks
Mauritius
Madagascar
Botswana
Solomon Islands
Reunion
Australia
New Caledonia
Swaziland
Norfolk Island
Lesotho
South Africa
Tuvalu
Vanuatu
Mozambique
For information on companies followed
Papua
New Guinea
Coral Sea
Islands
Comoros
Zambia
Zimbabwe
Federated States
of Micronesia
Borneo
East Timor
Angola
Marshall Islan
Guam
Dijbouti
Burkina Faso
Ghana
Guinea
Sierra
Cote d'Ivoire
Leone
Liberia
Nepal
Qatar
Oman
Senegal
Guinea-Bissau
Pakistan
Bahrain
Western Sahara
Very Low
Gambia
Uzbekistan
Turkmenistan
(Occupied by Morocco)
Cape Verde
s
nd
la
Is
Kyrgyzstan
Azerbaijan
Turkey
Greece
Monaco
ril
Ku
Russia
Financial System Risk
Italy
Mongolia
Romania
Croatia
Andorra
Morocco
Kazakhstan
Republic of
Moldova
Hungary
Slovenia
San Marino
Canary
Islands
Sakhalin
Poland
Germany
Belgium
Guernsey
Azores
Russia
Russia
Latvia
Denmark
CRT 1 2 3 4 5
Copyright © 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
1
New Zealand
F
AMB Country Risk Report
Malaysia
Regional Summary: Southeast Asia
• Economic growth for the region will
vary depending on country specific
factors. Gross domestic product growth for
the Association of Southeast Asian Nations
(ASEAN) as a whole is forecasted at 5.1%
for 2015 and 5.3% for 2016. Growth is
expected to be driven by exports and an
increase in consumer consumption.
• Potential external risks for the region in
the coming year include the slowdown in
the Chinese economy, the normalization
of the United States monetary policy,
potential exchange rate volatility, lower
commodity prices, regional unrest and the
potential for increased political instability.
• Political changes and social unrest
have the potential to affect foreign direct
investment inflows and tourism revenues.
The region has been attractive due to
low labor costs, the prevalence of natural
resources and the need for new and
improved large-scale infrastructure.
Vital Statistics 2014
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Premiums Written (Life)
Premiums Written (Non-Life)
Premiums Growth (2013 - 2014)
USD bn
mil
USD
%
%
USD mil
USD mil
%
326.93
30.3
10,804
6.0
3.1
10,231
5,633
3.4
Regional Comparison
Country Risk Tier
CRT-3
CRT-4
CRT-4
CRT-1
CRT-3
CRT-4
Malaysia
Indonesia
Philippines
Singapore
Thailand
Vietnam
Source: IMF, Axco, Swiss Re and A.M. Best
Economic Growth
Economic Risk: Moderate
• Despite a fairly well diversified
economy, Malaysia remains a significant
exporter of hydrocarbons, deriving
approximately 15% of its GDP, 30% of
government revenues and 15% of its
exports from the hydrocarbon sector.
8
Real GDP
CPI Inflation
7
6
5
4
• Malaysia should benefit from improving
conditions in the United States, one of
the country’s largest export markets.
The U.S. accounts for about 20% of
merchandise exports. A weaker ringgit,
the country’s currency, is also expected
to boost manufactured exports through
increased competitiveness.
%
3
2
1
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-1
-2
Source: IMF World Economic Outlook and A.M. Best
• Additional economic growth in 2015 is
expected to be led by consumption and
growth in private investment in the nonoil sector.
2
AMB Country Risk Report
Malaysia
Political Risk: Moderate
Political Risk Summary
• The United Malays National Organization
is the dominate political party. However,
it lost its two thirds majority vote, first
in 2008 and again in 2013, indicating an
increasingly more polarized population.
Score 1 (best) to 5 (worst)
Malaysia
World Average
International Transactions
Policy
5
4
Legal System
Monetary Policy
• While the government is generally stable,
an alleged corruption scandal involving
the country’s prime minister has the
potential to cause political instability.The
prime minister is accused of embezzling
hundreds of millions of dollars from the
state development fund.
3
2
1
Regional Stability
Fiscal Policy
0
Social Stability
Business Environment
Government Stability
Labor Flexibility
Source: A.M. Best
• Malaysia is a pro-business country with
excellent infrastructure and a highly
qualified labor pool.The country ranks
18th out of 189 countries in the World
Bank’s 2015 Ease of Doing Business Survey.
GDP Per Capita and Population
for Selected Countries
Financial System Risk: Low
60,000
300
GDP Per Capita
Population
250
40,000
200
USD
Millions
50,000
30,000
150
20,000
100
10,000
50
0
Malaysia
Indonesia
Source: IMF and A.M. Best
Philippines
Singapore
Thailand
• As a result of falling oil revenues, the
country has been proactive in mitigating
the projected budget shortfall by
implementing a goods and services tax and
abolishing fuel subsidies. It is estimated
that Malaysia spent approximately 20% of
its total fiscal budget on subsidies in 2014.
Vietnam
0
• The insurance industry in Malaysia
is regulated by the central bank, Bank
Negara Malaysia.
• Malaysia’s financial system is strong
and well diversified, with the banks
well-capitalized and profitable. However,
the financial sector does face potential
vulnerabilities with regards to years of
rapid credit growth.
• Malaysia has a deep domestic bond
market which reduces its reliance on
external financing.
• Asset quality continues to improve,
with a non-performing loan ratio of 1.8%
compared with 6% at the end of 2007.
3
AMB Country Risk Report
Malaysia
GUIDE TO BEST’S COUnTry rISk TIErS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurer’s financial stability, strength and performance.
A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country risk Tiers
Country risk Tier
Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country
Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk
Definition
Economic Risk
The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer.
A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the government’s economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category
Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy
Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Measures the ability of a country to effectively implement fiscal policy.
Business Environment
Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility
Measures the flexibility of the labor market, including the company’s ability to hire and fire employees.
Government Stability
Measures the degree of stability in a government.
Social Stability
Measures the degree of social stability, including human development and political rights.
Regional Stability
Measures the degree of stability in the region.
Legal System
Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Copyright © 2015 by A.M. Best Company, Inc.
Version 091714
Copyright © 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
4