KUALA LUMPUR, April 23 — RAM Ratings Services Bhd has maintained its "stable” outlook on the Malaysian takaful industry for 2020 despite the economic slowdown, aggravated by the Covid-19 pandemic.

Its Financial Institution Ratings co-head Sophia Lee said the industry’s strong capitalisation is sufficient to withstand headwinds, and while the economic impact of the health crisis is viewed as severe, it is seen as temporary and would gradually recover by year-end.

"We caution that downside risks remain, considering the high degree of uncertainty over the momentum of the spread of Covid-19 and its ultimate global peak.

"We may revise our industry outlook if the extent of the economic impact exceeds our current expectations,” she said in a statement today.

In 2019, the family takaful’s new business contributions grew 25 per cent to RM6.2 billion, an additional 13 per cent from 2018, mainly driven by the MySalam initiative — the national health protection scheme.

Excluding MySalam, growth was still commendable at an estimated 16 per cent, anchored by credit-related takaful products and the employee benefits group business.

Similarly, the general takaful industry expanded by a strong 20 per cent in 2019, led primarily by the motor business.

"Family takaful’s profit more than doubled to RM3.8 billion in 2019, supported by improved contributions and a better investment performance.

"However, we foresee the industry’s profitability in 2020 to be softer in view of a subdued top line and downside pressure on investment income, owing to volatile capital market movements in recent months,” she said.

Lee said despite the headwinds, the strong capitalisation levels of both the family and general takaful industries should be able to buttress the impact of the interim adversity.

"Based on latest available data, the industries’ capital adequacy ratios were sturdy at 194 per cent and 293 per cent, respectively, as at end-June 2019, comfortably above the minimum regulatory requirement of 130 per cent,” she added. — Bernama