KUALA LUMPUR – Floods in Malaysia have caused economic losses ranging between RM5.3 billion and RM6.5 billion in December 2021.
Malaysian Reinsurance Bhd, also known as Malaysian Re, had recently released the Malaysian Insurance Highlights (MIH) 2021 which analyses how Malaysia’s economy and the insurance markets are impacted by the flooding situation.
A statement by the company explained that MIH 2021 talks about the major issues of under-insured flood risks in the country as data shows that only 10% of the economic losses are covered by insurance.
The publication, it said, shows Malaysia’s insurers are covering about 20% to 30% of these losses during the time when a large portion of manufacturing properties were hit by floods in Kuala Lumpur and Selangor. That amounts to between RM1.5 billion to RM2.0 billion total.
President and CEO of Malaysian Re, Zainudin Ishak, stated that MIH 2021 highlights how livelihoods and properties across Malaysia were badly damaged by the disaster which hit at an unprecedented scale and unusual timing.
“The price of flood insurance is quite low and the coverage is offered as an add-on to the normal fire insurance policies. It costs approximate 0.086% of the sum insured,” he said.
According to Zainudin, the pricing of the risk is perceived to be high so it would be typically only purchased in areas that are flood-prone or after the recent events
Furthermore, the MIH 2021 emphasises that there is a need to address the protection gap due to the increasing risks of floods. The flood cover demand is influenced by government assistance for the damages taken by the lower income segment.
He stated that the government contributed RM1.4 billion as flood relief aid to help those that were impacted.
This MIH 2021 edition also remarked about how the floods in December had an effect on flood coverage prices in Malaysia’s insurance markets.
Insurers are also expected to re-evaluate their insurance systems so that they are able to get adequate coverage following a better understanding of the risks of being a flood prone country.
Additionally, Zainudin explained that Malaysian Re is collaborating with Bank Negara Malaysia and the National Disaster Management Agency (NADMA) in order to offer solutions for those who are unable to afford insurance coverage.
He said that there is a need to strive for more in-depth discussions to identify solutions that would allow for better coverage with Malaysia being flood prone and it can be achieved through bringing together the insurance industry, regulators such as Bank Negara Malaysia, NADMA and the government.
“Prior to this, the focus has been on building a coverage that addressed the exposure of the low income segments in Malaysia’s population. Present solutions are working to provide faster protection and include all segments of society or policyholders,” he continued.
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