What is the industry breakdown between conventional and takaful insurance?
DE CUYPER: At the moment, the industry breakdown is 15% for takaful and 85% for conventional insurance. Etiqa is one of the leading companies for takaful, not only in Malaysia, but also at a world level. So, for us, at the moment the balance is closer to 50/50. To be exact, 45% in takaful and 55% in conventional insurance. We also have a balance between the life and family side as well as the general side. Here, the balance at the moment is 60/40, we are 60% a life and family company, and 40% a general company.
Where do you see the biggest growth lines?
DE CUYPER: Takaful definitely has a higher growth perspective. If you look at compound growth over the last five years, you’ll see the takaful industry is growing between 15% and 20%, while the conventional industry has grown just above GDP growth at about 5% to 7%. With our strong position and market leadership in takaful of more than 40% market share, we are very well positioned to tap into the growth of the Malaysian market.
To what extent has economic growth been matched by an equivalent growth in insurance coverage and penetration in Malaysia?
DE CUYPER: The GDP growth in Malaysia varies between 4% and 7%. Generally speaking, the insurance industry has kept up with the pace of GDP growth. There is a strong focus on Malaysia to become an Islamic financial center and one of the leading financial hubs for Islamic finance in the world. We have seen that Islamic finance, specifically takaful for us, has outpaced the market. Starting from a lower base, the takaful industry grows between 15% and 20%, which is roughly four times that of GDP growth. On a combined basis, the industry grows between 1.5 and 2 times of GDP, which is faster than the growth of the economy but is slightly lesser than the growth of our businesses in the emerging markets like India, China, or Indonesia.
Would you describe those as big markets to look at?
DE CUYPER: Yes, you should also look at the penetration of the businesses in Malaysia. Now, the penetration of our industry is 4.8% of GDP. That is well ahead of Indonesia, comparatively, where the penetration is only just above 1%. This is still well below the penetration that we see in very developed markets where insurance can be up to 7% or 8% of the GDP.
What market segments is Etiqa looking to move into?
DE CUYPER: The major benefit of Etiqa is that we are in all the business lines related to our industry. This means we are in the life side and the general side. We are also in insurance as well as in takaful, and we are servicing the retail market up to the corporate market. We do the small general insurance, like travel insurance, but we also do the big business such as the airlines, oil and gas businesses, and the marine and aviation transport. On the life side, we are strong players in the individual market. We also have a leading position in employee benefits and medical. In the Malaysian market, Etiqa is actually the only company with such a wide business mix. This gives us stable growth as well as stable profits.
Which international markets is Etiqa looking to enter? Where do you see the biggest growth markets for Etiqa?
DE CUYPER: For Etiqa, we have two major export products in our organization. One is, of course, the takaful expertise. We can claim that we are one of the leading organizations in the art of takaful. Takaful is a young industry, so all the principles of takaful are still emerging and developing together with the growth of the industry. Our takaful expertise is definitely an added value for countries with a significant Muslim population. The second aspect of our business, specifically in the Malaysian market, is that we are a leading bancassurance company. Approximately 50% of our business is distributed through Maybank, the leading Malaysian bank, and third party bank partners. This makes us one of the leading bancassurance experts in the region. We are mainly focused on countries where we can leverage our two areas of expertise: takaful and bancassurance.
How would you describe domestic competition among insurance firms?
DE CUYPER: It varies significantly. In conventional insurance, there are a significant number of international players who are able to import international expertise into the business. We can play in that space because we are also a joint venture between Maybank and Ageas, an international insurance group. If you look at the general conventional market, it is a market which is highly diversified. There are many players in the general insurance industry, and it is a market where we expect some consolidation to happen in the years to come. In the takaful market, we have more than 40% market share, so we are absolutely leading in that segment. However, as the market develops, more licenses have been issued since 2010. Four new licenses have also been issued to international players and bancatakaful players. For takaful, we are mainly focusing on professionalizing the industry and keeping ahead of the competition, even though more international players are coming into that segment.
Takaful definitely has a higher growth perspective. If you look at compound growth over the last five years, you’ll see the takaful industry is growing between 15% and 20%, while the conventional industry has grown just above GDP growth at about 5% to 7%.
How would you describe the development of captive insurance and captive models here?
DE CUYPER: We are seeing more big groups in Malaysia setting up captive business out of Labuan. We have a strong business relationship with them. We are concerned about risk elements for these captive players, but we also see that part of the market becoming more professional. For instance, one of the captive players has gone for an international rating and we see more and more captives exploring that opportunity, which will improve the risk profile of that business.
How sophisticated is the Malaysian market in terms of products and service offerings?
DE CUYPER: Our regulatory framework and the market are highly sophisticated and professional. On the conventional side, for instance, we are already in a risk based capital regime. If you look at the products, almost the full product range seen in the insurance industry is also available in Malaysia, from traditional participating and non-participating products, to the universal life segment and unit link segment. In the market, a lagging element remains the retirement savings market. However, we see the Malaysian government taking more initiatives to establish a private industry for retirement savings, together with an increasing awareness among the Malaysian population about retirement needs.
What are the biggest challenges Etiqa faces while doing business?
DE CUYPER: First of all, we are a very diverse player. We play in all the segments of the market. We are now an organization with 2,000 staff. The industry is becoming more and more complex, not only from a regulatory point of view but also from a product and distribution point of view. One area for me to look at is the return on investment and the return on equity on everything that we do. This is a business which is becoming increasingly capital intensive. Therefore, return on equity is one of the focus areas for everything we develop. Secondly, we see this across the whole of Southeast Asia, is the need for talent. The need for talent at all levels of the organization is very present in insurance, but it is even more present in the takaful business, as takaful is a young and emerging industry. Capital and return on investment, together with talent, are two areas which require a lot of my attention.