Malaysian Insurers Warned Over Rising Uninsurable Risks

Malaysia’s insurance sector is entering a period of profound transformation, with mounting concerns that an increasing share of risks could soon become economically uninsurable. This warning was delivered by Rangam Bir, Chief Executive of Transformative Financial Services, during the Asian Banking & Finance x Insurance Asia Summit 2026.

Bir cautioned that insurers have drifted away from their traditional role as risk managers, focusing instead on regulatory compliance and administrative functions. While areas such as anti-money laundering, sales governance, and mis-selling controls have become more prominent, he argued that this shift has diluted the industry’s ability to anticipate and price emerging risks effectively.

“Insurance firms were once fundamentally in the business of managing risk for customers,” Bir noted. “Today, the emphasis has tilted heavily towards compliance obligations rather than forward-looking risk assessment.”

Growing Complexity and Interconnected Risks

A central concern raised by Bir is the growing interconnection between different categories of risk. Historically, insurers assessed underwriting, operational, cyber, and financial risks in relative isolation. However, modern systems—driven by digital integration and technological advancement—have blurred these boundaries.

He stressed that the industry is transitioning into an era where risks are no longer discrete but deeply intertwined. For instance, cyber incidents can trigger operational disruptions, financial losses, and reputational damage simultaneously, complicating traditional underwriting approaches.

This evolving landscape is reflected in global catastrophe trends. Insured losses from natural disasters have consistently exceeded $100 billion annually in recent years, signalling a sustained escalation in climate-related risk exposure.

Global Catastrophe Loss Trends

Bir highlighted that, under existing pricing frameworks, between 30% and 40% of today’s insured property risks could become economically unviable by 2032. This projection underscores the urgent need for insurers to rethink how they evaluate and price exposure.

Limitations of Historical Data

A key structural weakness, according to Bir, lies in the industry’s continued reliance on historical claims data. While such backward-looking models have traditionally underpinned pricing strategies, they are increasingly inadequate in a world where risks evolve in real time.

“A significant portion of insurance pricing still depends on past claims experience,” he said. “Yet many of the risks we face today—particularly those driven by technology and climate change—are forward-looking and dynamic, making them difficult to price accurately.”

Emerging technologies such as electric vehicles, autonomous transport systems, and artificial intelligence-driven operations exemplify this challenge. These innovations introduce risk profiles that lack sufficient historical precedent, rendering conventional actuarial models less reliable.

Demographic Pressures and Healthcare Inflation

The challenges extend beyond general insurance into life and health segments. Bir pointed to Asia’s rapidly ageing population, noting that individuals aged 60 and above are increasingly viewed as high-risk or even uninsurable under current frameworks.

At the same time, healthcare costs are rising sharply. In Malaysia, medical inflation has reportedly ranged between 12% and 15% annually in recent years, placing additional strain on insurers attempting to balance affordability with sustainability.

Structural Shifts Needed in Risk Management

Bir argued that insurers must fundamentally restructure their approach to risk management. Rather than treating risk as a compliance or governance function, it must be repositioned as a strategic priority embedded across the organisation.

This transformation would require:

• Greater adoption of forward-looking pricing models
• Stronger governance frameworks for artificial intelligence
• Enhanced cross-functional collaboration across underwriting, operations, and risk teams

He also highlighted the rapid growth of parametric insurance solutions, which offer faster payouts based on predefined triggers and are expanding at a significantly faster rate than traditional products.

A Pivotal Moment for the Industry

Describing the current environment as a “pivotal” moment, Bir emphasised the speed at which risk conditions are evolving. He remarked that assumptions made even six months ago may already be outdated, reflecting the pace of change confronting insurers.

Ultimately, the message to Malaysia’s insurance industry is clear: without decisive adaptation, a substantial portion of risks may soon fall outside the bounds of insurability. The challenge now lies in restoring the industry’s core strength—managing risk—while navigating an increasingly complex and uncertain future