Climate risk preparedness: a survey of Takaful operators in Malaysia

This study explores the readiness of takaful operators in Malaysia and investigates the challenges and opportunities associated with incorporating climate parameters into their existing risk management frameworks. Survey findings indicate a widespread recognition among respondents of the importance of climate risk assessment for takaful operations while revealing a neutral stance on the efficacy of current risk management strategies in addressing unforeseen climate-related risks. Critical impediments identified include internal data deficiencies, skills gaps within the workforce, and regulatory constraints concerning climate risk adaptation. In addition, respondents notably favour direct climate-specific metrics, such as flood models and rainfall intensity, for quantifying climate impacts. These results underscore the pressing need for Malaysian takaful operators to integrate climate risk parameters into their frameworks, reflecting an increasing acknowledgment of climate-related financial risks. Recommendations include enhancing data collection and analysis capabilities, bolstering workforce proficiency in climate risk assessment, and fostering partnerships to innovate risk management tools and practices. The study holds significant implications for policymakers and stakeholders seeking to fortify resilience and sustainability within the takaful industry amidst evolving climate dynamics.