By NG MIN SHEN / Pic By TMR
Foreign insurers operating in Malaysia have been given more flexibility in complying with the central bank’s rule on foreign ownership of local entities, with the deadline for compliance to be decided on a “bilateral basis” based on each firm’s method of divestment.
“We are in the middle of discussions with the companies because the objective of the divestment is still relevant. That’s what we’re focused on right now in our engagements,” Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus said.
“Because of this flexibility and these other options that are now being pursued, the deadline will be on a bilateral basis depending on the options chosen by the insurance companies. Depending on the bilateral engagements, that will also determine the timeline for individual shareholders,” she said at a briefing on the country’s economic growth in Kuala Lumpur.
Nor Shamsiah further said the objective of the divestment, which is to promote long-term economic benefits for the country through greater insurance penetration and more equitable sharing in the wealth generated by the firms, remains intact.
She said a company might choose a complicated option that requires multiple layers of approvals from both domestic and foreign regulators, thus the firm may be given one year to complete its divestment.
Another company that opts for a direct stake sale and has already identified a buyer would be able to complete the divestment within a shorter period of time.
The new central bank chief noted that upon entry into the domestic market, these insurance companies had promised BNM that they would comply with Malaysia’s rule which allows foreign equity participation of up to 70% in insurance firms and takaful operators.
Some of these commitments made between insurance firms and BNM were made as far back as 20 years ago, she added.
Since June last year, BNM — under former governor Tan Sri Muhammad Ibrahim — had requested foreign insurers with wholly owned units to reduce their stakes as per the foreign ownership regulation.
The previous deadline for compliance was June 2018.
In March this year, Muhammad said five out of six foreign insurers operating in Malaysia had reached a significant stage of talks with domestic buyers to sell stakes in their local units. Notably, the divestment rule is only applicable to insurance companies that made the initial commitment with the central monetary authority.
“There are some insurance companies that didn’t make the commitment. They will not be bound by the divestment,” Nor Shamsiah said, without revealing the names of exempt companies, if any.
As per BNM data, there are currently 11 locally-incorporated conventional insurers and nine locally-integrated life insurers that are fully owned by foreign firms.
These include Singapore’s Great Eastern Holdings Ltd, UK-based Prudential plc, Japan’s Tokio Marine Holdings Inc and US-listed property and casualty insurer Chubb Ltd.
Presently, only Allianz SE’s Allianz Malaysia Bhd and the Manufacturing Life Insurance Co’s (Manulife Financial Corp) Manulife Holdings Bhd are traded on the local bourse.