By NG MIN SHEN / Pic By ISMAIL CHE RUS
Foreign insurers have been given the option to either sell their 30% stake to comply with the country’s ruling, or contribute to the B40 National Health Protection Fund.
Malaysia has made it mandatory that wholly owned foreign insurers operating in the country must pare down their stakes to 70%. However, stake sales at these insurers have been at a standstill despite talks with various buyers.
Plans to seek listing at the local stock market to reduce the shareholdings did not materialised.
Bank Negara Malaysia (BNM), which regulates the insurance sector, remains steadfast that foreign insurers must comply with the foreign ownership rule.
Governor Datuk Nor Shamsiah Mohd Yunus (picture) said the objectives — boost insurance penetration; make the protection available to the bottom 40% (B40) households; and greater wealth sharing — remain.
“The option is to divest or contribute to the B40 National Health Protection Fund. Each insurance company has been given an option and they are supposed to revert back to BNM.
“We will then look at their plans and see what would be a reasonable timeline for them to comply with the plans,” she told the media at BNM’s headquarters in Kuala Lumpur last Friday.
Foreign insurers had promised to comply with Malaysia’s rule that allows foreign equity participation of up to 70% in insurance firms and takaful operators.
The foot-dragging by the foreign insurers left the central bank with little choice, as the previous deadline for compliance was June 2018.
It was reported that five out of six foreign insurers had made significant breakthroughs in their talks with local firms. None, however, have managed to ink at the dotted line.
The new central bank head had said in August that foreign insurers have been given more flexibility in complying with the rule, while the deadline for compliance would be decided on a “bilateral basis” depending on each firm’s method of divestment.
During the presentation of Budget 2019, the government announced that the national health insurance scheme would provide free protection for the B40 group against the top four critical illnesses and up to 14 days of hospitalisation benefits beginning January 2019.
Great Eastern Life Insurance has agreed to contribute the initial seed funding of RM2 billion to the fund, which will be managed by BNM.
On the ideal size of the fund, Nor Shamsiah said the central bank is “probably looking at upwards of RM2 billion”.
“The details will depend on the scope of coverage provided to this segment, and that’s now in discussion with the Ministry of Finance. We hope to be able to finalise everything and announce the details of the scheme in the early part of next year,” she added.
There are presently 11 locally incorporated conventional insurers and nine locally integrated life insurers operating in Malaysia that are wholly owned by foreign firms, including Singapore’s Great Eastern Holdings Ltd, the UK-based Prudential plc and Japan’s Tokio Marine Holdings Inc.