Malaysian foreign ownership directive to be reviewed

Malaysia’s insurance regulator is likely to review a directive to foreign insurers to reduce ownership of their local units by nearly a third as finding domestic buyers for the equity stakes is proving hard, according to some sources.

The review may result in the Malaysian regulator putting the requirement in abeyance, according to a report in The Star Online.

That would provide respite to foreign firms including Great Eastern Holdings, Prudential Tokio Marine Holdings and Zurich Insurance by putting off deals worth more than USD2 billion that were being thrust upon them.

Foreign insurers have been expanding in Malaysia and other Southeast Asian countries in recent years, lured by strong economic growth, rising middle-class income and lower insurance penetration.

However Malaysia’s central bank, which also regulates insurers, said it would enforce its 2009 rule setting a 70 percent cap on foreign ownership of local insurance businesses last year.

The directive had sent foreign insurers in Malaysia, many of who operate wholly-owned units, scrambling to seal deals to sell 30 percent stakes to local state-linked funds or list the local arms.

One of the sources said stake sale valuations were below expectations of some insurers and they had indicated this to the central bank.

The Malaysian regulator, however, is yet to formally inform insurers about the possible review or relaxation of any conditions.