Foreign insurers pushed to partner with local firms

Wholly foreign- owned insurance companies in Malaysia that dominate the multi-billion-dollar sector are being encouraged to partner with local firms to conform with the country’s strict ownership laws.

Based on a directive issued in April by the central bank, Bank Negara, companies such as AIA, Great Eastern, Prudential and Tokio Marine have until the end of August to submit the identity of the prospective parties that will take over the minimum 30 percent shareholding in their respective operations, said senior industry executives and government officials.

The directive stipulated that the negotiations for the divestment with the targeted parties must be completed before the end of the year, and should those talks fail to materialise, the foreign insurance companies must opt for the listing of their businesses on the local stock exchange.

Bank Negara, the country’s top financial regulator that supervises the insurance sector, also notified the financial institutions that failure to meet all conditions by the middle of next year would result in punitive action which industry executives said would not preclude the suspension of their operating licences.

The move on foreign insurers to comply with the minimum 30 per cent local participation in their businesses was first mooted in the late 1980s under the government’s financial sector rationalisation plan.