Malaysia is weighing tougher enforcement of a cap on foreign ownership of insurers as it seeks to boost local participation in the industry, reported Bloomberg citing people with knowledge of the matter.
The central bank is considering applying more strictly an existing policy that foreign companies owning 100% of local insurance firms must cut their stakes to no more than 70%, according to the people. It could make an announcement on the matter as soon as this month, the people said, asking not to be identified because the information is private.
Bank Negara Malaysia, which has routinely granted extensions to firms that did not comply, may be less lenient in the future and require such companies to show they have the country’s best interests at heart, the people said. While details are still being discussed, criteria that may be used include hiring more Malaysian workers for highly skilled jobs and creating products fulfilling the needs of niche local market segments, according to the people.
Central bank governor Muhammad Ibrahim warned last year that foreign insurers “need to contribute more to justify their presence” in the Malaysian market. Some participants’ undue focus on short-term profits had come at the expense of serving their customers, Muhammad said in a speech last October at an insurance summit in Kuala Lumpur.
AIA Group, Great Eastern Holdings and Tokio Marine Holdings are among foreign companies that have wholly owned general insurance and life insurance operations in Malaysia, according to their latest annual reports.
Malaysia liberalised foreign ownership rules in 2009, allowing overseas insurance companies to hold as much as 70% of local firms from a maximum of 49% previously. Higher ownership levels could be allowed on a case-by-case basis for companies that can facilitate consolidation and rationalisation of the insurance industry, according to a statement at the time.