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Malaysia set 2023 cutoff for foreign insurer stake sales, sources say
MALAYSIA’S central bank is giving foreign insurers until the end of 2023 to either reduce stakes in their local ventures or contribute to a charitable fund, people with knowledge of the matter said, more than a decade after the requirement was introduced.
Foreign insurers that do not comply with the ownership limit by the deadline will have to pay into a national health insurance programme known as B40 Health Protection Fund, said the people, who asked not to be identified as the information is private. The initiative, which was piloted in 2018 by the Malaysian government, provides coverage to lower income households needing treatment for critical illnesses.
Insurance companies that contribute to the B40 fund will be deemed to have complied with the ownership limit, the people said.
Foreign shareholders accepted the divestment condition when they entered the Malaysian market, Bank Negara Malaysia said in response to a query from Bloomberg News. The central bank continues to engage closely with foreign shareholders on their divestment plans and does not comment on specific cases.
AIA Group, Prudential, Tokio Marine Holdings and Zurich Insurance Group are among the international insurers with ventures in the South-east Asian nation. Singapore’s Great Eastern Holdings is the only foreign insurer to have publicly announced a contribution to date, pledging RM2 billion (S$630 million) to the B40 fund in 2019, according to a stock exchange filing.
The deadline would see Bank Negara Malaysia enforcing the limit it introduced in 2009 with the liberalisation of foreign ownership. The ruling mandated that overseas insurance companies were allowed to hold a maximum 70 per cent in local firms, but it was mostly disregarded until 2017 when the regulator issued a directive reminding insurers they have to meet the requirement.
A plan to impose a hard deadline for compliance in 2018 fell by the wayside following a change in government in the general elections that year. Governor Nor Shamsiah Mohd Yunus told reporters at the time that foreign insurers would be given some flexibility to pursue options, and that the deadline would be determined on a case-by-case basis. BLOOMBERG