Malaysia Set 2023 Cutoff for Foreign Insurer Stake Sales, Sources Say

Elffie Chew, Bloomberg News

The skyline in Kuala Lumpur, Malaysia, on Tuesday, May 12, 2021. Malaysia will follow a standardized protocol nationwide to make it easier for people to comply with social-distancing procedures as the nation bolsters efforts to stem a new wave of Covid infections. Photographer: Samsul Said/Bloomberg , Bloomberg

(Bloomberg) -- 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 program 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 Ltd., Prudential Plc, Tokio Marine Holdings Inc. and Zurich Insurance Group AG are among the international insurers with ventures in the Southeast Asian nation. Singapore’s Great Eastern Holdings Ltd. is the only foreign insurer to have publicly announced a contribution to date, pledging 2 billion ringgit ($451 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 liberalization of foreign ownership. The ruling mandated that overseas insurance companies were allowed to hold a maximum 70% 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.