KUALA LUMPUR (Nov 16): Foreign insurers will be given the option to divest their stakes in their Malaysian units or contribute to the B40 National Health Protection Fund, to comply with a Bank Negara Malaysia (BNM) ruling to sell at least 30% of their stakes to local parties.

BNM Governor Datuk Nor Shamsiah Mohd Yunus said the objective of the divestment remains intact, which is to promote long-term benefits to Malaysia that will ultimately result in providing broader insurance coverage, especially to the bottom 40% (B40) household group.

"Each (foreign) insurance company now has been given the option, and they are supposed to revert back to BNM with their plans," she told a media briefing on the country's economic performance for the third quarter of 2018 today.

"Based on their plans, we will look on what would be a reasonable timeline for them to comply with the plans that they have submitted," she added.

The foreign ownership limit for Malaysian insurers was set at 70% in 2009 under the financial liberalisation policy. Higher foreign shareholdings were accorded on a case-by-case basis.

Under the previous governor, Tan Sri Muhammad Ibrahim, the central bank had set a June 30 deadline for all foreign insurers to comply.

On May 17, the central bank had announced that five foreign insurers in the country were at a "significant stage" of discussion with domestic investors to take up at least 30% stakes in their businesses, with Muhammad saying that a sixth foreign insurer would be starting negotiations with domestic investors.

Eleven insurers including Great Eastern, AIA and Tokio Marine are currently wholly owned by foreign firms.

On the B40 National Health Protection Fund, Nor Shamsiah said further details of the scheme will be announced in the early part of next year.

"We're probably looking at upwards of RM2 billion, but the details will really depend on the scope of coverage that will be provided to the segment and that is still in discussion now with the ministry of finance," she said.

During the tabling of Budget 2019, the government announced that it will provide free protection for the B40 group against the top four critical illnesses and up to 14 days of hospitalisation benefits starting in January 2019.

The free protection against the top four critical illnesses will go up to a sum of RM8,000, while the hospitalisation income cover will be at RM50 per day or RM700 per year.

Great Eastern Life Insurance has agreed to contribute the initial seed funding of RM2 billion to this fund, which will be managed by BNM, said Finance Minister Lim Guan Eng in his Budget 2019 speech.