This article first appeared in The Edge Financial Daily on July 5, 2017

KUALA LUMPUR: Bank Negara Malaysia (BNM) has sent a reminder to foreign shareholders of local insurance companies on honouring their commitment to ensuring that their shareholdings are within the stipulated levels.

“Foreign shareholders of insurers that have made specific commitments in applying for entry into the Malaysian insurance market, including maintaining specified levels of domestic shareholding within agreed timelines, must honour their commitments.

“As the regulator, [BNM] expects adherence to these agreements and will play a facilitative role to ensure these commitments are met,” the central bank said in a statement yesterday.

BNM reiterated that there was no new policy on foreign ownership in insurance companies.

The central bank said it assesses all applications for the acquisition of shares under the prudential and best interests of Malaysia criteria in accordance with the Financial Services Act 2013.

In 2009, Malaysia liberalised foreign ownership rules to allow foreign equity participation in insurance companies and takaful operators to increase from a limit of 49% to 70%. At that time, BNM said that a higher foreign equity limit beyond 70% for insurance companies will be considered on a case-by-case basis for players who can facilitate consolidation and rationalisation of the domestic insurance industry.

It is understood that this is not the first reminder that the central bank has given to the insurance companies.

The Edge Malaysia weekly in May reported, quoting sources familiar with the matter, that Japanese insurer Tokio Marine Holdings Inc had hired international banking group BNP Paribas as advisers to help it come up with a solution to pare down its shareholding in its life insurance business in Malaysia.

The weekly wrote that BNM had set a deadline of June 2018 for foreign insurers to comply with the shareholding requirement.

“In the past, extensions have been granted to firms that did not comply with the foreign ownership limit but with the latest reminder, it appears that the central bank is taking a tougher stance on foreign insurer holding,” the weekly reported.

Tokio Marine together with two of the largest insurance companies in Malaysia — AIA Group Ltd and Great Eastern Holdings Ltd — are among the foreign companies that have wholly-owned general insurance and life insurance operations in Malaysia.

Allianz Malaysia Bhd and Manulife Holdings Bhd are among the foreign insurance companies that are currently listed on Bursa Malaysia.

Allianz Malaysia’s major shareholder is Allianz SE of Germany with a 66.4% stake, while Manulife Holdings is controlled by Manulife Century Holdings (Netherlands) BV with a 59.5% stake.