KUALA LUMPUR (Aug 17): Foreign insurers in Malaysia will be given more flexibility to divest their stakes, and the deadline for the divestments will now depend on the bilateral agreement between the insurance companies and Bank Negara Malaysia (BNM).

The central bank's new Governor Datuk Nor Shamsiah Mohd Yunus said the objective of the divestment remains intact, but instead of imposing the June 30 deadline for all foreign insurers to reduce their stakes, it will be based on the respective agreements between the foreign insurers and BNM.

"The divestment commitment was something that they made with the central bank…it was their commitment to divest. We're still in discussion. The objective of that divestment is still relevant," she told a press conference to announce the second-quarter gross domestic product growth today.

Nor Shamsiah noted that some of the objectives were to promote a long-term economic benefit for the country, as well as to increase the insurance penetration rate.

Under the previous governor, Tan Sri Muhammad Ibrahim, the central bank had set a firm deadline for foreign insurers to divest.

Nor Shamsiah said BNM hopes to look for a speedy resolution with the insurers, but has given a more flexible option.

She explained that the divestment road taken by some foreign insurers could be more complicated than others, thus the need for flexibility.

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.

Nor Shamsiah also explained that the divestment plan is applied to those foreign insurers that have made the divestment commitment in the past.

No foreign insurers were mentioned as the exception from the ruling. Eleven insurers including Great Eastern, AIA and Tokio Marine, are wholly owned by foreign firms.

Two foreign insurance companies, namely Allianz Malaysia Bhd and Manulife Holdings Bhd, are listed on Bursa Malaysia. The major shareholder for Allianz Malaysia is Allianz SE of Germany, while Manulife Holdings is controlled by Manulife Century Holdings (Netherlands) BV.