MALAYSIA’S latest requirement for international insurance firms to relinquish at least 30% of their domestic businesses spells bad news for the companies, who have operated with little restrictions in the past, an op-ed in Bloomberg said today.
By the end of June, all overseas insurance firms must sell at least 30% of their domestic businesses via strategic stake sales or local initial public offerings.
The Employees’ Provident Fund (EPF) had said earlier this month that it’s in talks to buy a stake in the Malaysian unit of Singapore’s Great Eastern Holdings Ltd, while Britain’s Prudential and Japan’s Tokio Marine are also in discussions with local bankers.
The new ruling puts a damper on the ambitions of many international firms, who have long viewed Malaysia as having strong potential for insurance penetration growth, said the report.
The country has a relatively young population at 66% between the ages of 15 and 64, and premiums in Malaysia also tend to be higher, with life insurance payments per capita averaging US$317 (RM1,240) in 2014-2016, according to data from Swiss Re AG.
That compares with US$212 in Thailand and US$157 in China.
Foreign insurance firms will also have no choice but to sell to local companies, which essentially limits the pool of buyers to EPF, Retirement Fund Incorporated (KWAP), Permodalan Nasional Bhd. and sovereign wealth fund Khazanah Nasional Bhd.
The article noted that if Malaysian regulators decide to strictly enforce the 70-30 ownership rule, foreign firms will lose the one market in the region where they could operate with few restrictions.