To comply with new foreign ownership rules, foreign insurers can now choose to either pare their stakes in their Malaysian units or contribute to the B40 National Health Protection Fund, according to the country’s central bank Bank Negara Malaysia (BNM).
“Each (foreign) insurance company now has been given the option, and they are supposed to revert back to BNM with their plans. 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,” said BNM governor Nor Shamsiah Mohd Yunus at a media briefing on Malaysia’s economic performance for 3Q2018.
The B40 National Health Protection Fund was announced by Malaysia’s finance minister Lim Guan Eng during his 2019 budget speech on November 2 to alleviate the healthcare costs of low-income Malaysians.
During his budget speech, Lim said that Singapore-based insurer Great Eastern Life Insurance has pledged and agreed to contribute RM2 billion in seed funding to the health insurance fund, which will be managed by the Malaysian central bank.
In a stock filing with the Singapore stock exchange on November 5, Great Eastern Life Insurance’s parent company, Great Eastern Holdings, had said that discussions are “still ongoing” and suggested the contribution may be linked to foreign ownership limits in its Malaysian subsidiaries.
Last year, the Malaysia central bank, which also regulates insurers, had decided to enforce its 2009 rule setting a 70 per cent cap on foreign ownership of local insurance businesses, sending foreign insurers into a tizzy to find local partners.
In Malaysia, 11 insurers including Great Eastern, AIA, and Tokio Marine, are currently wholly owned by foreign firms.
According to a report by The Edge Malaysia, a large foreign-owned insurer has proposed to contribute RM 2.3-2.5 billion to set up a medical scheme for the poor in exchange for an exemption from having to sell a 30 per cent stake to local investors as required by the regulator.
The business weekly did not name the insurer but pointed out that the two largest foreign-owned insurers in Malaysia are AIA Bhd and Great Eastern Life Assurance (M) Bhd.