Report: Foreign insurance firms want review of local ownership rule

PETALING JAYA: Two major foreign insurance companies, AIA and American International Group (AIG), are hoping that Bank Negara Malaysia (BNM) will review its requirement on local ownership following intervention by the US government, a report today said.

The Straits Times reported a senior US financial industry executive involved in negotiations as saying the US had “received backing from the Malaysian government that it would reconsider the restructuring laws”.

In April last year, BNM laid down a set of deadlines that called on foreign insurance companies to divest a minimum of 30% interest in their operations to local investors.

The report cited a senior Malaysian government official as saying that resistance to the plan had cropped up in recent bilateral talks between Washington and Kuala Lumpur, and “some parties are taking comfort in those negotiations”.

But the official said the decades-old push to restructure the insurance sector would not be derailed, adding that “there is general acceptance to the plan” with other international players.

The requirement for local participation in foreign insurance companies was first mooted in the late 1980s as part of a government financial sector rationalisation plan.

But the four big players – AIA, Great Eastern, Prudential and Tokio Marine – sought deferments because of the difficulty in finding suitable partners, the Straits Times report said.

BNM also handed down special dispensations to foreign insurance companies that stepped in to take over troubled domestic operators.

The AIG group received a special exemption from former prime minister Dr Mahathir Mohamad just before he stepped down in November 2003.

The Straits Times quoted Malaysian government officials as saying that AIG and AIA wanted the special exemption to remain in force.

The report also said that foreign insurance company officials in Malaysia had refused to discuss their divestment plans but industry officials said Great Eastern, Prudential and Tokio Marine were actively pursuing local partners.

The Employees Provident Fund is said to be in serious negotiations with Great Eastern while Prudential is believed to be in talks with Kumpulan Wang Persaraan (KWAP).