Malaysia deciding on whether to enforce a cap on foreign insurer ownership

Malaysia is contemplating whether to enforce a limit on foreign ownership of insurers as it looks to strengthen local participation. The central bank is looking at a stricter variation on an existing policy that says foreign companies owning 100% of local insurance firms must pare their stakes to no more than 70%. Bank Negara Malaysia is thought to be taking a more forceful tone in the future and will require companies with large insurance stakes to show they have the country’s best interests at heart. Details are still being debated but some criteria could include hiring more Malaysian workers for highly skilled jobs and creating products that fulfil the needs of niche local market segments. Datuk Muhammad Ibrahim, the central bank governor, warned foreign insurers last year that they “need to contribute more to justify their presence in the Malaysian market.” There are concerns that some foreign owners focus on short-term profits that come at the expense of serving their customers. Malaysia’s life insurance penetration has been stationary over the past three years at 55%. AIA Group Ltd, Great Eastern Holdings Ltd and Tokio Marine Holdings Inc are among foreign companies that have wholly owned general insurance and life insurance operations in Malaysia, according to their latest annual reports.