The central bank, Bank Negara Malaysia (BNM), has insisted that insurance companies keep their promise.
In a statement headlined “Response to Singapore Straits Times Article entitled 'Foreign Insurers in Malaysia Resisting Divestment: Sources' ", BNM said tersely: “Foreign shareholders of insurers were allowed to operate in Malaysia based on their promise and commitment including maintaining specified levels of domestic shareholding within agreed timelines.
“Without these promises and commitments, they would not have been allowed to operate in Malaysia. Bank Negara Malaysia expects these insurers to honour their promises and commitments.”
The Straits Times article, which was published on 26 March 2018, quoting industry executives and Malaysian government officials, stated that two major foreign insurance companies – AIA and American International Group – are baulking at complying with BNM’s directive on ownership following intervention by the US government.
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, Bank Negara laid down a set of deadlines requiring foreign insurance companies to divest a minimum of 30% interest in their operations to local investors.
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 Employees Provident Fund is said to be in serious negotiations with Great Eastern over divestment by the latter while Prudential is believed to be in talks with Kumpulan Wang Persaraan (KWAP).