June 19, 2018, 7:48 pm
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Malaysia to review foreign insurance ownership directive

HONG KONG/SINGAPORE- Malaysia is likely to review a directive to foreign insurers to reduce ownership of their local units by nearly a third as finding domestic buyers for the equity stakes is proving hard, three people familiar with the matter said.

The review may result in the Malaysian regulator putting the requirement in abeyance, the people said.

That would provide respite to foreign firms including Great Eastern Holdings, Prudential, Tokio Marine Holdings and Zurich Insurance by putting off deals worth more than $2 billion that were being thrust upon them.

Foreign insurers have been expanding in Malaysia and other Southeast Asian countries in recent years, lured by strong economic growth, rising middle-class income and lower insurance penetration.

But they were caught offguard last year when Malaysia’s central bank, which also regulates insurers, said it would enforce its 2009 rule setting a 70 percent cap on foreign ownership of local insurance businesses.

The directive had sent foreign insurers in Malaysia, many of whom operate wholly-owned units, scrambling to seal deals to sell 30 percent stakes to local state-linked funds or list the local arms.

The potential review of the directive comes against the backdrop of Mahathir Mohamad becoming Malaysia’s prime minister last month and Muhammad Ibrahim resigning as the central bank governor.

Two senior officials who were responsible for issues relating to the insurance sector at Bank Negara Malaysia, the central bank, have also resigned in recent months, two of the people said. - Reuters
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