BNM: Divestment requirement for foreign insurers not a new policy

KUALA LUMPUR: Bank Negara Malaysia (BNM) is firm in calling for foreign insurance companies to reduce their stakes in local operations by the given deadline, as the commitment to do so was a prerequisite to the issuance of their operating licence.
"They are in the midst of discussion with some of the domestic investors. We hope they will come up with some announcement soon. But, it is important to emphasise here that this is not a new policy. It has always been there," Bank Negara Malaysia (BNM) Governor Tan Sri Muhammad Ibrahim said in a briefing with senior editors on Tuesday ahead of the release of BNM Annual Report 2017 and Financial Stability and Payment Systems Report here today.
"These foreign investors gave their commitment and promises that if they were given licence, they would diversify. Now, after receiving the licence, they are saying that they want to renege on their promise," he added.
If these foreign insurers had not given BNM the commitment, the bank would not have issued them the licence, Muhammad said.
A recent article in the Singapore Straits Times titled, "Foreign Insurers in Malaysia Resisting Divestment: Sources", quoting industry executives and Malaysian government officials, stated that two major foreign insurance companies — AIA and American International Group — baulked at complying with BNM's directive on ownership following intervention by the US government.
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.
"We gave them ample time. We are not being unfair. They should meet the deadline. It is not like we suddenly wake up in the morning and we say that we want you to divest," he said.
He noted there were many options, such as undertaking a merger, creating an initial public offering or bringing in new shareholders.
Muhammad said the insurance industry was a profitable venture, which was why it was important that everybody had a stake in the wealth and the progress, including Malaysians.
"Promise was given to us. (So) you got to honour your word," he said. — Bernama