Takaful Malaysia suspends foreign property foray plans, awaits IFSA clarity

PETALING JAYA (July 11, 2013): Syarikat Takaful Malaysia Bhd, the country's oldest Islamic insurer, has put all future investments on hold until it gets a clearer picture on the newly-enforced Islamic Financial Services Act (IFSA), its top executive said.

The takaful player had planned to make its first foray into the overseas property market last year and was vying for high yielding properties in London, the UK.

However, with news of sweeping regulatory changes expected to be introduced under the IFSA, Takaful Malaysia is temporarily suspending plans.

Under the IFSA, which came into force on July 1, 2013, takaful operators are required to relinquish their composite licence within a five-year period and conduct its life and general insurance businesses under separate units or subsidiaries.

The Act also requires takaful players to set up a financial holding company for purposes of regulation and supervision. All operators must submit an application to Bank Negara Malaysia to be approved as a financial holding company.

"We have to study on how to utilise this financial holding company as a vehicle for us to purchase foreign properties," Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil (pix) told SunBiz in an interview.

"(As such,) we are holding back our property purchases (for now) because later when the company is split into two separate units, it would be difficult with the property investment in the mix," he added.

Takaful Malaysia is a 60.85% subsidiary of BIMB Holdings Bhd.

Due to lack of clarity, Hassan said the company is also unsure if BIMB will remain as its holding entity or that Takaful Malaysia would have to set up a new financial holding company.

The Islamic insurance company had planned to set up a wholly-owned subsidiary in the Labuan International Offshore Financial Centre to act as a special-purpose vehicle (SPV) to invest and hold its overseas property investments.

"The Act just came into force, so we will study the guidelines from Bank Negara before we proceed with our next steps in acquiring properties in London," he added.

Takaful Malaysia has been looking to diversify its investment portfolio by acquiring properties in London. Armed with a RM200 million war chest, the takaful player has been scouting for commercial buildings or offices within a 30km radius in central London since last year.

Bank Negara limits local insurers to invest up to 5% of their total assets overseas.

With total assets worth about RM6.7 billion at group level, this means that Takaful Malaysia will have about RM335 million for property investment overseas.

Property investment accounts for about 5% of Takaful Malaysia's investment portfolio. The bulk of its asset allocation or about 60% are in fixed income and 12% from equities.

Its largest investment is its headquarters building – Dataran Kewangan Darul Takaful – in Kuala Lumpur, which it had bought in 2005 for RM117.7 million.