Malaysian insurers gear up for IPOs after central bank order

Insurers could go public in order to comply with enforcement of foreign ownership cap

Malaysian insurers gear up for IPOs after central bank order

Insurance News

By Gabriel Olano

There could be a streak of Malaysian insurers embarking on initial public offerings (IPOs) after Bank Negara Malaysia (BNM), the country’s central bank, reminded the industry of the foreign ownership cap, according to reports.

Insurers that have foreign ownership over the limit of 70% must reduce these holdings by selling to local investors or through IPOs. The deadline is understood to be June 2018.

There are 11 insurers in Malaysia that are fully foreign-owned. Reuters reported that several of these firms, such as Japan’s Tokio Marine and Hong Kong’s AIA, received letters from the BNM, instructing them to comply with the directive.

“There have been a few conversations between banks and insurers, but nothing has been firmed up at this stage,” an exchange control head in Malaysia was quoted as saying by GlobalCapital Asia. “If anything, activity will only begin in earnest next year.”

However, the BNM said that there’s no new policy on foreign ownership of insurers in Malaysia, but it reminded foreign shareholders about their responsibilities.

“Foreign shareholders of insurers that have made specific commitments in applying for entry into the Malaysian insurance market, including maintaining specified levels of domestic shareholding within agreed timelines, must honour their commitment,” BNM said in a statement.

A commercial law expert said that insurers are taking the BNM’s instructions seriously.

“The main question is what will happen to the insurance firms next June,” asked Brian Chia, head of corporate, commercial, and securities practice at Wong & Partners law firm.

“Would they all manage to partner up? Would they meet the deadline set by BNM to raise local ownership? And if some of them don’t make it on time, what will BNM do?”

Related stories:
Domestic insurer welcomes competition from foreign entities
Malaysian central bank has no new policy on foreign ownership of insurers
Indonesia may seek to limit foreign ownership in insurance sector

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