Foreign insurers scramble to meet ownership cap or face wrath of Malaysia authorities

International insurance companies are seeking out local partners in Malaysia ahead of a midyear deadline that will impose caps on foreigner ownership, forcing large insurers such as AIA and Prudential to restructure their local units, according to two insurance sources.

Foreign insurance companies must sell 30 per cent stakes in their Malaysian insurance arms to local partners or list the stakes on the Malaysian stock exchange by the end of the second quarter, according to a former Malaysia-based insurance executive who declined to be named.

Bank Negara Malaysia, the central bank and regulator of the nation’s insurance industry, last year sent out a directive telling Malaysian insurance units that their overseas parents would need to observe a 70 per cent ownership cap by the end of June, the executive said. 

Employees Provident Fund of Malaysia last week confirmed it was in talks to buy a stake in the Malaysian insurance arm of Singapore-based insurer Great Eastern Holdings. The deal, estimated to be worth about US$1 billion, is seen to be a result of the company’s efforts to meet the new ownership cap.

Malaysia unveiled the 70 per cent foreign ownership cap in 2009, but the rule has not been rigorously enforced.