Foreign tie-ups will boost local insurance companies

The Star, Tuesday, April 28, 2009, PETALING JAYA: Allowing greater flexibility for insurance companies and takaful operators to tie up with foreign partners will result in the adoption of better international practices and expertise, as well as facilitate consolidation in the industry.

Besides strengthening the local insurers’ resilience and competitiveness, the move would also raise service standards for consumers, said General Insurance Association of Malaysia executive director CF Lim.

“This objective will be further assisted by the flexibility to employ expatriates with the relevant value-added expertise to benefit the industry and at the same time, raise the skill and competency levels of Malaysian personnel to international standards.”

Lim told StarBiz the flexibility to establish branch offices nationwide without restriction would also help companies achieve higher levels of insurance penetration as well as provide depth and breadth to customer services.

With immediate effect, foreign equity participation in insurance companies and takaful operators has been increased to 70% from 49%.

A higher foreign equity limit beyond 70% for insurance companies would be considered on a case-by-case basis for players that can facilitate consolidation and rationalisation of the insurance industry.

MAA Takaful Bhd CEO Salim Majid Zain said greater flexibility on foreign equity participation would attract foreign expertise, technology transfer and product innovation into Malaysia.

“Local companies will be driven to devise more competitive strategies in facing the competition, including seeking new foreign partners or increased foreign participation.

“The move to allow locally incorporated foreign insurers and takaful operators to establish branches will help increase confidence and market awareness in the rural areas,’’ he added.

ACE Synergy Insurance Bhd chief executive officer and managing director Raj Nanra said the increase in foreign equity ownership would provide fertile ground for consolidation and rationalisation in the industry.

These initiatives would strengthen the industry and give policyholders greater sense of security and confidence in their insurance providers in the challenging economic environment, he added.

ACE Synergy is 51% owned by Zurich based-ACE Ltd and 49% by Advance Synergy Capital Bhd.

Asked if foreign partners with 70% equity stake would have management control of the local entity, Syarikat Takaful Malaysia Bhd group managing director Datuk Hassan Kamil: “Management control would depend on the agreement between the existing management and the new shareholders.

“It is normal for the new majority shareholders to have management control. They may absorb part of the existing management as part of their new team.”

On the granting of up to two new family takaful licences for this year, Hassan said this was an excellent proposition since the takaful industry was still lacking the depth in talent, especially in product development and finance.

Source from: The Star Online, By DALJIT DHESI,
URL:
http://biz.thestar.com.my/news/story.asp?file=/2009/4/28/business/3784223&sec=business