The contributions of the foreign insurers to the overall development of the domestic insurance industry despite a long presence in Malaysia, have not been at the level expected.
For example, there has been minimal improvement in insurance penetration, compounded by the lack of breadth in products (especially for lower income segments) and concentration of high-cost distribution models, BNM said in a statement today.
"The Bank welcomes any initiative by insurers that would benefit the Malaysian economy and the general public, as expected of any ordinary responsible corporate citizen that operates in the country," it said in reply to report that foreign insurance companies would set up healthcare trust as an alternative to fulfilling their commitment to pare down their shareholding by 30 per cent before the June 30 deadline.
BNM also noted that the bank had not received such a proposal.
The Bank stressed that the agreed foreign shareholding level was a commitment provided by the foreign shareholders in being granted a licence to operate in the country.
The foreign insurers were given the licence to operate in the domestic market on the basis of the specific commitments and assurances given.
"A licence would not have been given if the commitments were not made," it said.
Over the years, ample opportunities and flexibilities have already been conceded to accommodate actions that should have been taken by shareholders to deliver on their commitments.
The Bank therefore fully expects shareholders to honour an explicit promise made, and to operate in Malaysia in a manner that benefits the development of the domestic insurance market and the economy generally.
This should be commensurate with the significant returns accruing to foreign insurers from the Malaysian market.
Shareholders of foreign insurers have benefited enormously from their presence in the Malaysian market.
BNM estimates that a total of RM16.5 billion, or 70 per cent, of total profits attributable to foreign shareholders of insurers were repatriated over the period of 2008 to 2017 in the form of dividends.
In addition, foreign insurers repatriated an estimated RM1.3 billion in management fees and outsourcing arrangements to foreign affiliates between 2014 and 2016.