By Aidila Razak
Individual owners insurance companies will have five years to comply with the 10-percent shareholdings limit of the yet-to-be gazetted Financial Services Act 2012 (FSA).
This was the “transitional requirement” stated in a briefing by Bank Negara Malaysia (BNM) to insurers on the Act on Feb 6, 2013.
“Existing shareholders exceeding the limit shall take steps to comply within five years from the commencement date,” BNM said in its handout sighted by KiniBiz.
The Act is expected to commence on May 2, BNM said in the handout.
Tony Fernandes
Among those who could be affected are Tune Insurance owners Tony Fernandes and Kamarudin Meranun, who collectively own 72 percent of the company and Lonpac Insurance owner Teh Hong Piow who owns 44 percent of the company.
Section 92 of the Act states that individuals have a maximum permissible holding of 10 percent.
The Act appears silent on any grace period for owners of banks.
Banks owned by individuals include Public Bank (24 percent owned by Teh), Hong Leong Bank (79 percent owned by Quek Leng Chan) and Ambank (17 percent owned by Azman Hashim).
Greater control over insurance companies
The inclusion of insurers into the FSA will also see a higher degree of control by BNM, the handout shows.
The Act obliges holding companies which own 50 percent or more of institutions to register as a financial holding company within 12 months of Act commencement.
This will mean that BNM will have the power to place minimum capital requirements and “conduct examinations” on the holding company and related financial institutions.
It will also see companies restructuring to comply with restrictions on non-financial business and will act as an additional layer of controls for insurers.
RHB Research in a note last week said that the FSA and Islamic Financial Services Act (Ifsa) will have a “huge impact” on the industry, particularly on takaful players like Syarikat Takaful Malaysia (STMB) and MNRB’s Takaful Ikhlas SB.
The disaggregation of licences for life and general insurance, as well as the separate segments of the takaful business, may see some companies selling off certain segments to comply.
“We expect the industry to react to the new regulations in ways that may include stakes selldown, capital injection, changes in company structure and higher compliance, audit and personnel costs.”
BNM is expected to brief the media on the FSA and Islamic Financial Services Act on Mar 20.
The two Acts replace the Banking and Financial Institutions Act 1989, Insurance Act 1996 (with exception of Sections 147(4), 147(5), 150, 151 and 144), Payment Systems Act 2003, Exchange Control Act 1953, Islamic Banking Act 1983 and the Takaful Act 1984.
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