Zurich Insurance is looking at several options regarding its Malaysian unit, in order to comply with Kuala Lumpur’s cap on foreign-owned insurance companies.
The government recently decided to enforce a 70% limit on foreign holdings in insurers, meaning that at least 30% of a firm must be held by Malaysians. A June deadline has been set for insurers to comply.
One of the options being considered is selling shares through an initial public offering, Bloomberg reported. This listing could fetch Zurich up to US$100 million. Another option is to directly sell a stake to a local partner. Two of the country’s top pension funds have already expressed interest in purchasing part of a foreign-owned insurer.
Prudential and Great Eastern had earlier revealed that they were already in talks with potential buyers in order to comply with the ruling.
Last month, Bank Negara Malaysia reminded insurers that their permit to operate in the country was conditional on their “promise” to follow the central bank’s policies. This was in response to several insurers’ reluctance to reduce their holdings in the country, due to its lucrative insurance sector boosted by strong economic growth, a young population, and an emerging middle class.
How the central bank and insurers will react once the deadline arrives and push comes to shove remains to be seen.
