Malaysia's central bank to tighten control on insurers

Malaysia's central bank to tighten control on insurers

KUALA LUMPUR (AFP): Malaysia's central bank yesterday indicated tighter supervision of all insurers to safeguard their financial integrity from next year following the recent liquidation of the country's largest general insurer.

Bank Governor Ahmad Mohamed Don, who is also the director- general of insurance, said the bank would issue an external audit minimum checklist and spell out minimum requirements for internal audits of insurers, both for implementation in January next year.

"The move is to ensure proper financial discipline and to render more objectivity, credibility and integrity to the financial reporting of insurers," Ahmad said after the bank's seventh annual conference with insurance companies.

Ahmad Don made no reference to the recent liquidation of Merchantile Insurance Sdn. Bhd. after it became insolvent, but analysts said the central bank had been trying hard to enhance the credibility of 59 local insurers, some of whom are still plagued by capital inadequacy and lack of professional skills.

Merchantile was the first insurance company to be liquidated after it faced capital deficiency.

Ahmad told insurers not to be complacent as the present protected Malaysian insurance market could not be taken for granted.

"Insurers have to be ready to commit themselves to greater capital backing and develop expertise in underwrite new and sophisticated risks in view of the increasingly competitive market conditions," he said.

Without economies of operations linked to size, small and weak insurers would find it difficult to survive, he said.

Malaysia's general insurance business slowed last year, with written premiums growing by 11.1 percent to 3.2 billion ringgit (US$1.28 billion), from a strong growth of 20.6 percent in 1992. But total assets of general insurers rose sharply by 26.1 percent to 4.9 billion ringgit at the end of 1993 from 3.9 billion ringgit at the end of 1992.

In the life sector, premium receipts increased by 22.9 percent to 3.0 billion ringgit and total assets were 23.9 percent higher at 12.1 billion ringgit, 2.1 percent of the aggregate assets of Malaysia's financial system at the end of 1993.