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.