Underwriter Asia

Timber companies having difficulty logging in insurance

2011-02-13T03:12:00.000-08:00

By Sonia Krisnan
Timber-based companies in Malaysia are facing an uphill task to underwrite their risks as insurers are shunning them due to past claims ratio for the sector.

The companies are having issues in getting underwriting for their properties, workmen's compensation claims and fire risks, one timber-based company representative told a recent dialoque organised by the Malaysian Timber Industry Board (MTIB).

When contacted, insurers say they are more careful and selective in underwriting risks from timber-based companies as the experience in insuring the sector has generally not improved despite insurers introducing risk improvement measures over the years.

"We're very selective, unless proper risk management and prevention are in place," Syarikat Takaful Malaysia Bhd (Takaful Malaysia) group managing director, Datuk Mohamed Hassan Md Kamil, told The Malaysian Reserve.

In an email reply, Overseas Assurance Corp (M) Bhd chief executive officer Ng Kok Kheng said that the timber industry needs to seriously look at its own operations and find ways to actually reduce its bad claims incidents.

"Although the inherent fire risk is said to be high, not much effort has been taken by industry players to reduce this hazard," he said.

Without providing any figures, a spokesman for the General Insurance Association of Malaysia (PIAM) said that the "losses are beyond tolerance".

Malaysia's timber and timber products growth is projected to grow 6.5% this year compared to its record of RM19.49 billion in 2009, according to a survey by Malaysian Timber Industry Board.

Another general insurer said Malaysia has seen foreign investments in the sector and at least they bring in their better technology and risk management thinking.

"Locals should try to learn from them or take the advice of risk engineers on how they can improve the safety of their operations," he said.

On the insurers' side, Mohamed Hassan said the insurance companies are also finding it tougher to get reinsurance support for wood-based companies.

Insurance companies generally parcel out risks to reinsurance companies like Malaysian Reinsurance Bhd and Swiss Reinsurance Company as part of their risk management strategy.
Another issue faced by insurers are the rates at work in the present market.

"Rates are thin, risks are high. As an insurer, obviously, I would like to see an upward movement of rates," he said. In the past, Mohamed Hassan said Takaful Malaysia has actually declined business coming its way from woodbased companies.

[The Malaysian Reserve, 7 Feb 2011]

Manulife eyes smaller insurers

2010-05-11T19:49:00.000-07:00

By Ishun P. Ahmad

Manulife Insurance Bhd, which has been on an organic growth path in the last five years, is now looking at buying smaller insurers as one of the ways to expand its market share and business.

“There will be consolidation and Manulife will be one of the consolidators,” said Manulife Insurance’s chief executive officer Kevin McWhinney.

He told The Malaysian Reserve in a recent exclusive interview that the insurance firm, whose listed parent is Manulife Holdings Bhd, is on the look out for an opportunity like buying into insurance companies that works well for its shareholders and be good for policy holders.

When asked if Manulife is open to buying insurance companies, McWhinney replied if the right opportunity presents itself, Manulife has the resources, capital, and the knowhow to integrate companies.

A case in point was when Manulife purchased John Hancock back in 2005.

“With the introduction of risk-based capital, there are players in the market today that have a decision to make whether if they would want to inject more capital into their companies or continue with their insurance business, if that is not their core business they will exit the market and concentrate on their core business. And so definitely those opportunities will present themselves, especially in the next couple of years,” said McWhinney.

According to McWhinney, Manulife has major initiatives to double its 2,000 strong agency force in the next three years with a record increase of 500 agents added in the last 15 months.

Apart from increasing its agency numbers, he said Manulife is looking to have more full time agents, that will have a multiplying effect on productivity and professionalism.

“Feeling the pickup in the market confidence and people interest to join Manulife, we are training people to be more full time professional advisors,” said McWhinney.

Furthermore, Manulife is also looking at growing its distribution by strengthening its agency force through increasing professionalism and productivity. “Last year 2009, Manulife experienced a 25% increase year-on-year, 1Q 2010 over 1Q 2009, on the agency side, which is already doubled the amount of production with overall sales up by 30%,” said McWhinney.

As of 3Q 2009, he said Manulife was at number 12 in terms of market share, and anticipates to move up two notches to 10th place in 2010.

The insurance firm is looking to step up more regional support centres and is actively looking at Kuching for its growing and young population, Penang Island for its mass affluent market, and Kota Kinabalu to increase its presence in East Malaysia.

“The investment is in the hiring of people, agents, and managers in the regional centres,” said McWhinney in regards to the cost of setting up the support centres.

Manulife has currently six of these centres that are also equipped with training facilities each located in Bukit Mertajam, Ipoh, PJ, KL, Johor, and Sibu.

McWhinney said Manulife will continue to focus on three segments that matter most to Malaysians, namely products relating to retirement plan, medical emergencies, and children's education plan. Furthermore, he said Manulife would also look into underserved markets like the Bumiputera market that has a very high potential due to its extremely low penetration rate as well as the underserved markets in the rural areas.

McWhinney commented that the industry has to deal with the high turnover of agents mainly due to the fact that the bulk are part timers and are more likely to be discouraged and less motivated. Malaysia has about 75,000 licensed agents, high in proportion to the country’s 27 million population.

McWhinney said the main challenge is to ensure insurance careers are a fulltime job and not seen as part time, adding that Manulife is tackling this issue head on, and believes in producing caring and professional advisors rather that “you get somebody paddle you a product“.

“Industrywide, we see agents that come and try out the business for a short period of time and because they don’t give it their full commitment, they may get discourage quickly and just return to their fulltime job and don’t pursue it,” he said.

[The Malaysian Reserve, 12 May 2010, page 1]

Deposit insurance limit to be increased

2010-05-11T19:46:00.000-07:00

By Bhupinder Singh

The Perbadanan Insurans Deposit Malaysia (PIDM), which administers the deposit insurance system, is proposing to increase the deposit insurance limit from RM60,000 per deposit per member bank to RM250,000 per deposit per member bank effective January 2011.

The PIDM plans to advance a legislative package to the tabled in Parliament for debate and enactment before year-end as part of government backed measures to enhance financial consumer protection in the country.

The government deposit guarantee will lapse at the end of this year and the new guarantee limit proposed by PIDM will replace it as the higher limit level will provide protection to 99% of depositors.

The premium is paid by the financial institutions annually and the PIDM collected some RM131.8 million in premiums at the end of last year when its total Deposit Insurance Funds amounted to RM369.9 million, with the Conventional Deposit Insurance Fund totaling RM320.9 million and the Islamic Deposit Insurance Fund of RM49.0 million.

The PIDM intends to develop legislation to introduce an explicit Insurance Compensation Scheme (ICS) for insurance and takaful policy holders as well.

The ICS, which will be administered by PIDM, is a scheme designed to protect policy holders from the loss of their policy claims or insured benefits in the unlikely event of a failure of an insurance or takaful company.

Hence, the ICS will ensure policy holders of the 14.4 million or so policies in force till the end of 2009, be it insurance and takaful products, will also enjoy the same level of protection provided by PIDM to depositors of commercial banks and Islamic banks.

“The proposed ICS will enhance financial consumer confidence and promote consumer demand for insurance and takaful products,' PIDM said in a statement yesterday.

PIDM will hold discussions with the various stakeholders on the ICS before its tabled to the government.

[The Malaysian Reserve, 12 May 2010, page 1]

Takaful Ikhlas eyes rental, property investments

2010-03-19T20:32:00.000-07:00

By Alfean Hardy

Takaful Ikhlas Sdn Bhd, which has invested RM97 million on two tower blocks in Bangsar South, Kuala Lumpur, is targeting similar investments going forward given the long-term sustainability of rental income for revenue generation, its president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman said.

The Islamic insurance firm used RM87 million of its policy holders’ funds to buy the commercial property and another RM10 million was invested in renovating both towers. The company has more than a million individual and group policy holders to date.

The unit of main boardlisted MNRB Holdings Bhd moved into all of Ikhlas Point Tower 11A and three floors of Ikhlas Point Tower 11 on Feb 1, 2010. Covering a built-up area of 99,286 sq ft in total, some 32,000 plus sq ft in one of the towers have been earmarked for rental/future expansion.
Speaking at a media briefing in Kuala Lumpur last Thursday, Syed Moheeb said, essentially, the buildings were not Takaful Ikhlas’s.
"These buildings were paid by policy holders’ funds coming from our risk fund. So, inevitably, the policy holders are the owners of the buildings, we’re merely renting it from them.
"We chose this strategy because we wanted to ensure rental income to policy holders and, over the last few years, one of the better revenue generating strategies is rental income, which is more sustainable over the long-term," he said.

Going forward, he said Takaful Ikhlas would make use of either shareholders’ funds or policy holders’ funds to purchase buildings and then rent them out to generate rental income.
"By doing this, we will slowly acquire property. Eventually, we also want to house all our branches in our own buildings. We’re not sure yet whether we will use funds from our shareholders or from our policy holders (when we buy these buildings)," he said, adding that Takaful Point was the firm’s first property investment.
Syed Moheeb said Takaful Ikhlas could have ventured into property investment earlier, but he felt that the firm needed to ensure that, whatever it bought, would have made an impact to investment income.
"The fact that (the two towers) have a capital appreciation of more than 20% indicates that this was a good decision.
"Among some of the things that we’re looking at will be rentable office premises and it won’t be anything else at this point in time. Our investment policy has been very cautious and has been more towards capital preservation and, in any thing that we do, we have to make sure that we don’t have to answer to any bad decisions later on," he said.
Syed Moheeb said Takaful Ikhlas was currently looking at housing two new branches in Klang, Selangor, and Kuala Terengganu, Terengganu, by middle of the year in new properties.
"At this point in time we haven’t identified yet any properties yet (for these two new branches). If you look at the 10 branches that we have currently, these are the areas that we would be looking to make investment opportunities," he said.
The Islamic insurer currently has branches in Kota Baru, Johor Baru, Sungai Petani, Ipoh, Kuching and Kota Kinabalu in Kelantan, Johor, Kedah, Perak, Sarawak and Sabah respectively. Asked on how much would be set aside for Takaful Ikhlas’s property buy war chest going forward, Syed Moheeb said the company’s investment strategy was set by the board, which decides how much went into equities, governmentbacked securities and others.
"Where property is concerned, we’re looking at not more than 20%. In the shorter term at least, until our financial year ending Mar 31, 2011, we will cap this at 20%," he said.

(This story appeared in The Malaysian Reserve on 1 March 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh, at http://islamicfinanceasia.blogspot.com/)

Factory bus operators fume over insurance ‘risk’: The Star

2009-08-02T20:55:00.000-07:00

Bus operators ferrying factory workers are fuming with insurance firms for classifying them in the “high risk” category with express and tour buses.
Selangor Workers Bus Operators Association president Jackie Chew Soo Mee said factory buses should not be classified in that category, reports The Star ( July 31, 2009).
"Our operators have a set timetable and the distance is within a district or the next town. Our daily mileage is much lower and the condition of factory buses over a period of time is much better compared to express buses," she said.
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Chew suggested that insurance companies create a new scheme to accommodate factory buses in order not to burden operators. Of the 100 factory bus operators in Selangor, half are members of the association.
"With the tough economic period, factory bus operators should not be burdened further. If the new insurance structure is not created, several of our operators will be forced to wind up," she said at the association’s first annual general meeting (AGM).
Chew said the association would appeal to the General Insurance Association of Malaysia (PIAM), Bank Negara and Finance Ministry to create a new insurance scheme for factory bus operators.
She said buses over 12 years old were not allowed to take out comprehensive insurance, with such operators having to buy third party insurance with loading.
Road Transport Department director-general Datuk Solah Mat Hassan, who opened the AGM on behalf of Transport Minister Datuk Seri Ong Tee Keat, said discussions on the insurance scheme was going on with PIAM.

RHB Insurance Eyes RM1.2 Million Premiums From Maid Protector Policy

2009-08-02T20:54:00.000-07:00

RHB Insurance Bhd is targeting RM1.2 million in premiums from its latest product, Maid Protector Insurance plan, within the first year of its launch.
RHB group managing director, Datuk Tajuddin Atan, said the premium would be as low as RM60 to RM95 per year.
"This product, which will be offered to only legal foreign maids, will receive an encouraging response from Malaysians who employ maids.
"As at May 2009, a total of 300,000 foreign maids are working in Malaysia," he told a media briefing after the launch of the product here Thursday.
The plan is offered jointly by RHB Insurance and Pos Malaysia Bhd.
It will provide employers with an attractive and competitive protection plan for domestic workers.
The product will provide insurance coverage for maids in the event that they meet with an accident or death, or in the event that an unwanted accident or damage happens to a third party due to negligence of the maids.
Tajuddin said the company was leveraging on Pos Malaysia Bhd's network to offer this product.
The plan will be available at 13 general post offices tomorrow and 671 other post offices nationwide from Aug 15.
The employers can opt for the 12-month or 24-month policy. -- BERNAMA

Finding the right pension model

2009-08-02T20:52:00.002-07:00

While the Securities Commission (SC) says it is in the midst of finding successful private pension fund models that best fit Malaysia, fund managers want the models to be transparent and give investors the right to choose their fund managers. Financial planners, meanwhile, say the proposed funds should provide some form of incentives to ensure its successful implementation, reports The Star ( July 25, 2009).
Fortress Capital Asset Management (M) Sdn Bhd chief executive officer Thomas Yong said the proposed pension fund should be liberalised similar to models in many developed nations that allowed savers to choose whom they wished to manage their savings nests.
"If the fund is sufficiently liberalised like that in Australia, savers will have the choice of who manages their investments and what they invest in. While the message is clear that everyone including the self-employed should save for the long term, the issue is who should decide how these savings are managed.
"Should the savers be allowed to decide, with the fund providing adequate disclosures and information, or should the fund decide arbitrarily based on some national average," ,” he told the newspaper.
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In any case, he felt the regulatory framework and disclosure standards must first be put in place to ensure effective transparency and liberalisation. A fund manager, who wished to remain anonymous, said the SC while scouting for suitable fund models should ensure investors would be kept informed of the performance of the pension funds managed by all participating fund managers.
“It is not sufficient that the funds’ performance only be disclosed to the regulators, as this will cause doubts among the retirees and the self-employed,” he added.
To ensure the success of such funds, the SC also needed to have asset allocation limits and determine the type of investment instruments permitted for the fund, apart from an appropriate ceiling on fees that fund managers may charge, said Yong. The SC, as the regulator of the proposed funds, is currently gathering input from various jurisdictions to ensure the adoption of successful private pension fund models.
Malaysia is set to have private pension funds by the middle of next year and several fund managers have shown keen interest to manage these funds.
Great Vision Advisory Group head of tax and financial planning Datuk Chua Tia Guan said the funds should not be too flexible to enable contributors to withdraw a lump sum upon retirement as it would easily be exhausted in a short period as in the case of Employees Provident Fund (EPF) withdrawals.
“The government should also provide tax break for the participants of the private pension funds in addition to the current tax relief given on insurance and EPF of RM6,000.
“In Singapore, the government provides tax relief for those who participate in the Supplementary Retirement Scheme, which was introduced many years ago, in addition to the Central Provident Fund,” Chua noted.
He added that proper studies should also be conducted to ensure the funds did not experience similar fate as the disastrous insurance annuity scheme introduced years back. A licensed financial planner said it was meaningless for existing EPF contributors to invest in pension funds unless certain tax benefits were provided.
Licensed financial adviser Jeremy Tan of Standard Financial Planner Sdn Bhd, on the other hand, said the launching of these funds would not be an issue as there was sufficient existing regulatory supervising and monitoring of legitimate investment schemes in the country.

OCBC ties up with Great Eastern to offer bancassurance products

2009-08-02T20:52:00.001-07:00

OCBC Bank (Malaysia) Bhd aims to be among the leading players in the bancassurance market following its partnership deal with Great Eastern Life Assurance (Malaysia) Bhd.
It aims to capture a 10%-15% share of the regular life insurance market in order to become a significant player in the field.
However, it did not reveal its current market share, saying that there were no accurate figures for the segment at the moment. OCBC which started operations in the bancassurance field under several partnerships six years ago, will market two Great Eastern bancassurance products, MaxMoney Plus and MaxMoney Back, beginning today (yesterday), said OCBC Bank director and chief executive officer, Jeffrey Chew Sun Teong.
He said this during a press conference following the launch of the products in Kuala Lumpur yesterday. MaxMoney Plus is expected to generate RM12 million in premiums by year-end, while MaxMoney Back is expected to garner about RM6 million.
Another product is expected to be launched next month. Meanwhile, Great Eastern Life Assurance (Malaysia) Bhd director and chief executive officer Koh Yaw Hui, said the tie-up will help Great Eastern to achieve its target of total weighted new business premiums of RM800 million this year. He said with a network of 29 branches throughout Malaysia, OCBC Bank's ability to mine its customer base rendered significant market potential for Great Eastern making personal visits to bank branches was still common.
Koh said the bancassurance arrangement with OCBC Bank was made possible through a combination of both the government's recent liberalisation initiatives and a strong partnership forged between the two companies over the past seven years.
In Malaysia, bancassurance forms about half of the new premiums collected annually in the life insurance market with more than 90% from single premium, he said.
He said Great Eastern also planned to expand its network of branches. In the Klang Valley, which contributes 38% to Great Eastern's business, there are plans to set up a big branch office in Mutiara Damansara, Petaling Jaya, he said. Its presence is more focussed in Kuala Lumpur at the moment. It also expects to open up branches in the states. — Bernama

Zainuddin: From humble beginnings to moving mountains

2009-08-02T20:35:00.000-07:00

By Alfean Hardy
Options were not plentiful if you were a secondary school graduate in Rembau, Negri Sembilan, in the late 70s. According to HSBC Amanah Takaful (Malaysia) Sdn Bhd executive director and chief executive officer Zainuddin Ishak, the most most people could look forward to was working in a factory in Senawang.
"My father was a rubber tapper and my mother a housewife. There were eight of us in the family and life at that time was borderline poverty or poverty. I went to a kampung school in Rembau and graduated from a secondary school that was also in Rembau," he told The Malaysian Reserve recently.
With no career advisers around to guide an impressionable youth from a large family, perhaps that was where Zainuddin would have ended up. It was sound advice from his eldest brother, a former Institut Teknologi Mara (ITM) student, that changed his life. "He advised me to take up an insurance qualificaion. He told me it was a very difficult course, an external course with the professional papers coming from the UK.
"He said that amongst his friends who managed to clear some of the papers, and not the full syllabus, made it big time in the insurance industry. So, I said to myself, it sounds good, make money, why not," he added. This, Zainuddin said, was in 1984.
"To cut a long story short, I got accepted into ITM (now known as Universiti Teknologi Malaysia, or UITM). Prior to doing the associate (paper), you had to sit for the certificate. "There were 80 of us in that batch class of 1984 sitting for the certificate. Only 30 went on to do the associate. Of that, only four of us made it through," he added.
Zainuddin said, those who did not clear the associate papers could still get a decent job. For him, though, the challenge of being able to take on a difficult endeavour was a prime motivator and it was this drive within him, he felt, that helped him make it all the way through. "I made it, not because I'm clever, but because I've always had the tenacity and the stamina to complete any task placed before me. I guess that's my strong point. The more difficult it is, the more determined I am to clear the hurdles," he said.

The start of a long and fruitful career in the industry began in 1989, as a management trainee at Aviva with the possibility of getting a full time job within six months. Unfortunately for Zainuddin, this opportunity came at the tail end of a recession, which spelled stiff competition for a permanent position. "When I first joined the industry, because (of the) recession, there were a lot of unemployed people in the industry. There was big competition to get a permanent position (in Aviva) but the internship gave me the opportunity to work in a world-class organisation.
"My first real job was after that, as a full executive, was with a company owned by Kompleks Kewangan in the early 1990s called Trust International Insurance (TII), developing a bancassurance channel for the company. "I got my exposure in sales in the insurance industry," he added. That break with TII was pivotal for Zainuddin. After three years, he went on to join Norwich Winterthur before moving on to Malaysia National Insurance Bhd (MNI) and eventually to American National Insurance, which was owned by the New Straits Times Press Bhd (NSTP) group at the time. "I stayed there for a long while. What changed was the company. Because of a series of acquisitions, from NSTP to Bank of Commerce to CIMB, I stayed with one company that changed its shareholders until I became chief executive officer of CIMB Bank Aviva Takaful," he added.

All in all, Zainuddin stayed with the firm for almost 14 years, slowly and steadily moving up the ranks every two years or so. Eventually, though, it was the challenge of something new that attracted him to make the change in mid-January 2009. "If you look at the takaful industry, there are various stages of maturities amongst the eight companies here. HSBC clearly has gone through its crucial, formative stage.
"When you're at the formative stage, it's good to have internal people because you understand the people and the culture.
"When you want to take it to the next stage, you need to get outside people and bring in the industry expertise to come in and take a company to the next level. "I felt that this was a good time for me to come in and bring the company to that next level. HSBC is an admired brand and it gives you more opportunities and avenues to grow," he said. Formed in 2006, HSBC Takaful is a joint venture (JV) that is 49%-owned by HSBC Insurance (Asia Pacific) Holdings Ltd, 31%-owned by Jerneh Asia Bhd and 20%-owned by the Employees Provident Fund (EPF).
To Zainuddin, his challenge for this relatively new venture was to take it to the next level. "In everything, nothing is ever good enough. Every day is a challenge, nothing is ever good enough. Every day you're looking at opportunities to improve from yesterday.
"We're always improving. It's always the next level, it's always a moving target. You've got lots of room to improve. Every day is about improving what we are today," he said.
"Another challenge is to bring takaful to the HSBC world because Malaysia is the first takaful outfit (within the group) and vice versa. "We need, (and) the industry certainly needs, big names like HSBC to champion takaful so that it will make takaful very prominent. That's my challenge, how to fulfill the vision, the set of targets, etc," he added.
The task for the boy from Rembau is certainly a challenging one, what with a very competitive industry and a global economy that has a bad case of the flu but, somehow, you sense that, with his drive, determination and desire to succeed, Zainuddin will certainly move mountains to get the job done.

(This story appeared in The Malaysian Reserve on July 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Prudential’s biggest ad campaign

2009-08-02T20:34:00.000-07:00

Prudential Assurance Malaysia Bhd has allocated RM7mil for its biggest advertising campaign to-date to promote its new medical insurance plan, PRUhealth, reports The Star (July 18, 2009).
According to chief marketing officer Thomas Wong, the campaign starting July 20 via television, radio, print and outdoor advertising, is expected to generate a considerable amount of interest for the unique medical insurance plan, which rewards policyholders for staying healthy by giving them no claims bonus.
“We expect to secure a large proportion of new and existing customers for this first of its kind product in the market,” he said. One of the biggest medical insurers in Malaysia, Prudential paid a third of the industry’s medical costs last year, which amounted to RM900mil, the newspaper reported.

MMIP insurance covers now available at Pos Malaysia outlets

2009-07-15T05:20:00.002-07:00

The Persatuan Insurans Am Malaysia (Piam) last week announced that Malaysian Motor Insurance Pool (MMIP) insurance covers will be available to the public at Pos Malaysia outlets, confirming an earlier report by The Malaysian Reserve.
With effect from July 10, it said private car and motorcycle owners can purchase MMIP's insurance covers from Pos Malaysia outlets throughout the country including Sabah and Sarawak.
In order to immediately address accessibility problems in Sabah and Sarawak, it said insurance for taxis and buses will also be made available from the same day, while those in Peninsula Malaysia from July 24.
"In the current scenario where the motor insurance market is experiencing high loss experience, many insurers have either declined or are scaling back on underwriting risks especially third party insurance. As such, an increasing number of motorists are turning to the MMIP for insurance cover," Piam said in the statement.
On July 23, The Malaysian Reserve reported that the central bank was on the verge of appointing Pos Malaysia Bhd as the agent for motorists to buy motor insurance from the industry pool, now that most insurers have declined to underwrite directly that segment of the insurance market.
It was reported that Pos Malaysia, the national postal services provider which has been in the red for financial years 2007 and 2008, will secure the contract to ensure that motorists are able to secure the third party insurance cover.
In the past weeks, more and more motorists found themselves turned away by their insurer when they wanted to renew their third party cover. Instead, they were told to shop around at other insurance companies that may still underwrite that segment, but to little avail as most general insurers and takaful operators have stopped underwriting directly the risk due to the segment's high loss experience.
In light of the increasing difficulty, Bank Negara Malaysia (BNM) which regulates the insurance and takaful industry had turned to Pos Malaysia to act as an agent on behalf of the motor insurance pool, the insurer of the last resort.
In its statement, Piam said in order to provide convenience and accessibility to the public, MMIP and Pos Malaysia have formed a strategic partnership to capitalise on Pos Malaysia's extensive network of offices throughout the country, in both the urban and rural areas. Pos Malaysia has 684 outlets nationwide which will provide MMIP insurance with 578 outlets in Peninsula Malaysia and 106 in Sabah and Sarawak, it said.
Furthermore, it said Pos Malaysia already has the necessary experience, human resources and IT facilities in place to provide the MMIP's insurance covers.
"This service will be an extension of the existing insurance renewal service that is already available at Pos Malaysia outlets as it currently acts as agents for eight insurance companies and three takaful operators," it said. In addition to insurance renewal, it said Pos Malaysia also offers the renewal of road tax for private vehicles on behalf of Road Transport Department. The MMIP was formed in 1992 to ensure that all vehicles on the road would not be without access to the minimum motor insurance cover required by law.
The MMIP also provides insurance for vehicles that are considered high risks and are unable or have difficulty in securing motor insurance from the normal market.
The liabilities and expenses of the MMIP are shared equally by all the 33 general insurance companies. Currently, the MMIP utilises the branch office networks of two insurers, Multi-Purpose Insurans Bhd and Uni Asia General Insurance Bhd, who serve as the servicing insurers for MMIP. Both these servicing insurers will continue to provide MMIP insurance covers together with the Pos Malaysia outlets.

(This story appeared in The Malaysian Reserve on July 13, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Stronger growth seen for insurance

2009-07-15T05:20:00.001-07:00

The insurance industry is poised to show improvement in performance in the second half of the year on the back of the recovery in the country’s export sector. Many insurance players are optimistic the performance for the second half will be better than the first half of the year underpin by the pick-up in economic activities spurring stronger export growth, reports The Star (July 11, 2009).
Great Eastern Life Assurance (Malaysia) Bhd director and chief executive officer Koh Yaw Hui told the newspaper: "All recent economic indicators suggest that the worst is over as the most affected export industry has been seen picking up and many companies have started recruiting.
"We expect the life insurance industry for the second half of the year to do much better than the first half. Personally, I think this year, the industry should end up having double-digit growth."
The growth driver that will steer the industry in the second half, it quoted general insurer LPI Capital Bhd chief executive officer Tee Choon Yeow will be the export and construction sectors.
The growth in the export industry, he adds, will help in the development of the marine and manufacturing sectors, which in turn will create greater demand for marine insurance as well as fire insurance, it added.
Manulife Holdings Bhd Group CEO Michael Chan was quoted as saying he is positive of the outlook for the insurance for the second half as insurance plays a very important role in one’s financial planning portfolio regardless of the economic cycles.
“Manulife’s insurance business showed strong growth in the second quarter as we launched new products and new agency performance management standards.
“We expect to see continued improvement in the second half as we roll out more new products, further drive the agency performance management standards and continue with our recruitment programmes,” Chan adds.

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Koh says Great Eastern has done very well in the first half of the year registering more than RM360mil in total weighted new business premium, which was more than 50% growth compared with the similar period last year in line with economic improvement.
Riding on the momentum of its strong first half result, he adds the company should continue to do well in the second half and meet its goal of RM800mil in total weighted new business premium for this year.
Based on the company’s first six months results, Tee points out that Lonpac is still optimistic of meeting its target of 15% growth in gross premiums by year-end.
Despite operating in a competitive and challenging environment, it turned in an impressive underwriting surplus of RM35.5mil representing a significant jump of 55.7% over the corresponding period of 2008. It also recorded underwriting surplus in all classes of insurance for the period.
Tee attributed the improved performance to prudent underwriting which has help it achieve profit and premium growth year on year.
He stress for insurers to improve performance amid the tough economic environment, they need to also display a high degree of transparency, corporate governance and professionalism.
According to Bank Negara’s statistics, gross premiums for general insurance last year stood at RM9.73bil against RM9.07bil in 2007. Net premiums for the period was also higher at about RM9bil as oppose to RM8.2bil (in 2007).
The Life Insurance Association of Malaysia (LIAM), in releasing its latest figures, says the industry delivered a strong first quarter (January-March) performance with new business sales growing by 14% on weighted premium basis.
Weighted premium is calculated as 10% of single premium plus 100% of regular premium.
The growth, LIAM says, was contributed by a strong performance in regular premium sales which went up by 24% compared to the same period last year.
Single premium business, however, registered a decline of 43% due to the global financial crisis and the decline in interest rate.
By class of business, investment-linked business, normally perceived as savings related products, registered a sharp decline of 23% by weighted premium.
The sale of single premium investment-linked declined from RM584mil in the first quarter of 2008 to a mere RM48mil in the corresponding period in 2009.
Traditional business, normally perceived as protection related products, on the other hand registered a strong growth of 43% during the period as opposed to similar quarter last year.
The sales of group insurance business remained fairly static with total premium of RM652mil compared to RM653mil a year earlier, LIAM says.

Key growth drivers

Koh said the two key growth drivers for the industry for the second half will still be the distribution channel as well as products.
“For us, the second half of the year will be an exciting period. Apart from continuing with our strategy to further enhance the productivity and professionalism of our 17,000 agency force, we will be distributing our products through the bancassurance channel under the financial sector liberalisation plan.
“Great Eastern is now able to have bancassurance tie-up with all the banks including foreign banks in Malaysia and hope to sell its first policy within the next one to two months,” he adds.
As far as distribution channel is concern, Koh says bancassurance is set to grow faster after the liberalisation as there is now no restriction of insurance companies tying up with banks to enhance their sales.
On the possible and likely challenges for the industry, Tee says it is the increasing claim trends from motorists, especially on bodily injury as well as from motor theft.
“We believe that the most important step that needs to be taken to address these issues is to practice prudential underwriting and to have in place strong claims management and underwriting processes,” he adds.
Koh says one of the challenges is for agents to advise consumers on the importance of financial planning to meet their future goals since people tend to be very prudent in their spending during the current difficult times.
As such, it is important that agents are professional and have the required knowledge and competency to play that role, he explains.
Chan views the state of the economy as a challenge for the industry. “The positive news is that the Government has announced numerous stimulus plans to help drive economic growth but the pace of growth may be impacted by external factors among which is the recovery of our export markets.
“Also, equity markets have not stabilised and should they continue to be volatile, it will impact investment income for insurers,” Chan says.

Exim Bank to introduce takaful products next yr

2009-07-09T00:19:00.000-07:00

Export-Import Bank of Malaysia Bhd (Exim Bank) is poised to expand its reach further by offering better options to customers via the introduction of Shariah-compliant products.
Islamic financing has been identified as a new area of growth for the bank in view that Malaysia is expanding trade involving the Organisation of Islamic Countries (OIC) member states.
The bank has envisaged that by end-2009, it would have sufficient Shariah-compliant banking products to cater for the needs of its growing global customers, said managing director/CEO Mohd Fauzi Rahmat.
"We are also planning to introduce takaful (Islamic insurance) products by next year," he said in a statement on Monday.
Exim Bank supports the financing needs of Malaysian companies and investors with operations in four continents across two dozen countries worldwide. Asean and Middle East will continue to be major contributors to the bank's portfolio with about two-third of its exposures while Africa, Europe and Asia Pacific make up the rest.
According to Fauzi, the bank is committed to continue its drive to support local exporters and investors extending their international business by providing banking facilities and insurance coverage particularly those that significantly contribute to the extension and enlargement of Malaysia's export volume, value and markets.
While the bank recognise that 2009 would be more a challenging year amidst global economic uncertainties, it would continue to provide support to its existing and potential customers and partners who are willing to take the challenge and participate in the still significant global trade and investments and to be ready for future businesses when the economy picks up.
In 2008, Exim Bank approved a total of RM460.3 million direct loans and guarantees to customers in various sectors including construction, investment, manufacturing and commodity trading.
In addition, the Export Credit Refinancing, extended via participating financial institutions and by far the single largest product of the bank by volume, contributed a total of RM9.5 billion in loan disbursements compared with RM8.4 billion in the previous year.
In trade credit insurance, it has a total of RM2.43 billion business in force in 2008, against RM2.78 billion in 2007. As for commercial and political risk insurance business, the bank approved RM120 million worth of business last year reflecting it cautious approach in light of the global economic crisis.
The total Malaysian exports insured for 2008 amounted to RM2.55 billion and is spread over 72 countries primarily across Asia and Africa.
"Exim Bank maintained a positive and stable performance for both banking and insurance businesses although a more selective approach has been adopted to respond to the current global economic situation," Fauzi said.
To strengthen its capacity to undertake more businesses, the shareholders' funds of Exim Bank has increased to RM2.8 billion in 2008 from RM839 million a year ago. This would go a long way in ensuring that Exim Bank continues to thrive as a vibrant and active Development Financial Institution for Malaysian exporters and investors over the medium and long-term.

(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Takaful Malaysia eyes 50% market share in 2-3 years

2009-07-09T00:18:00.000-07:00

By T Vignesh
Syarikat Takaful Malaysia Bhd (Takaful Malaysia) expects to capture slightly more than half of the takaful industry's total asset market share in the next two to three years despite the current economic crisis. Managing director Datuk Mohamad Hassan said the industry's total assets have reached RM12 billion and the company's share currently stands at RM4.05 billion.
"We are confident of achieving slightly more than the current takaful market rate, which is between 22% and 25% per annum," he told reporters after a signing ceremony with Standard Financial Planner Sdn Bhd (SFP) in Kuala Lumpur yesterday.
Takaful Malaysia became the first in the takaful industry to add professional financial advisors to its existing portfolio of distribution channels following the appointment of SFP to market its products. SFP has a nationwide network of more than 300 representatives of whom 75 are licensed financial advisors with Bank Negara Malaysia.
Mohamad Hassan said that this will enhance the penetration of the company's family and general insurance products into the middle-upper Malaysian market, thereby makes Takaful Malaysia's products more accessible to a wider customer base.
He said the company is confident of the selection of SFP due to its position as a market leader and largest independent financial advisory group in Malaysia. S FP is also the first financial planning group in Malaysia to hold both Financial Advisors (FA) and Corporate Unit Trust Advisor (CUTA) licences.
At the signing ceremony, SFP's CEO Alfred Sek said the past ten years have witnessed fresh changes to the financial planning industry and its delivery of financial advice in Malaysia.
He said that Takaful Malaysia will greatly benefit from this arrangement as its potential customers will develop full confidence in the products offered, through high quality independent advice from these Financial Advisors.
Meanwhile, Takaful Malaysia has plans to undertake a rebranding exercise to reflect its fresh characteristics in conjunction with its 25th anniversary this year.

(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Axa Affin sees plenty of potential post liberalisation

2009-07-08T03:14:00.002-07:00

By Alfean Hardy
Axa Affin Life Insurance Bhd, a local-international joint venture (JV), sees a lot of potential for itself going forward in the new climate of liberalisation in the finance and insurance sectors, and is making plans to tap into these opportunities, its chief marketing officer Nicholas Kua Choo Ming said.
Despite being a relatively young start-up, Axa Affin sees a lot of opportunities to tap into going forward.
"When the liberalisation was announced, there were reports that spoke of opportunities for foreign players and that local players would feel more pressure," Kua said. "For Axa Affin, we see it as an opportunity. Granted that we're a start-up and we're entering into a new era of liberalisation, (but) we have a head start over new entrants coming in.
"We are already operating and, with our business model, we can outpace our competitors in terms of growth and emerge stronger and in a better position," he told The Malaysian Reserve in Kuala Lumpur recently.

Axa Affin is 51%-owned by local giant Affin Holdings Bhd and 49%-owned by global financial protection and wealth management giant Axa Group. The JV was incorporated in early 2006. Previously, both parties had been collaborating in the general insurance area for many years. Under the liberalisation of the finacial sector announced in April 2009, foreign equity participation in insurance and takaful JVs was raised to 70%. In addition, locally-incorporated foreign insurance and takaful companiess are now allowed to establish branches nationwide without restriction, while the restriction for such firms to enter into bancassurance/bancatakaful arrangements with banking institutions have also been lifted. Axa Affin's strengths, Kua said, stemmed from having strong parents.

"We're part of a very strong group, the Axa Group, which is a leading global player, and we have a strong shareholder in Affin," he said. "We are able to leverage on Axa's expertise and its robust business platform. We have access to eight other operating entities in Asia like China, India and Hong Kong. "Whether it's product innovation, distribution management and customer services, we have best practices that we can follow," he said.

"As part of the LTAT Group, Affin's business is across almost the entire Malaysian landscape and there are major opportunities to work with local groups, either via their group insurance or banking group," he said, adding that about half of Affin Bank's 80-plus branches already have dedicated Axa Affin advisers attached to them, making it the only bancassurance relationship of its kind currently. "And, as Affin expands, we will expand with them," he said.

Kua said one of the challenges going forward was building its distribution channel, which mostly consisted of its agency force and its bancassurance relationship with Affin Bank and other bank partners. "One of the challenges is growing our agency manpower. We're above 300 now and we aim to hit the 1,000 threshold by the end of the year," he said. He also said that the firm is upgrading the capabilities of its agency force to eventually see a fully professional force. The target time frame is by 2012, to coincide with Axa's global aspirations to be the preferred company of choice by then. Kua said Axa Affin was also able to sign up with other banks under a multi-provider bancassurance model.

"We are currently working with three or four other partners. With liberalisation, the key now is how we work with these banks (who have other providers as well) and make ourselves the preferred provider," he said. "Axa, on a regional basis, has always believed in a multi-distribution platform. The same is true whether we're in Thailand, the Philippines, Hong Kong or Indonesia. "We have both bank partners and the agency force. The blue print is there, (and) the business model is there in every entity that we enter into," Kua said.

(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Insurers may be forced to cut costs, outsource

2009-07-08T03:14:00.001-07:00

European insurers such as Allianz SE and Axa SA may be forced to cut costs, outsource more functions and boost revenue from emerging markets to maintain earnings growth as the recession in their home markets deepens, consulting firm Accenture Ltd sai, reports Bloomberg.
Insurers may gain from moving asset management, claims handling and the underwriting of insurance risks outside the company, Thomas Meyer, the Zurich-based managing director for Accenture’s insurance practice in Europe, Africa and Latin America, said in a telephone interview.
"Insurance is a 300-year-old industry and it hasn’t changed that much since its inception, with the average insurer still handling about 85% of its operations that create value inhouse," Meyer told the news agency.
In contrast, "car manufacturers nowadays only handle about 15% themselves," he said. Almost 16,000 people have been fired by insurers worldwide since the start of the financial crisis as they seek to trim costs to offset slower earnings growth.
Global life and non-life insurance premiums fell in real terms last year for the first time since 1980, Swiss Reinsurance Co, the world’s second-largest reinsurer, said last month. The industry has written down US$243 million (RM862.34 million) on credit and investment losses since the start of 2007.
"While the financial crisis will lead to declining premium income in developed and saturated markets, emerging markets such as China, India and Brazil will offer opportunities to grow," Meyer said. British insurers are among companies that have announced moves to outsource some services. Aviva plc reduced its workforce by 3,000, or 6%, and said it was scaling back operations that had been outsourced to India.

Perwakim submits memorandum on motor insurance rebates

2009-07-05T23:53:00.004-07:00

PERWAKIM, an association of general insurance agents in Malaysia, has submitted a memorandum to Bank Negara protesting the central bank's proposal to give rebates on premiums for consumers that renew their motor insurance directly with insurance firms, reports Business Times.
They claim that the move, which takes effect from today, would adversely affect consumers, agents and the insurance industry in general.
Perwakim president Liza Lau said a copy of the memorandum was also handed to the office of Prime Minister Datuk Seri Najib Tun Razak, the Ministry of Finance and Ministry of Human Resources.
Lau led more than 50 agents in a peaceful picket in front of Bank Negara yesterday. The crowd dispersed after about two hours.
She said there are a total of 50,000 insurance agents nationwide of which 40 per cent are full-time agents.
Insurance agents earn a 10 per cent commission from the insurance companies.

Allianz to launch Islamic pension product in 2010

2009-07-05T23:53:00.003-07:00

Allianz will launch its first Islamic annuity product next year, the head of its takaful unit said, tapping into a growing number of clients in the Middle East keen to add to their state pensions. It has long been hard for takaful - or syariah-compliant - insurers to sell such products, because of the lack of long-term Islamic bonds with which to match pension liabilities, Abdul Rahman Tolefat said on Wednesday, reports Reuters (July 3, 2009).
The German insurer's unit had lobbied banks to issue long-term debt and unnamed banks had now issued 25-year to 30-year sukuk, Tolefat said at a conference.
"This is really a promising industry, especially in the GCC (Gulf Cooperation Council) - people are looking for private pensions because state pension are not high enough," he said on the sidelines of the conference, the report added.
Allianz was one of the first Western insurance companies to venture into takaful, in which members contribute to a pool of funds which is used to indemnify participants who suffer a loss, much in the same way as with a mutual insurer.
Allianz Takaful already has a pension product which pays out over a pre-agreed number of years, but annuities that guarantee income until death are still an untapped market.

Sykt Takaful aims to be largest player

2009-07-05T23:53:00.001-07:00

SYARIKAT Takaful Malaysia Bhd (STMB), which has RM4 billion in assets, aims to be the largest takaful insurer in the country in terms of assets within two years.
Group managing director, Datuk Hassan Kamil, said currently, STMB was in second position after Etiqa Takaful Bhd, which has 400,000 policyholders.
He said the company hoped to sign up at least 10 per cent more policyholders within a year of the launch of the one-stop Takaful myDesk in collaboration with Lembaga Tabung Haji.
"Through the Takaful myDesk, the company also hopes to achieve approximately RM1 million worth of contributions, also within the first year of operations," he told reporters after the launch of Takaful myDesk in Kuala Lumpur today.
Hassan said the contributions were expected to be much higher because the customers could also renew their motor policies, buy Takaful mySiswa (education plan) and Takaful myRawat (health insurance in preparation for them to go on haj).
He said the collaboration would also boost its presence with the establishment of Takaful myDesk at selected Tabung Haji (TH) branches nationwide in addition to its present 56 branches.
The TH branches are in Jalan Tun Razak (Kuala Lumpur), Penang, Pasir Puteh (Kelantan), Bagan Serai (Perak), Kuala Pilah (Negeri Sembilan), Kota Tinggi (Johor) and Bentong (Pahang), he said.
"It's a cost-effective distribution network. The partnership allows us to market our products through TH branches," he said.
Under the agreement, Hassan said, STMB would provide facilities such as computers, while TH the space to set up Takaful myDesk.
"We have been studying this proposal for the last six months where we actually identify together with TH the locations where we feel will have the maximum impact," he said.
Hassan said the set-up of MyDesk would be in stages. The TH Jalan Tun Razak branch started operation on June 1 while the Penang branch will commence on August 3.
"Hopefully in the next six months we will be able to cover all the locations," he said.
He said the cost was minimal because technically, what was needed was a computer and the connectivity.
"So, the person sitting at the desk will be online with our takaful system at the head office.
"They can actually issue the certificate and receipts on the spot," he said. - Bernama (22 June 2009)

Insurance industry to undergo transformation

2009-07-05T23:50:00.000-07:00

THE Malaysian insurance industry is undergoing a transformation to provide a strong foundation for a more resilient and competitive industry in support of Malaysia's economic development agenda.
Bank Negara Malaysia's (BNM) assistant governor, Datuk Muhammad Ibrahim, said Malaysia has implemented the risk-based capital framework this year and new product regulations. He said these developments were part of a broader move towards introducing a more principle-based regulatory regime that would allow greater flexibility for insurers to compete and improve performance.
"Later this year, BNM will consult the industry on risk management standards that insurers are expected to observe as part of this evolution," he said in his keynote address at the LOMA/LIMRA 17th Annual Strategic Issues Conference here today.
The conference, themed "The New Global Economy: Resilience in Challenging Times", is jointly organised with the Life Insurance Association of Malaysia. It aims to serve as a platform for captains of the financial services industries operating in Asia to discuss the latest movements in the industry.
Muhammad said the distribution channels for insurance products and services had also been broadened significantly with the development of bancassurance and financial advisers.
"This will contribute towards enhancing revenue and reducing costs, while enhancing consumer protection and improving the insurance penetration rate in Malaysia," he said. - Bernama (22 June 2009)

BNM close to appointing Pos Malaysia as agent

2009-06-23T20:08:00.000-07:00

By HABHAJAN SINGH
THE central bank is on the verge of appointing Pos Malaysia Bhd as the agent for motorists to buy motor insurance from the industry pool, now that most insurers have declined to underwrite directly that segment of the insurance market.
It is understood that Pos Malaysia, the national postal services provider which has been in the red for financial years 2007 and 2008, will secure the contract to ensure that motorists are able to secure the third party insurance cover.
In the past few weeks, more and more motorists found themselves turned away by their insurers when they wanted to renew their third party cover. Instead, they were told to shop around at other insurance companies that may still underwrite that segment, but to little avail as most general insurers and takaful operators have stopped underwriting the risk directly due to the segment's high loss experience.
In light of this increasing difficulty, Bank Negara Malaysia (BNM) which regulates the insurance and takaful industry is understood to be turning to Pos Malaysia to act as an agent on behalf of the motor insurance pool, the insurer of the last resort.
As it is, Pos Malayia is already an agent for various general insurers who provide third party motor insurance, including the likes of Kurnia Insurance (M) Bhd and Allianz General Insurance Company (Malaysia) Bhd.
However, under the new proposed arrangement, Pos Malaysia would act as an agent for the Malaysian Motor Insurance Pool (MMIP), a high-risk insurance pool run collectively by the industry under orders from the regulators, and no longer as a direct agent for the insurers themselves.
At present, MMIP, which is a subsidiary of MNRB Holdings Bhd (MNRB), has appointed two insurance companies to act as its agents.
"With more and more insurers declining to underwrite third party motor insurance risk, their only other resort is the insurance pool run under MMIP. It only makes sense for the pool to be more widely accesible, and not limited to just two insurers who may not have branches throughout the country," said one industry executive.
Sources say BNM would be making the announcement on the alternate and new channels for purchasing third party motor insurance soon. Pos Malaysia seems to be the obvious choice simply due to its nationwide presence.
In 2008, the Government resorted to Pos Malaysia to disburse the fuel cash rebate. Pos Malaysia chairman Tan Sri Dr Aseh Che Mat in the company's 2008 annual report statement referred to this as a recognition that "Pos Malaysia has the widest retail footprint in the country."
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, and are instead sending their customers to a highrisk insurance pool.
The report also noted that a recent decision by two local insurers — Kurnia and Pacific & Orient Insurance Co Bhd (P&O Insurance) — to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premiums going towards the insurance pool, which had already seen a big jump last year.
Even before the two local insurers made the decision, the motor insurance pool had collectively underwritten total gross premiums of RM13.33 million, which is four times more than the RM3.11 million in premiums in 2007.

(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Motor insurance premium rebate blindsides agents

2009-06-23T20:06:00.000-07:00

COMMENT by Habhajan Singh
The central bank should have done better when managing the policy directive on rebates for direct purchases from insurance companies.
The directive is wonderful: It is pro-people and puts money into their pockets should they buy their policies directly from the insurer. It also fits perfectly with Bank Negara Malaysia's (BNM) liberalisation plans for the financial industry.
However, the move jolted some 40,000 insurance agents. They claim that they first knew of the directive when they read it in the newspapers. Little wonder then, that they had a hard time digesting the news that the central bank would now allow individuals to pocket up to 10% of the premium value the next time they renewed their motor insurance directly with the insurer.
At a press conference to announce the initiative last week, BNM deputy govenor Datuk Mohd Razif Abd Kadir used the weight of his office to announce the move, despite protests from various corners.
Effective July 1, individuals who purchase general insurance coverage directly from insurance companies will be eligible to receive premium rebates, with the quantum depending on the type of incover purchased, the central bank said in a statement.
For motor insurance, it stated that an individual would receive 5% of the premium within the first year of implementation and 10% thereafter. For others including businesses, insurance companies have the flexibility in providing these rebates. The direct purchase includes walk-in, through the internet, direct mailing and via the telemarketing channel. In relation to consumers, it is a laudable move.
Consumers will now be able to renew their insurance policies directly, if they choose not to engage an agent, thereby actually saving cost. For insurers', they can no longer book as revenue the commission should customers come to them directly.
But they have been in the loop all this while. Left out in the cold, it would seem here, are the agents.
When asked, BNM officials at the press conference confirmed that they have been talking to officials at the Persatuan Insurans Am Malaysia (Piam), but not directly with any particular outfit representing the interests of the agents.
Here's the beef. Piam represents these companies, and not the agents. True, the agents come under the companies. Therefore, it is possible to argue that when the central bank talks to these companies, the message should reach the agents. But that does not seem to have taken place in this instance. With notice in advance, agents could have planned to weather a potential drop in income.
Some may have been spurred to add value in their offerings to customers. After all, not every customer is going drop their agent in light of the rebate. However if prior notice was offered, agents could have taken preemptive measures to keep their customers. One forward looking car seller cum insurance agent has, for example, been returning a portion of the commission earned to customers. This was to entice customers to stay with them.
With a little bit of warning, others may have come out with such simple but effective game plans.

(This story appeared in The Malaysian Reserve on June 24, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Asia attractive to major players

2009-06-23T20:03:00.000-07:00

IN THE PHOTOGRAPH: (from left) LIAM president Md Adnan Md Zain, Kerzner, Bank Negara Malaysia assistant governor YBhg Dato' Muhammad Ibrahim and Malaysian Host Committee chairman Ng Lian Lu at the 17th Limra/Loma Strategic Issues Conference held in Kuala Lumpur recently

By Alfean Hardy
Asia's relatively young and large population and its growing middle class have made the region an attractive venture for many North American and European life insurance companies looking for opportunities amidst the current economic downturn, Limra, Loma and LL Global Inc president and chief executive officer Robert Kerzner said.
Limra is an association that provides research, consulting and other services to the insurance and financial services sectors. Loma is an international association of insurance and financial services companies. LL Global is their parent organisation.
In his speech at the 17th Limra/Loma Strategic Issues Conference held in Kuala Lumpur recently, Kerzner said, over the last few weeks, capital has once again begun to flow and US firms like Prudential Financial and Metropolitan Life Insurance Co have been raising capital via stock and/or debt offerings, which he sees will help fuel future growth in the global insurance sector. As the sector transforms, he said many firms will begin to decide in which market and country they would want to play.
"Many will look to Asia. What we're seeing worldwide, major players are pulling out of some major green field markets and are choosing to play much harder in others. And it's clear that the growth of the next decade is clearly much more focussed in Asia than the US or Western Europe," he added.
Kerzner said, with the renewed capital within the system, many chief executive officers of major US companies have expressed an intent to make use of the global financial crisis to gain ground and grow market share over their competitors.
"In the US, 79% of chief financial officers (CFOs) say they want to buy life (insurance) companies and 75% want to buy the group operations.
"At the same time, they have their eyes clearly on Asia. Prudential has already bought one company in Japan and is rumoured to be looking at others. At the same time, the president of Metropolitan said he would sleep better at night if they owned another asset in Japan," he added. Speaking to reporters later, Kerzner said Asia's large population and not as mature markets meant there were more opportunities to sell a whole array of products.
"In many Asian countries, you have an ageing population and, there by all accounts, there's simply been not enough money saved for retirement, and this was prior to the crisis," he said.
"Also, Asia has many who are coming into the new middle market of having more assets and your economy is growing wealth at a faster pace and so there's a broad need for more products that life insurance companies have. When you look at the demographics across Asia, over time, the outlook is optimistic," he added.
All countries within Asia, Kerzner said, are attractive. "Japan is mentioned more often because, for some of the western companies have a better understanding of the Japanese economy and there's a more immediate need for retirement products (given its large ageing population) there," he said.
"But I think you're going to see the Europeans, in particular, and the North Americans look broadly within Asia. "When I talked about green field operations of the Europeans being closed down, that may mean more focus is given here in the Asian countries and choose to be a fierce competitor in the markets that they've decided are crucial.
"Also, there's also a history that shows that, when one or two of these (Asian expansions) are announced, then others will feel the need to get in before it's too late. "You could see, over the next year, as capital frees up and companies look to where they really want to expand strategically, then you will see Asia becoming a focus again," he added.
Kerzner said regulatory restrictions and competition would not be major hurdles for western life insurance companies venturing into Asia as many of these firms have already operated in regulated industries in the west.
"The major barrier to entry is culture and really understanding what's crucial within each individual Asian country," he said.
"If you look at history, many have entered the US and Western European markets, that's because that's where there's been a great deal of wealth. "I think companies have traditionally looked at where the needs are the greatest but where's the most activity versus longer-term involvements in countries that will be slower to grow.
"I also think, if you look at Asia, the companies that have done well in Asia for many years, particularly those not based within the Asia region have a stong base in (Asian) countries and, as the country grew, they grew as well.
"So, I believe the new entrants will tend to sometimes look for the more matured markets but those who look for a long-term view will look at the more emerging markets and take more of a five, 10, 15-years view," he added. Kerzner said it had been the European global players that have had the broadest reach worldwide.
"I can't comment on specific companies but if you look at announcements made last week in China and Taiwan, you are seeing and will see many, many more deals being announced or at least companies buying lines of businesses and licenses to expand and leave open opportunities for the future," he added

(This story appeared in The Malaysian Reserve on June 24, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

BNM: Trust and growth essential for insurance sector

2009-06-23T19:56:00.000-07:00

By Alfean Hardy
Bank Negara Malaysia has identified four priorities that insurers should adopt and is itself undertaking more measures in the pipeline to insure the growth, and the public trust and confidence in the insurance sector, its Assistant Governor Datuk Muhammad Ibrahim said.
"The first area of priority is ensuring strong capital buffers and sound risk management by insurers. The second area of priority concerns the management of financial risks by insurers," he told delegates in his keynote address at the recent LOMA/LIMRA Strategic Issues Conference in Kuala Lumpur
"Thirdly, there is also a need for more uniform global approaches to the effective regulation of reinsurance activities. Fourthly, as part of the financial system, a key imperative for insurers is re-building the confidence of retail investors and consumers in financial institutions," he added. Muhammad said the recent decades had indicated that the significance of the insurance industry to financial stability has become more pronounced and the adoption of core fundamentals essential.
"Insurance and reinsurance companies have become an important and growing class of financial market participants," he said.
"The involvement of the insurance industry in the capital markets has both deepened and broadened substantially (and), from being important investors, insurers and reinsurers have evolved to become important intermediaries in a broad range of financial markets," he added.
Muhammad said recent problems indicated that the lines between the insurance and banking sectors had become more blurred amd that unregulated activities and failure in internal risk management of a large global insurance group could adversely affect derivatives, and bank counterparties in creditrisk transfer transactions on a scale that had led to unprecedented market failure.
"As an integral and important component of the financial system, building the resilience of the insurance industry is therefore, critical. Unless adequate attention is directed towards promoting resilience in all of the core components of the financial system, efforts to preserve financial stability and prevent the occurrence of a future financial crisis and its consequences would be jeopardised," he added.
Muhammad said achieving more meaningful and consistent protection for consumers was also critical to rebuild confidence. To that extent, he said that in July 2009, all licensed local insurers and takaful operators would be required to comply fully with its guidelines on the introduction of new products.
"A large part of the Guidelines is devoted to addressing the responsibilities of the operators towards consumers in ensuring that the needs and rights of consumers are respected, and that consumers are clearly and fully informed of the nature and risks associated with the products," he added.
Muhammad said the local industry was undergoing a transformation that would provide a strong foundation for a more resilient and competitive industry. He said that the introduction of the risk-based capital framework and other initiatives were part of a broader move to introduce a regulatory regime that would allow greater flexibility to insurers under a rigorous internal supervisory and oversight framework.
"These developments will create opportunities for insurers to build financial solidity, restore consumer confidence and respond proactively to changing consumer needs in a more uncertain environment. Later this year, the bank will also consult the industry on risk management standards that insurers are expected to observe as part of this evolution.
"The priorities of the industry should be equally weighed between preserving the inherent strengths and original purpose of insurance, while committing to meaningful change that is needed to secure long-term viability and contribute to financial stability," he added.

(This story appeared in The Malaysian Reserve on June 24, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Life insurers urged to focus on fundamentals to ride out storm

2009-06-23T19:54:00.000-07:00

By Alfean Hardy
The Life Insurance Association of Malaysia (LIAM) is calling upon the life insurance sector to remain focussed on the industry's key fundamentals in order to ride out the global financial crisis and its president, Md Adnan Md Zain, is predicting single digit growth for the sector in spite of the current economic climate.
In a speech at the 17th Strategic Issues Conference in Kuala Lumpur yesterday, Md Adnan said 2008 had been a challenging year for the indusry, given a global financial turmoil that has been considered the worst since the Great Depression of the 1930s.
"Nevertheless, there are always sliver linings that will appear with untapped business opportunities, multiplied with unexpected growth possibilities. By focussing on key fundamentals, including sound risk management, highly prudential and regulatory standards, and strong corporate governance, we are confident that we'll be able to ride out this stormy crisis," he added.
Speaking to reporters later, Md Adnan said that the country had benefited from steps undertaken by the authorities, like the adoption of the risk-based capital framework in January 2009, which aimed to create a strong risk management structure.
"Players are now more mindful that of ensuring that they put in place good processes and proper management practices to be able to bring out strengths in various areas for the betterment of themselves and their policyholders and, that in itself, will make the players perform at far higher standards," he added.
Md Adnan, who is also the chief executive officer of MCIS Zurich, said the life insurance sector has also been helped by a public at large that has come to a great understanding on the importance of life insurance in their lifes, barring investment-linked products.
"Even as we speak, the economic situation is the one that is not encouraging. Yet, there's still growth in the life insurance industry. Perhaps, because of the investment climate, investmentlinked products may not be featuring very well in terms of growth but the traditional life insurance is still showing good developments. People are still buying insurance. That clearly shows the knowledge, the awareness and people are recognising the importance of life insurance, both in terms of protection as well as savings. Medical is also another area that is shifting up well. And, for a country like ours, these are areas that will really see more growth opportunities with the growing population and the understanding of needs of people protecting themselves. Medical costs are also increasing and people have become more conscious of the good of insurance to provide them with a good position to provide for themselves and their families through insurance coverage," he added.
Md Adnan said, to question about growth forecast for the sector this year was his personal view that the life insurance sector would see single digit growth this year.
"We have been having some double digit growth in the past. You will see growth but it will be single digit growth," he said. "For traditional life insurance, growth is fairing much better. but investment linked is slowing down. It's cyclical and with the measures being undertaken by the authorities, in ensuring the stability of the economy, it's a matter of time that you will find the positive changes taking place and that will again bring back the confidence in the investmentlinked segment," he added.

(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Insurance premium rebate to go ahead, says BNM

2009-06-21T21:18:00.000-07:00

By JASON NG
Bank Negara Malaysia (BNM) will proceed with insurance premium rebate, a move that would give “millions of ringgit” back to consumers, said deputy governer Datuk Mohd Razif Abd Kadir.
The latest policy has come under protest from various quarters as it would effectively give consumers the incentive to bypass the use of agents by mandating insurance companies to give rebates for a direct purchase from insurance companies.
"We should look at the broader perspective particularly in fairness toward consumers," Mohd Razif said in a media briefing in Kuala Lumpur last Friday [June 19, 2009].
The policy for direct purchase channels will be effective July 1, 2009 and the quantum of rebates will depend on the type of insurance covers purchased.
Direct purchase includes walk-in, via internet, direct mailing and telemarketing. For motor insurance, individuals will receive 5% premium rebate in the first year of implementation and 10% subsequently. For others including businesses, insurance companies have the flexibility of providing the rebates.
Last year, the general insurance industry recorded gross premiums of RM4.4 billion, half of which are from the motor insurance segment.
According to BNM, about 15% of the gross premium collected are via direct channels.
"This is part of our fine-tuning of policy to put cash back in consumers' pocket. It is not necessary that the livelihood of the agents would be affected. People will still use the service of the agents if (the service) are value-added," Mohd Razif said.
It is understood that insurance companies pay 10% of the premium to agents, numbering around 40,000 with 15,000 working full time, as commission and consumers should be entitled to enjoy rebates that would otherwise, be pocketed by the insurance companies, he added.
Among those reported to be unhappy includes Proton Dealers Association Malaysia that claimed the policy would "destroy" the automotive dealers network while General Insurance Agents Association Malaysia organised a meeting recently to protest the implementation.
"We had a lot of protest and pressures for us to withdraw," Mohd Razif said, adding that "there is nothing much BNM can do" should there be further protest from any quarters.

(This story appeared in The Malaysian Reserve on June 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Motor insurance needs an overhaul

2009-06-15T00:44:00.000-07:00

By Habhajan Singh
Motor insurance in Malaysia requires a serious overhaul, with the perennially unprofitable third party coverage demanding a separate treatment altogether, says a senior industry executive.
The issue has come to a boil for general insurers and takaful providers active in the motoring sector, with most of them now no longer providing third party motor insurance coverage due to the high claims ratio.
"I'm proposing a rethink of our Road Transport Act 1987 and a review of the motor insurance policy. A new government agency should be set up to handle at least the Act cover, while redesigned insurance policies should only cover one's own damage, leaving third party claims to the agency. An industry pool could provide base underwriting," said Datuk Syed Moheeb Syed Kamarulzaman, the newly appointed chairman of the Malaysian Takaful Association (MTA).
Under this proposal, a new industry pool would be setup to manage third party made compulsory by the Act, commonly referred to as the Act cover.
Here, Syed Moheeb proposes that each vehicle licensed holder should contribute individually to the pool. Currently, third party insurance is pegged to the vehicle, irrespective of the number of drivers nor the name it is insured under. A family car may be insured under the head of the family, when in fact it could be driven by all children. This could result in a situation of inadequate premium against the risks exposed.
The suggestion by the seasoned insurer is for everyone with a valid licence to bear a portion of the risk.
"When you pay for your motor licence, a portion automatically goes to cover third party claims. This way, the third party risk is automatically handled by the new pool," said Syed Moheeb who is also the president and chief executive officer of Takaful Ikhlas Sdn Bhd.
This would also mean insurers and takaful operators will only provide coverage for claims other than those mandated under the Act.
The pool could replace the Malaysian Motor Insurance Pool (MMIP), a high-risk insurance pool run collectively by the industry under orders from the regulators, which acts as the insurer of last resort.
Under the present set-up, when a vehicle owner is unable to get any insurer to provide him liability cover for third party, MMIP would step in to provide the cover, at a rate higher than what insurers are allowed to charge. Industry players have been lobbying for years to change the tariff-driven premium structure for motor insurance, claiming that providing coverage mandatory under the Act is almost a sure loss-making proposition.
The move has not yielded results thus far, industry executives said.
"So far, we have been looking at tweaking insurance premiums rather than changing the whole structure. Perenially, we have a problem of inadequate premiums to pay for the increasing third party claims.
"This year, several insurers have found it difficult to continue writing third party risks. So, if we want different results, we need to do things differently. We need to reengineer. This suggestion, if it happens, will be headed by a new body supported by the government," said Syed Moheeb.
Syed Moheeb, a seasoned insurer with experience in reinsurance, was involved some years ago when the general insurance association, Persatuan Insurans Am Malaysia (Piam), was actively discussing with Bank Negara Malaysia (BNM) suggested changes to the motor insurance premium tariffs.
In the meantime, industry executives said writing third party motor cover had become more and more untenable from the profit standpoint, forcing players to steer clear of the segment.
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, thus sending their customers to the highrisk insurance pool instead.
On June 1, this newspaper also reported that Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, was set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of the sector.
The general insurer, a subsidiary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
From latest figures released, Piam said combined loss ratios for the motor insurance business in 2007 and 2008 stood at 114% and 115% respectively. It said insurers have also expressed their concerns over the rapidly increasing claims pay-outs especially for third party bodily injury claims. The claims ratio for third party bodily injury claims skyrocketed to 262% in 2007 and 288% in 2008, it added.
Industry sources estimate that the standalone motor 'Act' insurance, which is the portion compulsory for all motorists, has generated gross premiums of close to RM600 million last year, with Kurnia Insurans and P&O Insurance conducting close to half of the industry's total.
The motor 'Act' insurance policy provides protection against death and injury to third parties. The third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.

(This story appeared in The Malaysian Reserve on June 15, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Motor claims a major drag on profits of insurance firms

2009-06-15T00:42:00.000-07:00

By Habhajan Singh
Claims for motor insurance were a major drag on the operating profits of general insurance and takaful operators last year, according to an analysis of statistics released by Bank Negara Malaysia (BNM).
For 2008, operating profit of the general insurance and takaful business, which declined by 44.5% to RM0.7 billion, was affected by a higher claims ratio of 84.2%, mainly from due to claims by motor vehicle.
Last year, the claims ratio stood at 79.6%, which meant that for every ringgit of premium collected by these insurers and takaful operators, close to 80 sen went to claims. And the situation is expected to worsen, going by the caution thrown in by the the central bank's Financial Stability and Payment Systems Report 2008 released in March.
The BNM report said claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance. This will certainly put more pressure on providers of motor insurance, many of whom are pulling the plug when it comes to providing third party motor coverage.
"Bodily injury makes about 90% of third party claim. It is increasing, making it very painful for insurers.
"To make matters worse, there are fears that fraud syndicates are reaping big, big money from fraudalent third party bodily injury claims," said Takaful Ikhlas Sdn Bhd president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman.
Major players in the motor insurance sector include Kurnia Insurance (M) Bhd, Allianz General Insurance Company (Malaysia) Bhd, AmG Insurance Bhd, Tokio Marine Insurans (M) Bhd, Pacific & Orient Insurance Co Bhd, Berjaya Sompo Insurance Bhd and Uni.Asia General Insurance Bhd.
The high claims ratio has seen insurers steering clear from underwriting third party liability coverage, the minumum insurance cover mandated by the Road Transport Act 1987. Besides providing insurance protection against death and injury to third parties (which is provided under the 'Act Only' motor insurance policy), third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.
"It is the Act claim that is rising, and rising fast," Syed Moheeb said.
For this year, the central bank report released three months ago noted that the Malaysian insurance and takaful sector will also be affected by the potential lower demand for protection and related products in a highly competitive industry.
"In particular, the expected decline in vehicle sales will negatively impact the motor insurance and takaful business which constituted 45% of gross insurance premiums in 2008. Premiums are also likely to be affected due to an increase in surrender rates and lower sums insured as a result of policyholders' efforts to reduce costs during these difficult periods.
"In addition, claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance," the report said.
In the report, the central bank also noted that the insurance and takaful sector, while maintaining a comfortable solvency position, faced challenges in maintaining the growth in premiums and contributions from new businesses, compounded by intense competition in the industry. It said total net premium and contribution income grew by 2.4%, mainly attributed to the expansion in takaful business.
It also noted that demand for general insurance and takaful coverage on motor and marine, aviation and transportation related businesses moderated in tandem with the slower trade activities and a more subdued automotive demand outlook.
It said the gross direct premium and contribution for the general insurance and takaful business registered an increase of 5.5% to RM11.5 billion, driven mainly by the expansion in the fire segment.

(This story appeared in The Malaysian Reserve on June 15, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Takaful Malaysia sees light at the end of tunnel

2009-06-15T00:39:00.000-07:00

By Alfean Hardy
Syarikat Takaful Malaysia Bhd is seeing the light at the end of the global economic crisis tunnel and is planning to leverage on the improving e conomy and increasing customer appetite for investment products, its group managing director Datuk Mohamed Hassan Md Kamil said in a recent email interview with The Malaysian Reserve.
"We are of the view that the global economy will slowly stabilise towards the end of this year considering the massive stimulus packages and accommodative monetary policies introduced worldwide to support the downturn," he said. "Since equity markets normally recover a few months ahead of the economy, we expect the local market to steadily recover in the second half of this year.
"Hence, it is timely to offer an investment-linked product with equity exposure to take advantage of the upside when market recovers.
"We believe that investors are constantly looking for the best investible asset to invest in and Takaful myInvest provides them more alternatives to diversify their portfolios while at the same time obtain takaful protection," he added.
Takaful Malaysia recently launched an open-ended investment-linked product, Takaful myInvest, to cater to investors who want takaful protection while looking for alternatives to diversify their portfolios.
The product offers takaful protection in the event of death or total permanent disability during the investment period. It has four different investment funds — Dividend Fund (Irad), Blue Chips Fund (Istifad), Index Tracker Fund (Ihfaz) and Growth Fund (Ittihad) — that can be mixed to suit different investment appetites.
The funds will be invested in Bursa Malaysia-listed Shariah-compliant stocks approved by the Securities Commission's Shariah Advisory Council. The product is also designed to be invested in Islamic deposits and the money market.
Mohamed Hassan said Takaful myInvest is for all types of investors who hold an optimistic view on the equity market's recovery locally and would like to position their investment portfolios to take advantage of that recovery as well as the unlimited upside of potential returns that equity investments offer.
"While we are aware of the opportunities offered in the overseas markets as a result of the financial meltdown, we opine that the risks are also higher, which we need to avoid.
"The local market is more defensive in nature but it also offers tremendous growth," he said. "With the current economic condition, domestic investments would be the most prudent and best way to contain risk exposure.
"The domestic equity market still offers decent earnings in terms of dividend as compared to other regional markets, and money market investment ensures that liquidity is intact while at the same time offering the opportunity of stable returns," he added.
Asked whether Takaful Malaysia had an overseas variant of Takaful myInvest in the pipeline, Mohamed Hassan said the company was constantly working to offer innovative products to its valued customers.
"As such, there are plans on launching more investmentlinked products that will be associated with the performance of foreign investments, for example, structured products, provided that the global sentiment improves and that economic recovery is forthcoming," he said.

(This story appeared in The Malaysian Reserve on June 10, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Malaysian Re’s IFS rating affirmed by Fitch

2009-06-15T00:37:00.000-07:00

Malaysian Reinsurance Bhd (Malaysian Re) has had its A — insurer financial strength (IFS) rating — affirmed by Fitch Ratings with a stable outlook, incorporating the firm's dominant position in the local market, its healthy capital position and prudent management.
A unit of MNRB Holdings Bhd, Malaysian Re is the country's leading reinsurance company and is an underwriter of general reinsurance business. Fitch is a global rating agency that covers entities in 90 countries, including IFS ratings of about 2,000 insurance companies worldwide.
In a recent statement, Fitch Ratings said Malaysian Re, as the national reinsurer, is the largest player in the local maket and it believes that its dominance is likely to remain unchallenged, mainly due to the voluntary cession arrangements that exist in the local market, which provide a sustainable premium base.
"Under the existing voluntary cessions market agreement, all local general insurance companies are required to cede a portion of their business to Malaysian Re.
"Consequently, Malaysia is the core market for (the firm), constituting over 80% of its total business. The company also actively participates in various local industry initiatives, which has helped strengthen its relationships with domestic insurance companies," it added.
Fitch said it viewed Malaysian Re's capital position as healthy and of very good quality, which consists of ordinary equity and retained profits with no debt issuance.
It said a RM20 million capital injection from its MNRB parent in April 2009 had further boosted paid up capital to RM500 million from RM480 million previously.
"Additionally, at the holding company level, there is above RM500 million of surplus capital, which could be a source of support if required," it added.
However, Fitch warned that, due to Malaysian Re's limited business geographical diversification, it faces the challenge of maintaining its good operating performance under current market conditions as well as the potential risk that the existing voluntary cession agreements could be reduced due to market liberalisation.
"Against the backdrop of a challenging business environment with poor investment sentiments, Malaysian Re's net income for its financial year ended March 31, 2009, is estimated by the company to reach about RM40 million, compared to RM85.1 million for FY08," Fitch said. — by Alfean Hardy

(This story appeared in The Malaysian Reserve on June 10, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

TM Asia Life targets RM40m premiums in 3 wks

2009-06-15T00:36:00.000-07:00

TM ASIA Life Malaysia Bhd is confident of locking in RM40 million in premiums within three weeks of the launch of its short-term single premium capital protected investment-linked product, Asia Jade.
Asia Jade is strategically designed and offers a 3.75-year capital protection investment plan with 20% Head Start Coupon and potential Maturity Bonus of 10%, issued by HSBC Bank Malaysia Bhd. The product is available from June 8-30, 2009.
TM Asia Life deputy CEO Jun Tokura said that Asia Jade is a close-ended fund that offers life protection insurance and the opportunity to invest into three promising stocks in China.
"We are very optimistic about this fund as it is specially selected to capitalise on the strength of China's economy and the stimulus package offered by the China government targeting on infrastructure development. "With this, we have carefully chosen three promising stocks, which are China Mobile Ltd, China Railway Group Ltd and China National Offshore Oil Corp Ltd," he said.
Following the successful launch of Asia TriMax in October last year and due to popular demand from our customers, Tokura said TM Asia Life has chosen to tie up with HSBC Bank Malaysia again to introduce Asia Jade, its second investment plan. The company is confident that the new product will appeal to many investors as it offers life protection and potentially high capital growth within a short time frame.
"Based on the back testing results of China Mobile and China National Offshore Oil Corp from July 1, 2002 to April 7, 2009, investors can expect average returns of 29.33% at maturity", he added.
Asia Jade fund requires a minimum investment of RM10,000. Investors will be assured of 100% capital protected returns upon maturity, which will be in 2013.
The life insurance will offer financial protection of up to 125% of basic premium against death and TPD (Total and Permanent Disability). Potential investors as young as 19 years of age are eligible to invest in Asia Jade, while life assured can be as young as one month to 75 years old.
TM Asia Life also offers education, endowment, whole life, term, medical, investment linked and group insurance solutions, covering a range of over 20 products.
It is the first Japanese owned life insurance company in Malaysia following the acquisition of Asia General Holdings by Tokio Marine & Nichido Fire Insurance Co Ltd, a unit of Japan's largest insurer, Tokio Marine Holdings, Inc.

(This story appeared in The Malaysian Reserve on June 9, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Another local party keen on PacificMas’ insurance biz: FD

2009-06-15T00:30:00.000-07:00

PacificMas Bhd has found another interested party to acquire its insurance business and an application has been made to Bank Negara Malaysia (BNM) to enter into negotiations, PacificMas non-independent director George Lee said.
“It’s pending approval,” he told reporters after the company’s AGM in Kuala Lumpur on June 10, 2009, reports The Edge Financial Daily.
He did not name the interested party, the report added.
THE REPORT GOES ON:
Lee expressed confidence that the impending round of negotiations would work out, as the interested party is believed to be prepared to pay PacificMas’ asking price — a price tag which is pegged at a premium of the insurance business’ net book value of RM123 million as at March 31, 2009.
“It’s a local party and they are prepared to pay. After having failed on two previous occasions (due to pricing), we would not want to go into discussions with this party if we don’t have a fairly good indication that they are at least prepared to pay the price that the board feels is a fair price,” Lee said.
Lee is also the executive vice-president and head of group investment banking of Oversea-Chinese Banking Corporation Ltd (OCBC).
“We have a certain price in mind as we think it’s a profitable business. Therefore, it should be sold at a certain premium to book value and we are looking at a certain valuation,” he added.
The previous interested parties included EON Capital Bhd, OSK Holdings Bhd and even T Ananda Krishnan’s company — Usaha Tegas Sdn Bhd.
On PacificMas’ plans for the cash from the sale, Lee said the board may look at alternative investments, principally in finance services. “Also, we will definitely look at growing our fund management and leasing businesses,” he said.
“After careful evaluation and if the conclusion is that we can’t find a viable alternative and the money is put in fixed deposit, then it’s better we return the money to the shareholders than to put money in the bank,” Lee added.
For the year ended Dec 31, 2008, its insurance business contributed 29% to the group’s profits while its leasing and fund management businesses contributed 34% and less than 1% respectively. In 2007, the fund management business contributed 15% to group profits.
“Immediately after we sell the insurance (business), group profitability will shrink. What we are looking at over time is for the fund management and leasing businesses to contribute incremental profit on an absolute basis,” Lee said.
He added there was potential for the businesses to develop as currently the group’s fund management segment managed RM1.7 billion while the biggest fund in the country managed close to RM30 billion. The leasing business has a 1.5% market share of the RM50 billion market.
Industry observers believe PacificMas’ plan to grow these businesses has potential given that the group would also be able to leverage on OCBC.
On speculation of OCBC injecting Great Eastern Life Malaysia (GELM) into PacificMas post-disposal, Lee said the exercise was proposed twice but had failed.
“Nothing came out of the discussions and there must be very valid reasons why such mergers could not be consummated and I believe after two unsuccessful attempts… but I can’t speculate,” he said.
As OCBC has a 63.5% stake in PacificMas following its takeover exercise early last year, BNM imposed a condition on OCBC that it could not own two insurance companies in Malaysia. PacificMas has until October this year to sell its insurance business.
Meanwhile, on the company’s performance this year, PacificMas chief executive officer Ng Hon Soon said: “We expect better profitability.”
He added the second quarter was expected to see the same performance as its first quarter ended March. For its 1QFY09, PacificMas registered a net profit increase of 200% year-on-year to RM8.4 million.

Piam welcomes proposal to limit liability claims

2009-06-04T20:40:00.000-07:00

by Habhajan Singh
Persatuan Insurans Am Malaysia (Piam), the association for general insurers operating in Malaysia, welcomed a proposal to limit the liability shouldered by insurance companies for motor insurance claims.
It is timely that the proposal to limit liabilities on third party motor insurance covers be considered seriously in order to ensure the viability and availability of third party insurance protection for vehicle owners, Piam said in a statement released yesterday [May 4, 2009], affirming a position long held by the grouping.
This was in response to a statement by Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz on Wednesday.
One newspaper quoted the minister as saying the ministry would look at amending the laws covering motor insurance to resolve the matter. The report said public transport operators have been crying foul as insurance companies no longer want to insure taxis and buses.
Nazri said this was because the insurance companies claimed that they were losing money by insuring commercial vehicles. Nazri, the report added, said that at present operators could sue the insurance company for millions. The amendment would limit the liability shouldered by the insurance companies.
"This way, the vehicle would be insured, the operator would be able to claim during any accident and the insurance company would also be protected," one newspaper quoted the minister.
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, and are instead sending their customers to a high-risk insurance pool run collectively by the industry under orders from the regulators.
The report also noted that a recent decision by two local insurers to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premium going towards the high-risk insurance pool called the Malaysian Motor Insurance Pool (MMIP), which had already seen a big jump last year.
On June 1, The Malaysian Reserve reported that Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, was set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of this sector due to the high claims ratio.
The general insurer, a subsidiary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
In its response, Piam said for most countries in Europe, US and even Asean (except for Singapore, Brunei and Malaysia), the law provides for limited liability for third party risks arising out of the use of motor vehicles.
"In Malaysia, provisions for limiting liability will involve amendments to the Road Transport Act, 1987 and consultations with the Insurance Regulator on suitable amendments to the motor insurance policies to cater for the changes in limits of liability under the policy contract," it said.
Earlier, Piam had announced combined loss ratios of 114% and 115% for motor insurance business in 2007 and 2008 respectively. It said insurers have also expressed their concerns over the rapidly increasing claims pay-outs especially for third party bodily injury claims. Claims ratios for third party bodily injury claims skyrocketed to 262% in 2007 and 288% in 2008, said Piam.

(This story appeared in The Malaysian Reserve on June 5, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Firm eyes Johor to boost takaful business: Star

2009-06-04T20:31:00.000-07:00

By ZAZALI MUSA
JOHOR BARU: Prudential BSN Takaful Bhd (PruBSN) sees Johor as its next big market for the takaful business outside the Klang Valley.
Its chief executive officer Mohammad Salihuddin Ahmad said, in view of the good prospect, the company had decided to open its Southern Region Business Centre in Taman Austin Perdana near here.
PruBSN provides a wide range of services and acts as a one-stop centre where customers can make enquiries and seek advice from regional agents at the centre.
The Johor Baru centre is the company’s second after its Shah Alam branch was opened recently to serve customers in the central region.
“Johor, with a 3.17 million population of which 66% is of working age, is a large market that the company cannot ignore,’’ he said at the centre’s opening recently.
Salihuddin said that development activities at Iskandar Malaysia also provided good business opportunities for the company.
He said, apart from targeting Johoreans, the company would look at Singaporeans, especially those living in Johor Baru, as customers.
He said the company would open five new branches this year at state capitals in the northern region, east coast states, Sabah and Sarawak.
“We want to strengthen our position in the takaful industry,’’ he said.
Salihuddin said there was enormous potential for the industry to grow as its market penetration was only 7.7% compared to 40% for conventional insurance products.
He said the company wanted to create awareness that the takaful system was for everyone and it had nothing to do with one’s faith
PruBSN was founded in 2006 and has 216,308 policyholders of whom 35% are non-Muslims, and 10,000 agents of whom 50% are non-Muslims.

(THE STAR, Thursday June 4, 2009)

Rethink motor insurance rebates, Govt urged

2009-06-04T20:28:00.000-07:00

BATU PAHAT: The Government should intervene and defer the implementation of direct rebates for motor insurance as this will increase unemployment in the country. State Unity, Human Resources, Science, Technology and Innovation Committee chairman M. Asojan said the direct rebates would affect the livelihood of thousands of insurance agents nationwide, reports The Star (June 3, 2009).
He was quoted as saying: "The Government is working hard to ensure that people have jobs during the economic crisis and the last thing we need is a mass lay-off in the insurance sector."
Asojan, a former insurance agent, said he understood the plight of the thousands of agents nationwide. He said the agents provided an array of services including helping with claim forms, advising clients on what to do in road accidents, providing contacts on the nearest workshops and checking on the status of claims.
"Are insurance companies ready with more counters to handle the influx of motorist from July 1?" he aked, pointing out that it was the insurance companies’ responsibility to assist the Government in ensuring people had jobs, especially when the Government was trying to kick-start the economy with the two stimulus plans.
"Was there a study done before the General Insurance Association of Malaysia and Bank Negara decided to implement the move? What about the consequences of this move on the thousands of agents who have helped the industry?" he said, adding that it should be implemented after taking into account the views of all the parties.
Meanwhile, the same report said Human Resources Minister Datuk Dr S. Subramaniam suggested that the insurance agents group together and give their views to the Government as soon as possible.
"I can understand the implications of such a move. It is up to the Ministry of Finance to look into the matter," he said, adding that he was unsure about the rationale behind the move.
Since the news about the rebate broke, there has been a huge outcry, with some quarters starting a signature campaign and a boycott. Come July 1, car owners who buy motor insurance directly from insurance companies without an agent will qualify for mandatory rebates of 5% to 10%.

MAA may conclude unit sale to AMG by fourth quarter

2009-06-04T20:27:00.000-07:00

KUALA LUMPUR: MAA Holdings Bhd expects to conclude the sale of its general insurance business and 4.9% stake in MAA Takaful Bhd to AMG Insurance Bhd by the fourth quarter, said chief executive officer Muhamad Umar Swift.
The general insurance business was priced at RM274.8mil and the MAA Takaful stake at RM16.2mil, Bernama quoted him as saying.
Both parties had agreed to the terms and the next step was to secure the approval of Bank Negara and shareholders, he said after the group AGM yesterday.
MAA Holdings chairman Tunku Datuk Ya’acob Tunku Abdullah said the group was also looking to raise its capital to further grow business and would opt for a rights issue or issuing new notes.
“MAA has not raised capital in the last 20 years. In the past, we funded via medium-term notes, for which we will start repayment next year for five years.
“We are still deliberating on the ideal structure to raise capital,” he said, adding that it was also looking at disposing its non-core businesses.
Muhamad Umar said once the transaction with AMG Insurance was completed, the group would have a clearer picture on the best course of action to raise fund. “We are trying to move away from debt and towards equity funding,” he said.
On the group’s plan to expand its overseas operations, Muhamad Umar said it was business as usual and MAA Holdings was open to any beneficial tie-ups.
“We have invested a lot in these operations and are looking for strategic partners that can take us to the next capital level to expand,” he said.
Meanwhile, MAA Holdings has posted a net profit of RM24mil, or 7.88 sen per share, in the first quarter ended March 31, mainly on higher operating income recorded by the group’s shareholders ’ fund.
“The profit in shareholders’ fund was due to mainly reversal of fair value loss of RM25.3mil arising from an interest rate swap transaction resulted from improvement in the market condition of the US municipal bond,’’ it said.
Revenue during the period under review was RM485mil versus RM519mil a year ago.

(THE STAR, Saturday May 30, 2009)

MAA mulling options to improve capital structure

2009-06-04T02:24:00.000-07:00

by Alfean Hardy
MAA Holdings Bhd, which is in the midst of hiving off its general insurance business, is mulling over various options up to and including a rights issue as it seeks to raise funds to improve its capital structure, its chief executive officer/group managing director, Muhamad Umar Swift said.
As of its fiscal year ended Dec 31, 2008, the insurance firm's cash and cash equivalents fell 7.79% to RM51.35 million. The company expects to complete a RM254.8 million sale of its general insurance to AMG Insurance Bhd by year-end.
The exercise also includes an additional RM16.2 million deal to sell a 4.9% stake in MAA Takaful Bhd to AMG. Speaking to reporters after MAA's AGM in Kuala Lumpur last Friday [May 29, 2009], Muhamad Umar said one of the options being looked at aside from the disposal of MAA's general insurance business was a rights issue.
"The sale recapitalises our business and the rights issue (can) allow us to address the cash flow needs of the group," he said. "While that process is ongoing, we will also be disposing of our non-core businesses and activities and freeing up that cash as well.
These are activities like Wira Guards and our stake in Mithril Bhd (it holds a 33% stake as of end FY08).
These are non-core activities. Our focus is protection," he added. Muhamad Umar said it was MAA's long term vision to be an un-geared holding company. "There might be overdraft lines but the main will be equity-funded with investmentable business, life insurance business, and our funds management and mutual funds business," he added.
MAA has subsidiaries and associate firms overseas.
Asked what the company was going to do with those companies, Muhamad Umar said at the end of the day, MAA was a Malaysia-centric business.
"We're a Malaysian brand serving Malaysians," he said. "We expect our Philippines operations to be profitable this year and we're seeing a lot of consolidation in that market.
And, while we like our assets in the Philippines, should someone like it more we'd be more than willing to sell it.
While there's been some discussions, with the current recession, this is probably not the best time to market this asset," he added.
Muhamad Umar said Indonesia was another matter. "It's a more interesting issue for us with 250 million people, a large market force and we've invested time and effort there. It's wait-and-see. It's a profitable asset for us now but, again, how much capital do we need to take it to the next level. We're looking for a strategic partner to help us take it to the next level," he said.
"For (Australian associate) Columbus Capital Australia, the asset was profitable this year and it has an interesting business model but is it a core asset for us? No, so we're looking to dispose of that asset as well," he added.
MAA executive chairman Tunku Datuk Ya'acob Tunku Abdullah said, while it was nice to play overseas, changing central bank capital requirements meant that the firm required money for its Malaysian businesses.
"If there's an offer, we will sell. I don't think there's any offer (at this moment).
For now the businesses run as is," he said. "We're not expanding those overseas operations. We're reserving all our money for our Malaysian operations. If there's a need to increase capital requirements (set by governments there), we will then look for strategic partners to put in the difference," he added.
Asked about the rights issue, Tunku Ya'acob said, for now, it was only an option for MAA as it seeks to raise capital. "We're still deliberating what would be the ideal structure to finance MAA's financial requirements. Other options include to issue new notes and discontinue rolling our RM200 million medium-term notes facility," he added.

(This story appeared in The Malaysian Reserve on June 1, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Another insurance player shuns 3rd party coverage

2009-05-31T22:02:00.000-07:00

by Habhajan Singh
Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, is set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of this sector due to the high claims ratio.
The general insurer, a subsidary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
"We have dropped writing third party at the head office," P&O managing director and chief executive officer Chan Thyse Seng told The Malaysian Reserve, adding that the insurer is still active in other motor related insurance business.
Industry sources estimate that the motor 'Act' insurance, which is the portion compulsory for all motorists, has generated gross premiums of close to RM600 million last year, with Kurnia Insurans and P&O Insurance conducting close to half of the industry's total.
The motor 'Act' insurance policy provides protection against death and injury to third parties. The third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, and are instead sending their customers to a high-risk insurance pool run collectively by the industry under orders from the regulators.
The report also noted that a recent decision by two local insurers to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premium going towards the high-risk insurance pool called the Malaysian Motor Insurance Pool (MMIP), which had already seen a big jump last year.
Even before the two local insurers made the decision, the motor insurance pool had collectively underwritten total gross premiums of RM13.33 million, which is four times more than the RM3.11 million in premiums in 2007.
"The third party aspect is just wrongly priced. Therefore, we will not be able to (underwrite) it. "Under the new rules, it's a question of what you want to write and what you are comfortable with. This is part and parcel of the RBC. I don't think its anything extraordinary," P&O's Chan said.
The Risk-Based Capital Framework for Insurers (RBC), is the new insurance regulatory regime that was implemented on Jan 1, 2009. Loss-making P&O Insurance was one of the few insurers still providing third party insurance cover, though the segment had seen a high claim ratio, thus making it an unprofitable segment of the motor insurance segment.
For the financial year ended Sept 30, 2008, P&O posted a net loss of RMRM32.62 million on a turnover of RM337.21 million. In the first quarter ended Dec 31, 2008, it posted a net loss of RM8.65 million on a turnover of RM85.39 million. Chan said that P&O is still very much a player in the motor insurance sector as some segments are still profitable.
In a press release early this year, General Insurance Association of Malaysia (PIAM) said general insurance companies are bracing for a rough 2009 as average motor premium continues to fall while insurers suffer from higherthan-expected claims ratio. It also noted that motor insurance comprises 44.3% of overall general insurance business in Malaysia.

(This story appeared in The Malaysian Reserve on June 1, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER)

Great Eastern aims for RM800m in new premiums: BT

2009-05-31T21:58:00.000-07:00

By Rupinder SinghGREAT Eastern Life Assurance (Malaysia) Bhd, the Malaysian unit of Singapore based Great Eastern Life Assurance Co Ltd, aims to rake in new business premiums of RM800 million this year, on product innovation and the help of its agency force.
New business premiums stood at RM629 million in 2008.
"Our sales target for 2009 is to achieve RM800 million in total weighted new business premiums," said its chief executive officer Koh Yaw Hui, who is also director of Great Eastern Malaysia.
Koh said the insurance industry in Malaysia is showing positive signs, following a sluggish 2008 as a result of the global financial crisis.
This was reflected in its first quarter result, where it posted a 59 per cent growth in weighted new business premiums of RM170 million compared with RM107 million a year ago.
"This sterling performance is encouraging especially in this challenging and trying times," he told reporters after the company's Life Planning Advisory (LPA) programme graduation ceremony in Kuala Lumpur yesterday [May 20, 2009].
To meet its 2009 target, Great Eastern Malaysia is repositioning its investment-linked plans to meet specific needs namely in protection, investment, education and retirement.
"We plan to roll out these investment-linked products in June or July this year," he said.
It also plans to enhance its current stand-alone medical products.
Koh added that the core strategy will be to enhance the quality and professionalism of its agents through its agent transformation project.
Ninety five per cent of Great Eastern Malaysia's weighted premiums come from its 17,000 agents nationwide, servicing 2.25 million policyholders.
To expand its market reach, the company plans to open more branches nationwide now that the government has lifted restrictions for foreign insurers.
"We have identified a site in Petaling Jaya and on mainland Penang for a new branch. We plan to open the new branches in the next two to three years," he said. It currently has 24 branches nationwide.
Also in line with the recently announced liberalisation measures, the company plans to establish a bancassurance partnership, its first, with Overseas-Chinese Banking Corp Ltd (OCBC) in the next two to three months.
OCBC is the ultimate holding company of Great Eastern Malaysia.
Koh said the company will initially launch as many as three bancassurance products.
On its LPA programme, Koh said the company hopes to have up to 3,000 graduates by end of 2010.
Since the launch of the programme in December 2006, Great Eastern Malaysia has seen 600 graduating from LPA.

[Business Times, May 21, 2009]

Insurance firms shun 3rd party motor coverage

2009-05-26T19:46:00.000-07:00

by Habhajan Singh
Insurance companies are no longer willing to provide third party motor insurance under their banner, and instead are sending customers to a high-risk insurance pool run collectively by the industry under orders from the regulators.
A recent decision by two local insurers to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premium going towards the high-risk insurance pool called the Malaysian Motor Insurance Pool (MMIP), which had already seen a big jump last year.
Even before the two local insurers made the decision, the motor insurance pool had collectively underwritten total gross premiums of RM13.33 million, which is four times more than the RM3.11 million in premiums in 2007.
"That's a huge spike in the pool. It simply means that there is that much more insurance business that insurers do not want to touch.
"This also means that general insurers will have to fork out more for the pool," an industry executive told The Malaysian Reserve.
And the latest decision by the two insurers to completely shut out commercial vehicles is set to compound the situation. After the recent annual meeting of MMIP, executives believe premiums underwritten by the pool could more than double, with one source estimating that, moving forward, the pool could conduct as much as RM3 million of business in a month.
"What no insurer wants to do, all must do. Hence, since no single insurer is willing to underwrite third party motor risk, it goes to the pool which is collectively underwritten by all 33 general insurance players in the country," said the executive.
Major players in the motor insurance sector include Kurnia Insurance (M) Bhd, Allianz General Insurance Company (Malaysia) Bhd, AmG Insurance Bhd, Tokio Marine Insurans (M) Bhd, Pacific & Orient Insurance Co Bhd, Berjaya Sompo Insurance Bhd and Uni.Asia General Insurance Bhd. The high claims ratio has seen insurers steering clear from underwriting third party liability coverage, the minumum insurance cover mandated by the Road Transport Act 1987.
Besides providing insurance protection against death and injury to third parties (which is provided under the 'Act Only' motor insurance policy), third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only. Over the years, Bank Negara Malaysia (BNM) and the Ministry of Finance have formed a pool established by insurance companies registered under the Insurance Act 1996 to provide motor insurance to vehicle owners who are unable to obtain insurance protection for their vehicles. It is also commonly referred to as the insurer of the last resort.
This pool is managed by MMIP Services Sdn Bhd (MSSB), a subsidiary of MNRB Holdings Bhd (MNRB) incorporated in 2006. Among others, MSSB handles the administration, accounts, investment of the funds of the pool as well as the claims negotiations and settlements.

(This story appeared in The Malaysian Reserve on May 27, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

Nod for Mitsui, Hong Leong talks

2009-05-26T19:45:00.000-07:00

Hong Leong Financial Group Berhad (HLFG) announced yesterday [May 22, 2009] that Bank Negara has “no objection in principle” for HLFG and its wholly-owned subsidiary, Hong Leong Assurance Bhd to commence negotiation with Mitsui Sumitomo Insurance Company of Japan towards a potential strategic partnership in relation to the insurance business, reports The Star (May 23, 2009).
"The prior approval of the Minister of Finance, based on the recommendation of Bank Negara, is required before the relevant parties enter into any agreement to effect the proposed Partnership," it said. "A detailed announcement will be made in the event definitive agreements relating to the proposed partnership are signed."

Maybank growing insurance asset base

2009-05-26T19:40:00.000-07:00

Malayan Banking Bhd's (Maybank) insurance asset base which represent funds in management, currently at RM20 billion, is set to grow under the group’s aspiration to rival those managed by Great Eastern Life Assurance (Malaysia) Bhd, Prudential Assurance Malaysia Bhd and American International Assurance Bhd, reports The Star (May 23, 2009).
It aims to be the national insurance champion and is currently the leader in new business premium for the combined conventional and takaful sector as well as gross premiums for general insurance, it added.
This were the insurance-related nuggets from a recent interview by the daily newspaper with Maybank president and CEO 'of barely a year' Datuk Seri Abdul Wahid Omar.
The article started such: The tiger that had roared with so much power at Malayan Banking Bhd (Maybank) over the last decade has been pretty muted since it shocked the market with its overpriced and ill-timed purchase of Bank Internasional Indonesia (BII).
For the third quarter ended March 31, the Maybank group recorded a drop of 34% in its net profit to RM503mil compared with the previous corresponding period while for the nine months, it registered a decline of 18% to RM1.8 bil, due to lower contributions from investment banking, insurance and takaful, higher provisions and interest expense, impairment cost for MCB Bank and forex losses.

Putting customers in the driver’s seat on motor insurance

2009-05-26T19:30:00.000-07:00

Motor insurance is not something that usually generates massive amounts of news in the local papers. They are, thanks to mandatory laws, a necessity for vehicle owners to bear and not often thought of beyond that.
That all changed last week when news broke about a proposal by the General Insurance Association of Malaysia (PIAM) to introduce rebates of up to 10% to motor insurance policy holders who deal directly with insurance companies instead of going through an independent insurance agent.
The initiative, apparently, was the result of correspondence and meetings between PIAM and Bank Negara Malaysia to promote self-regulation within the motor insurance sector as well as to promote alternative channels of distribution that would spur industry growth and reduce the number of part-time agents.
When contacted by The Malaysian Reserve, Allianz Malaysia Bhd chief executive officer Alexander Ankel praised what his company saw as a move that could eventually lead to a more de-regulated market that is on par with what can be found in developed countries.
"Our experience shows that the culture of open dialogue as being promoted by (Bank Negara Malaysia) has always helped to smoothen the transition of the industry into a more deregulated market.
"We believe that our clients should be able to obtain our products through the distribution channel of their choice," he added. The European market, which is the Allianz Group home market, is an extremely open one that allows for innovative and multi-structured products and Ankel said the group's experience with its home markets indicated that a move towards deregulation was not a bad one.
"A career as a professional insurance agent creates thousands of job opportunities and delivers best customer-centric solutions to consumers," he added.
Some industry observers have indicated that PIAM's move is a welcomed and long overdue one that could help eliminate problems which have hindered the motor insurance sector, including unscrupulous independent agents.
However, there are also those who are against it. These critics have condemned the move, stating that such an initiative did not take into consideration the views of about 40,000 independent agents nationwide and the impact this would have on their livelihood.
The Proton Dealers Association Malaysia (Peda) went so far as to say that the move would destroy the automotive eco-system. According to various reports, Peda said PIAM's initiative could see independent agents lose more than 20% of their income as many new and second-hand car dealers do become agents for the general insurance agents.
At stake, it added, was that annual motor insurance premiums generated by these agents for the insurance firms on average hit the RM1 million per agency mark. The General Insurance Representatives Association Malaysia (Perwakim) has also voiced its criticism on the plan, stating that the industry, which was already feeling the impact of the global financial crisis, could see retrenchments taking place as the staff of up to 20,000 agents are let go.

When contacted, a Bank Negara Malaysia spokesperson said the central bank was not making any statements on the matter and to refer to a statement issued by PIAM last Saturday (May 23).
In that statement, the association said agents would remain a vital part of the sector even with the introduction of mandatory rebates for direct motor insurance purchases. It said agents would continue to be used as long as car owners were comfortable with and appreciative of an agent's services.
"The concern of some agents that there will be a mass exodus of their customers to purchase directly is highly speculative and unwarranted," it added.
PIAM said agents accounted for 60% of all business generated and that its move was intended to benefit consumers who wished to deal directly with companies; who wanted more choices in terms of how they purchased their policies; who wanted the savings generated by dealing directly and who were more mobile and IT savvy.
Allianz Malaysia's Ankel said his company catered to the needs of motor insurance customers via three dominant distribution channels, namely, agency, a bancassurance partnership with CIMB Bank and through motor franchises.
"We are committed to the strong agency workforce of Allianz Malaysia who play a very important role in our distribution capabilities and we are not considering shifting our business model to direct distribution (and) we also entertain walk-in customers who come to our branches to purchase direct insurance. — by Alfean Hardy

(This story appeared in The Malaysian Reserve on May 27, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER)

Manulife’s ‘Hongkie’ finds a home in Malaysia

2009-05-26T19:27:00.000-07:00

by Alfean Hardy
The insurance industry was the last thing on young Michael Chan Yui Ling's mind when he began his working career. For the Hong Kong Islander, the life of an accountant was what he wanted. Leading the operations of Manulife Holdings Bhd here was probably not something he would have imagined was in his future.
"I'm a Hongkie, a Hong Kong person. I was educated there, I met my wife there, my house is there, my car is there, I got my kids there.
"For the past 15 years, I've been doing a lot of regional projects for (parent company Manulife Financial Corp) but I've always been in Hong Kong. This is my first international assignment," he told The Malaysian Reserve recently.
As a graduate of Hong Kong Polytechnic University with an accountancy degree, Chan had set his sights on becoming an accountant. At no time had the idea of venturing into the insurance business crept into his mind.
"The shift was unplanned. After I graduated, I went to the government to become an accounting officer. Then I decided to see the commercial world in 1982 but, unfortunately, there was a market crash in 1983 and the company I was in was being wound up.
"At that time, because the market was bad, I needed a job. So, I got a job with a local insurance brokering firm, Everbest, and that's how I started my insurance career," he added.
After 10 years with the firm, Chan got a call from Manulife Hong Kong. "I was doing well at Everbest, being an accountant as well as taking care of its subisidiary, which later became a top broker for Manulife.
"And it was in 1991 that the Manulife group insurance vice president approached me and said 'why not join and see the other part of the business'.
"I told him I didn't want to join and that I was happy with my job and my company. But he was consistent. He talked to me consistently for 10 months. He was serious. He wanted someone to run their sales and marketing. Finally, I met their general manager for Asia and other people and I was impressed. I finally joined Manulife in 1992, Feb 15," he added.
Between that time and now, Chan has held three positions within the Manulife group.
"I was the head of sales and marketing for group insurance and pension. When group insurance was split between pensions and group life and health insurance, I headed (the latter) in 1999.
"In 2004, I was appointed head of agency for Manulife Hong Kong. I was there until 2009 when I was asked to run a country (operation). "It was something that I hadn't done before and it was a good development in my career. And I welcome that," he said.
Chan said he had been well prepared by his predecessors for how things were here. "Manulife in the Asian region is a very transparent operation and there's a lot of chance to talk to the senior management of other countries. I knew the management here well and I anticipated the situation before I came.
"I like the country, especially the clean air and the clean city. I like the food here. Malaysia is a good country because there are a lot of advantages because of the environment, the resources and there aren't too many people per area compared to my hometown where you see people every where.
All the time you see people," he said. Chan is here on his own, with his wife visiting regularly from Hong Kong. His eldest son is currently in a UK university, his second son is set to enter a university in Hong Kong this year and his daughter is in her last year of high school.
"My wife has promised that she will join me here once our daughter graduates," he said. Asked how long his posting was, Chan said that depended on his boss. "I hope I can stay here long. I love the country and I like the working team. If I can be longer here, I would be more happy to be here. I like it here," he added.

(This story appeared in The Malaysian Reserve on May 27, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER)

Rebates for direct insurance: Star

2009-05-20T00:38:00.000-07:00

Come July 1, car owners who buy motor insurance directly from insurance companies without using the services of an agent will qualify for mandatory rebates, a move that could render agents redundant, reports The Star (May 18, 2009).
The move would see new customers being given a 5% rebate on their insurance if they buy it via channels such as the Internet, telemarketing, direct mailing or by walking into the insurance company. These customers would also get a 10% rebate for renewals in the second year, it added.
In a circular sent to the General Insurance Association of Malaysia (PIAM) dated April 17, Bank Negara said the rebates would only apply to actual owners of the vehicles. The circular added that Bank Negara had “no objections” to PIAM’s proposal for the mandatory rebates. This is understood to mean that the move would more likely be implemented than not, the report said.
THE REPORT GOES ON:
Veteran insurance agent Hardyal Singh hit out at PIAM, saying the association did not take the views of 40,000 agents (15,000 of them full-time) into consideration.
“It will clearly affect the livelihood of the agents. Full-time agents hire at least three to 30 employees at their agencies and these people will also be affected.
“Our main source of income is the 10% commission, so the 10% rebate is actually our commission being given to the customer. It offers no benefit to the insurance company but instead creates a socio-economic crisis by making people jobless.”
Hardyal, who was formerly Perak General Insurance Agents Association president, said he would be forming an ad hoc committee with some larger agents in Kuala Lumpur to speak out more on the matter.
It is understood that the circular was the outcome of correspondence and meetings between PIAM and Bank Negara on the association’s proposals towards self-regulation of the industry.
In the circular, the central bank said the rationale for mandatory rebates was to “promote the promulgation of alternative channels of distribution so as to increase the penetration of insurance to the masses”.
An industry source said the industry was heavily regulated, especially towards the ability of insurance companies to reward agents, and that PIAM’s proposals were for Bank Negara to allow some self-regulation.
“When Bank Negara came back to the table, it seemed that they were saying if insurance companies were willing to reward agents, then they could also provide this benefit to policyholders.”
The source added that the central bank’s move could be seen as a way to reduce the number of part-time agents but said full-time agents would now have to work harder and think up new ways to get business.
Consumer advocate Billy Toh said he was strongly against the move as he felt that agents could still play a role by explaining the insurance policy details to customers.
However, Federation of Malaysian Consumers Association secretary-general Muhammad Sha’ani Abdullah said “the move would reduce the opportunity for agents who try to get customers to buy other types of insurance together with motor insurance.”

AXA Affin sees great potential for local takaful biz

2009-05-17T21:13:00.000-07:00

By Alfean Hardy
AXA Affin Life Insurance Bhd, which is 51%-owned by Affin Holdings Bhd, is bullish over the recent liberalisation of Malaysia's financial sector and sees a lot of potential for conventional insurance and, more specifically, in takaful, its chief marketing officer Nicholas Kua Choo Ming said.
Among the measures announced by the government were the issuing of two new family takaful licenses, the increase of foreign equity holdings to 70% on a case-by-case basis, no restrictions on locally incorporated foreign insurance firms/takaful operators establishing branches and the lifting of restrictions for such operators to enter into bancassurance/banctakaful arrangements with locally-based financial institutions.
The 49% balance in the company is held by global financial protection and wealth management giant AXA Group. The JV was incorporated in early 2006.
Speaking to The Malaysian Reserve last Friday, Kua said the local industry had been acknowledged as one of the more promising ones in the region.
"We are not at the level of maturity where you'd probably have a lot of difficulty in getting higher penetration of the market," he said.
"We're only at about 40% versus Singapore, which is already at 90%, and the like of Japan, which is at 200%. There are a lot of opportunities and the same optimism is felt throughout the whole industry. You have so many new entrants trying to grab a pie of the Malaysian market over the last two years alone.
"This tells you that foreign players continue to view Malaysia as a very promising market. You don't see the same type of activity in Singapore, Thailand and the Philippines, for instance," he added.
Kua said the liberalisation could probably see a lot more foreign players being keen on the local market, with an eye to seek out strategic partners with the local players.
"Then there's the new takaful licenses, which means more players into the market. This only shows that the regulator and the industry at large views the market as a very promising one.
"The same applies for AXA Affin as well. We wouldn't have formed the JV back then if we didn't see the opportunities in the market," he added. Kua said he was not surprised by the government's move to liberalise the financial and insurance sectors here.
"If you look at the region, Singapore has shown aspirations to grab a piece of the pie. Hong Kong is keen and Indonesia, of late, has also announced their aspirations to be a hub as well," he said.
"Malaysia has a head start and does have the perfect infrastructure and talent to spur the growth of Islamic finance and insurance to become the premier Islamic finance hub in the region," he added.
AXA Affin does not currently have a takaful wing and, while Kua would not comment on the firm's plans on the matter, he said who would not want to have an Islamic insurance division here at this point in time.
"From an industry perspective, who wouldn't be keen on those two new licences? I'm sure everyone's eyeing that," he said.
While the company did not track the takaful sector numbers per se, he said that independent evaluation provided a lot of positives for firms looking to venture into the local takaful segment.
"Any interested player coming into this market, looking at the statistics, would have a lot of confidence that this is the market to get into as a new start-up," he added.

(This story appeared in The Malaysian Reserve on May 18, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)

HSBC Malaysia rakes in RM100m from cargo insurance

2009-05-17T21:12:00.000-07:00

HSBC Bank Malaysia Bhd recently offered marine cargo insurance to complement its onestop t rade solut ions for commercial customers from small and medium enterprises (SMEs) to multinational corporations.
Vivek Gupta, director, Trade and Supply Chain, HSBC Bank said the initial response from customers, especially the SMEs, has been excellent as it appealed to their need for convenience and value-for-money solutions.
"When we first introduced it last month, we secured business with over RM100 million coverage. I am confident we will see an ongoing momentum for this customised proposition," he said in a statement.
"The marine cargo insurance initiative reinforced HSBC's focus on meeting customer needs with a comprehensive suite of products and services. We are not only able to bring about cost efficiency to our customers in terms of competitive pricing and a single contact point, but also help advise and educate customers on this key risk mitigation," Gupta said.
He added that HSBC Malaysia's import customers will now have the convenience of insuring their single voyage shipments within the same day of submitting documents at any of the 19 Trade and Supply Chain centres within HSBC branches nationwide.
With this, customers can now enjoy both single shipment voyage cover as well as marine open cover policies at competitive rates. This initiative further strengthens HSBC Malaysia's reputation as a premium provider of a comprehensive suite of trade and supply chain solutions in the local market.
HSBC manages to maintain its leading market position in the trade and supply chain business in Malaysia. Marino cargo insurance is designed to provide protection on companies' cargo shipments between countries against uncertainties. It covers the companies' cargo against risks during shipment by sea, air or land.

(The Malaysian Reserve, May 18, 2009, p9)

MUNICH RE: World’s first microinsurance in the offing

2009-05-13T21:23:00.000-07:00

By Alfean Hardy
Munich Re, a global leader in reinsurance, has teamed up with German government agency Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ) and Indonesian insurance firm Asuransi Wahana Tata (AWT) to launch the world's first microinsurance flood product.
The GTZ is currently active in numerous microinsurance projects and is helping to implement about 50 technical assistance projects globally in the field of social protection.
Microinsurance is being seen as a growing market, given that only 3% of the world's low income earners currently have access to insurance products. In a joint statement issued recently, the three parties said floods and inundation were a recurring threat to the livelihood of the people of Jakarta, Indonesia, and that impacts brought about by such disasters, such as property damage, higher medical expenses and rising food prices, constituted a heavy burden to those affected.
"The idea behind the joint project is to offer affordable, easy understandable and non-bureaucratic insurance cover specially adapted to this segment of the population. Instead of a lengthy policy document, the insured will receive a simple protection card that costs 50,000 rupiahs (RM16.75) per card and guarantees a one-off payment of 250,000 rupiahs (RM8,383) if the waters rise to or above 950cm (Alert 1) at the Manggarai Water Gate in Jakarta," they added.
The Alert 1 Manggarai Protection Card will offer the low income households in Jakarta with the opportunity to insure themselves against the direct economic losses and social risks brought about by severe flooding. Under the scope of the venture, AWT is to act as primary insurer and will be involved in the marketing, distributing and selling of the product. Munich Re developed its features and would also act as the sole reinsurer of the product.
GTZ was involved in researching the needs of the target group and also conducted a microinsurance awareness campaign within the pilot region of Jakarta.
The fourth largest country in terms of population, the World Bank has estimated that about 49% of the Indonesian population live below the US$2 (RM7.02) purchasing power parity rate. The local population is expected to hit the 243 million mark in 2010.
Susanne Krippner of the GTZ-supported Promotion of Small Financial Institutions programme in Indonesia said, "In developing countries in particuar, low income households are often those least protected against the financial and social consequences of natural catastrophies and other risks."
"Innovative microinsurance solutions can significantly improve the economic and social protection of the population and, thereby, contribute to the fight against poverty," she added.
Munich Re Asia board member Dr Ludger Arnoldussen said, "Thanks to Munich Re's risk management expertise and risk assessment we can help devise insurance solutions to cover people in exposed regions for whom protect ion was previously unavailable. It means that natural catastrophies will not automatically bring more poverty."
AWT president commissioner Rudy Wanandi said the project was an excellent chance to provide simple and affordable insurance cover to the low-income market combined with fast claims payment.
"With the right partners, a defined product and through our wide network within the region, we are able to reach people and explain our innovative solutions. It will raise the insurance awareness of society and bring more economic stability and social security to people who live in exposed regions," he added.

The Malaysian Reserve, May 13, 2009, p32

HLA group MD tipped to helm Prudential, says Star

2009-05-13T21:21:00.000-07:00

Hong Leong Assurance Bhd (HLA) group managing director (MD) and chief executive officer (CEO) Charlie E. Oropeza is tipped to become Prudential Assurance Malaysia Bhd’s (PAMB) new CEO, reports The Star (May 14, 2009).
The newspaper, without quuting sources, said it had learnt that his last day at Hong Leong Assurance will be at the end of this month.
It added that he will head Prudential Assurance next month pending approval from Bank Negara.
The report said, according to sources, HLA’s chief operating officer (life division) Loh Guat Lan would for the time being oversee the operations of the company.
HLA has not at the moment identified any suitable candidate to replace Oropeza.
There had been talk of late that since Bill Lisle, the former CEO of PAMB, jumped ship to join Aviva Asia as its regional director, PAMB had two candidates in mind – Oropeza and AIA Bhd CEO Khor Hock Seng.
Oropeza was picked to helm PAMB due to his expertise and vast experience in regional markets, one source said. Prior to joining HLA, he was the chief executive of Prudential Life Assurance Indonesia and the CEO of Prudential Vietnam Assurance.
He started his career with Allstate Insurance Co, United States in 1981.
A graduate of La Salle University and University of New Haven in the United States, Oropeza has more than 25 years of experience in international life and general insurance, mutual funds and consumer finance.
He assumed the position of group MD and CEO of HLA on July 10, 2007.
In view of liberalisation and growing competition in the financial services industry, many insurers are roping in experienced CEOs and other senior executives.
PAMB posted new business annual premium equivalent (NBAPE) (with life insurance sales and takaful contributions combined) of RM659mil for the financial year ended Dec 31, 2008, a 9% increase from 2007.
NBAPE consists of regular premium sales plus one-tenth of single premium insurance sales.

MAA Takaful gets syariah expert to stay ahead of competition

2009-05-13T21:18:00.000-07:00

By DALJIT DHESI
MAA Takaful Bhd aims to edge ahead of others in the Islamic insurance market through initiatives such as being the first local takaful player to have a syariah expert on its board.
Chief executive officer Salim Majid Zain says having an expert syariah adviser on board will help the company make informed strategic decisions and help it face growing competition in the industry.
“We are serious in ensuring that all aspects of our operations are syariah-compliant and certainly will have an edge over other players with the presence of our syariah adviser to provide us with relevant expert advice on syariah principles.
Salim Majid Zain “Having an expert on the board will also enhance our expertise in Islamic finance, corporate governance as well as give more confidence to our target market customers,’’ Salim says in an interview.
As one of the latest entrants into the takaful market, the company has aggressive plans to grow its market share, he says, adding that the company is recruiting talented agents.
At present the company has about 15,000 agents, of which 30% are active.
The company has also introduced customer-centric financial planning and sales-automation software in an effort to enhance service.
Investment-linked funds is also one of the areas of focus for the group.
To this end, Salim says MAA Takaful will also be hiring a top fund manager to assist in the development and management of these funds.
Investment-linked funds will continue to be the main contributor to family takaful business, he adds.
The company’s market share in investment-linked takaful business last year for regular new business was 13% and about 10% for single contribution (premium).
It is targeting a 35% growth in regular investment-linked new business by the end of the year.
There are eight players in the takaful market currently and the granting of up to two new family takaful licences this year under the Government’s liberalisation of the financial sector is expected to further heat up competition.
Asked on how it would compete with other new players coming on board, Salim says: “The new players will certainly increase competition and this would also pave the way for greater acceptance of takaful as an alternative to insurance and traditional invesment products.
“MAA Takaful inherits the MAA brandname which has been long established in Malaysia. It is known and well represented in the multi-ethnic population which provide the cutting edge in growing our business and retaining our customers.”
MAA Takaful is a 75:25 joint venture between MAA Holdings Bhd and Bahrain’s Solidarity Company BSC.
(The Star, Saturday May 9, 2009)

Manulife to grow agency force, looking for partners

2009-04-27T02:23:00.000-07:00

By ALFEAN HARDY
MANULIFE Holdings Bhd is looking to grow its agency force and is in talks to expand its bancassurance distribution network as it looks to maximise on opportunities amidst the current economic climate, its group CEO Michael Chan Yui Lung said.
Speaking to reporters on April 24 after the company's AGM in Kuala Lumpur, Chan said Manulife was keen to grow its agency force, which currently numbers about 1,500 nationwide.
"The percentage of new business coming from the agency force is about 73% of (new sales)," he said. "Our target this year is to recruit between 600 and 800 new agents," he added. Chan said the current situation was ideal to increase Manulife's agency force.
"The current economic situation may make a lot of people fear that they will lose their jobs and our agency force can provide them with an opportunity to join," he said.
"This is a good (time) for us to recruit more agents and we've seen the number of new agents joining us increase by about 10% so far this year. There is plenty of opportunity to grow here in terms of life insurance operations, given the penetration (rate) of about 40% in the Malay market alone," he added.
Chan said Manulife was also keen on growing its bancassurance dist ribut ion chain. The company currently has bank partnerships with four banks, HSBC Bank Malaysia Bhd, Citibank Malaysia, Alliance Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd.
"This gives us a range of about 200 branches (nationwide)," he added.
Chan also said the company was in active talks with a few potential partners but declined to elaborate until negotiations have firmed up.
Asked to elaborate on agency recruitment, Manulife Financial executive vice president and South-East Asia operations general manager Philip Hampden-Smith said it was during these challenging times that the quality of agents being recruited also improved.
"We get a lot of people from banks and qualified professionals like accountants who come to us... not just in Malaysia but in Asia as well," he said.
"And insurance companies have a slightly longer term perspective on the markets or seem to in the way they do their business, so that makes us an attractive proposition in terms of the financial services sector. So we're expanding rather than contracting," he added.

(The Malaysian Reserve, April 27, 2009, p4)

Takaful Ikhlas to focus on consolidation: BT

2009-04-27T02:18:00.000-07:00

Takaful Ikhlas Sdn Bhd will focus more on consolidation of its operations this year amid the economic slowdown. Its president and chief executive Syed Moheeb Syed Kamarulzaman said the current financial year ending March 31, 2010 will see the company striving for more efficiency in its operations, reports Business Times (April 24).
He said such a plan is apt as the takaful business has not been spared the economic crisis, especially the general and motor takaful business. However, unlike the conventional insurance sector, which some expect to see negative growth, the takaful industry could still achieve 10 to 20 per cent growth after years of experiencing 40 to 50 per cent growth, the report said.
In a recent interview, Syed Moheeb told the newspaper Takaful Ikhlas has achieved commendable growth from only RM7 million in gross collection in financial year 2003/2004 to RM590 million in 2008/2009.
"Our expectation for this year depends on the new government, really," he said, referring to the new leadership under Datuk Seri Najib Razak.
"That is why this year, our main focus is on consolidation by enhancing our internal capability. The theme for us is 'Achieving Operational Excellence'," he said.
Syed Moheeb added that about RM8 million will be spent on a better document management system where all documents will be digitalised, a new accounting system and a new point-on-sale system.
Takaful Ikhlas is one of the participants in the Minggu Amanah Saham 2009 (MSAM 2009) held in Johor Baru, its sixth participation in six years.
MSAM 2009, said Syed Moheeb, is a good platform for Takaful Ikhlas to not only sell its products but also help create greater awareness for the public to understand the takaful concept and its benefits.
About 240,000 people came to visit MSAM 2008, he said, adding that more visitors are expected this year. "We may not be able to do direct sales, but we collect referrals by inviting visitors to participate in simple quizzes. These referrals helped our growth," said Syed Moheeb.

Bigger foreign equity in insurance?

2009-04-27T02:17:00.000-07:00

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz met with insurance and takaful officials last week to inform them of some of the upcoming liberalisation measures. She did not disclose details of the plan, but hinted that new licences, namely for takaful operation, may be on the cards, an industry source said, reports Business Times (April 24).
Prime Minister Datuk Seri Najib Razak will announce the much-anticipated liberalisation measures for the financial sector today.
"Bank Negara will relax ownership rules for foreign financial firms and may grant new licences to operate here.
"The overall move is to help move the local economy because Bank Negara believes that the services and financial sector have always been the prime mover of the economy," the unnamed source told the newspaper.
The newspaper report goes on:
Currently, existing foreign shareholders can increase their stake in a local insurance company up to a maximum of 49 per cent - the maximum allowable under Malaysia's foreign investment rules.
New foreign insurance companies can also enter the industry but they can only buy up to 30 per cent of a locally incorporated insurance company.
The source said the lifting of the foreign equity barrier applies to both conventional and takaful operations.
The move will enable existing foreign players, mainly in the conventional insurance segment to increase their stake as well. It will also see new financial institutions making an entry into the Malaysian Islamic insurance.
But there's a catch. The new player will have to help facilitate the Malaysian entity to expand overseas.
"They must come with that added value, only then will Bank Negara be supportive of their venture," the source added.
It was learnt that local insurance companies, namely smaller non-life companies, will be pressured to merge with larger foreign firms as the implementation of the risk-based capital adequacy (RBC) framework deadline draws closer.
"These smaller companies are in dire need of capital injection to survive," the source said.
Business Times recently reported that at least seven non-life companies were unable to meet the minimum capital required come January 1 2009.
The RBC framework requires each insurer to maintain a capital level that commensurate with its risk.
According to the General Insurance Association of Malaysia (PIAM), as at April 1 this year, there were 39 general insurance companies operating in Malaysia comprising 23 general insurers, 10 composite insurers and six general reinsurers.

MAA rubbishes receivership talk: BT

2009-04-14T20:50:00.000-07:00

Financial services firm MAA Holdings Bhd has dismissed as rubbish talk that the group or its insurance arm Malaysian Assurance Alliance Bhd (MAA Assurance) has been placed under receivership over unpaid debts, reports Business Times (April 6, 2009).
"The group has more than sufficient assets to back all liabilities," MAA Holdings chief executive officer and group managing director Muhamad Umar Swift told Business Times in an e-mail response.
It had had reported that industry sources told the newspaper that the holding company was under receivership due to bad debts, thus requiring it to sell its insurance assets.
"Pure rubbish. MAA Holdings' only loan is its RM200 million bond, which has been serviced promptly to date with no problems envisaged," said its executive chairman Datuk Tunku Ya'acob Tunku Abdullah.
He was referring to MAA Holding's medium-term notes of RM200 million.
The report goes on:
According to Bursa Malaysia filings, the group's total borrowings stood at RM231.38 million as at December 31 2008, compared with RM241.16 million in December 31 2007.
Tunku Ya'acob added that the rumours were malicious in nature and probably instigated by unprofessional agents of competitors.
Meanwhile, Muhamad Umar said that MAA Holdings was not selling its life insurance division.
The group, however, is selling its general insurance unit and a 4.9 per cent stake in its takaful unit to Ambank Group for a combined price of RM291 million.
The deal, which was announced in November 2008, is expected to be completed this month.
MAA Holdings, which has been in the red for the past three fiscal years, hopes to be profitable within the next two years.
The group's performance last year was affected by the poor investment climate, therefore detracting it from meeting an earlier forecast of posting profits in 2008.
"The investment environment impacted the group's investment yield and returns as it did with all predominantly insurance-based groups," Muhamad Umar said.
For its financial year ended December 31 2008, the group posted a net loss of RM70 million on a revenue of RM2.21 billion.
Muhamad Umar also said that total recoveries from the group's non-performing loans (NPLs) were RM251.58 million for the financial year ended 31 December 2008.
"As at end-December 2008, the total carrying amount of NPLs stood at RM450.48 million compared with RM649.92 million at end-December 2007. The 44.3 per cent improvement in net NPLs was a result of stronger debt collection and our ongoing recovery exercise," said Muhamad Umar.

MAA aims to maintain RM1b life policy sales: BT

2009-04-14T20:47:00.000-07:00

MALAYSIAN Assurance Alliance (MAA Assurance) Bhd hopes to maintain its life insurance premium sales of RM1 billion for this year, says its top chief, reports Business Times (March 24, 2009).
"We are bullish on our sales as we anticipate take-up for protection plans to increase, and as we also shift our emphasis from selling single-premium policies," said its chief executive officer Muhamad Umar Swift at a press conference on the release of its latest endowment plan held at Kuala Lumpur yesterday.
Umar added that the finalisation of holding company MAA Holdings Bhd's deal with Ambank is expected to be completed within a month or so.
Ambank Group plans to buy MAA Holdings Bhd's general insurance unit for RM274.8 million and purchase a 4.9 per cent stake in the latter's takaful unit for RM16.2 million.
On its latest life policy "Super Fortune Plan", MAA Life Business Development Services vice-president Chan Yok Chor said he expects first-year premium sales of RM100 million, or 10 per cent of the life division's sales.
The plan allows policyholders to complete premium payments for the entire policy in either 6, 10, 15 or 20 years.
The plan caters to individuals aged between 10 and 55, and matures at the 50th or 80th birthday of the insured, depending on the entry ages.
It provides guaranteed annual cash payments at the end of the 10th policy year onwards and 120 per cent of the original sum assured will be paid upon maturity of the policy.
"We are targeting customers who are currently keeping their money in safe deposits and earning a minimal interest on their money as the policy provides protection and savings," said Chan.
Policyholders can also choose to enhance their basic cover by attaching additional rider policies such as medical plans.

Return to deposit insurance limit on the cards: THE STAR

2009-04-14T20:44:00.000-07:00

THE global economy is expected to stabilise by the end of next year and Malaysia is likely to return to the previous deposit insurance limit from the current blanket guarantee on all deposits.
“The government guarantee is until the end of 2010, which means that over this period of time, depositors are fully protected. The blanket guarantee is a pre-emptive move. Part of our corporate plan this year and next will be transitioning from this blanket guarantee back to the limited protection by PIDM’’ said PIDM CEO Jean Pierre Sabourin, reports The Star (April 6, 2009).
Currently, that is limited to RM60,000 per depositor per bank, which is likely to be reviewed, depending on the circumstances.
That transition will be easier for Malaysia as it has maintained the RM60,000 guarantee by PIDM. Above that is guaranteed by the Government but administered by PIDM.
Hong Kong, Malaysia and Singapore have announced a blanket guarantee of two years. However, PIDM reviews the situation on an ongoing basis and will make its recommendation to the Government, the report added.
As part of a deposit insurance tsunami, countries had substantially raised the protection for depositors following the worst banking crisis that the world had not witnessed for a long time. The US raised its deposit insurance from US$100,000 to US$250,000 and Europe from 20,000 euros to 50,000 euros, then 100,000 euros. Australia, which never had deposit insurance, put in a blanket guarantee and was followed the next day by New Zealand and subsequently by Hong Kong, it added.
On Oct 16 last year, the report said Malaysia and Singapore announced a blanket guarantee on all deposits. Taiwan did the same thing and Indonesia’s protection for depositors went from US$8,500 to US$250,000.
“Once put in place, it will be difficult to remove,’’ said Sabourin. PIDM will maintain the RM60,000 and administer the government guarantee above this amount. Essentially, PIDM is responsible for the entire amount of deposits.
The report goes on to say:PIDM will soon charge a guaranteed fee to all its member commercial and Islamic banks for deposits above RM60,000 per depositor and for products not insured, for example, foreign currency deposits.
Apart from member banks, PIDM also charges the guaranteed fee on investment banks, international Islamic banks and deposit taking development financial institutions (DFIs).
“We will take that fee and pay it to the Government which is giving us the guarantee,’’ said Sabourin.
The task of building confidence is a serious matter at PIDM. It involves setting up public awareness campaigns, training at branches, meeting bank officers together with officers from Bank Negara, the Financial Mediation Bureau (FMB), credit counselling and management agency (AKPK) and meeting the public on how the entire system works.
Its brochures, annual reports and website come in several languages. For the call centre, toll free lines are available in four languages and main dialects. “This is what the Government should do ... (explain to people) as slowly as they require and in the language they understand.’’
“I feel confident (that we can deal with any crisis), with all the infrastructure in place and the vision in this country,’’ said Sabourin.
Together with deposit insurance, the system is backed by the AKPK, FMB, Islamic banking system, government stimulus package, guarantees and lately, the Corporate Debt Restructuring Committee (CDRC).
“It seems to me they have put in the whole package,’’ he said. “Everyone is working together. Banks are also working with their clients on any potential financial problems. “They invite customers to talk to them. In some other countries, people don’t even know who to call if they are losing their homes,’’ he said.
Globally, the response to the crisis has been two-pronged. Governments in Europe, Britain and the United States have been putting in a lot of liquidity and capital. The other approach, adopted by countries like Malaysia, is to put in place mechanisms to promote stability and public confidence.

Insurance firms see rise in claims: BT

2009-04-14T20:38:00.000-07:00

General insurance companies are bracing for a rise in claims during the economic downturn, as they believe that hard times will lead to an increase in crime rate, reports Business Times.
Preventive maintenance is also likely to take a back seat as companies resort to cost cutting measures in the current economic environment, the General Insurance Association of Malaysia (PIAM) said.
"It is expected that the insurance industry will experience increases in vehicle theft, fire, robbery and other property theft claims," PIAM told via email the business section of the New Straits Times.
The report also had comments from a number of other industry players.
The report goes on:
ACE Synergy Insurance Bhd chief executive officer Raj Nanra added that deteriorating businesses, rising unemployment and crime rate are the most common phenomenon in challenging economic conditions.
"As this happens, it is natural to expect an increase in claims due to business closures and rising car and property theft," he said.
MAA Assurance Bhd's executive vice president of general claims management, Goh Ching On, said insurers expect to see an increase in moral hazards such as fire claims in a depressed economy.
As a result, PIAM said, the industry would normally respond by being more stringent in underwriting control and at the same time more vigilant in claims handling and investigation.
"Risk management measures will also be stepped up to deal with the potential risks factors," the association said.
Nanra added that claims ratio affects the overall capital of a company and ultimately its ability to meet the Risk Based Capital (RBC) requirement.
He said ACE, with an average claim ratio of about 28 per cent for the last five years, has a very strong balance sheet and its liquidity and net loss reserves for paying claims are exceptionally strong.
"In fact, we are well above the minimum capital requirement under the RBC regime," Nanra added.
MAA, with gross claims ratio of 63.1 per cent and incurred claims of RM234 million last year, said it will impose stringent underwriting guidelines by rejecting adverse risks.
For ACE Malaysia, containing rising claims will always remain a challenge and the industry needs to stay alert of changing trends and review existing methods. One way to do it is through education, Nanra added.
"Education will be the cornerstone in efforts to mold a society that frowns on insurance fraud. Society needs to understand, and be constantly reminded, of the high cost implications to business and by extension, to individuals in the community, if fraud is allowed to flourish," he said.
Insurers and adjusters, meanwhile, should ensure that their personnel have integrity, are technically sound and well experienced, Nanra said.

Strong capital foundation with new RBC

2009-03-31T21:53:00.001-07:00

By Habhajan Singh
The implementation of the Risk-Based Capital Framework for Insurers (RBC) on Jan 1, 2009, completed an "important component" of the overall objective towards ensuring a strong capital foundation for the financial sector, the central bank said.
In its annual report for 2008, Bank Negara Malaysia (BNM) noted that the RBC provides for capital assessments that are more aligned to the specific risk profiles of individual insurers and is reflective of market consistent valuations.
"After a parallel run of almost two years during which the framework underwent several refinements to enhance its integrity, legislative changes were approved to bring the framework into effect," it said in its recently-released Financial Stability and Payment Systems Report 2008. The framework replaces the previous margin of solvency regime.
"A key objective of RBC is to ensure that prudential buffers reflect the underlying risk profiles of individual insurers. To achieve this, the RBC requires more explicit quantification of the various risks inherent in the insurance business," it said.
Under the RBC, the central bank noted that capital adequacy requirements are more granular and risksensitive compared to the previous solvency regime, which did not differentiate between the nature and sources of risk. Providing an example, it said insurers whose asset portfolios are concentrated in high-risk assets or assets that are inadequately matched with the corresponding liabilities will be required to hold more capital under the RBC compared to the previous solvency regime.
Similarly, insurers who underwrite volatile lines of business or are highly concentrated in a single line of business will be required to hold more capital than insurers with diversified portfolios of relatively stable lines of business.
In an interview with The Malaysian Reserve last month, then-president of Life Insurance Association of Malaysia (LIAM) Ng Lian Lu said, there was never a doubt that the transition to the new RBC regime would be smooth as companies have conducted parallel runs for two years and all teething problems have been addressed prior to the implementation of the new framework.
The central bank also noted that since the implementation of the framework, further adjustments have been necessary to address the impact of market interest rates used in the valuation standards moving significantly out of line with historical norms. Neighbouring Singapore went into the RBC mode some years ago.
In a statement dated Aug 25, 2004, the Monetary Authority of Singapore (MAS) announced an RBC for insurers in Singapore. In conjunction with the new framework, its regulator said the RBC aims to put in place a more transparent and risk-focused capital and valuation basis that reflects all major financial risks of insurers. It was developed in close consultation with insurance practitioners, and the actuarial and accounting professions, it said.
MAS also issued two consultation papers to discuss how the RBC and regulations will be integrated into the Insurance Act. The shift from a one-size fits all approach will also encourage insurance companies in Singapore to manage their financial risks more actively and raise overall prudential standards, it added.
Meanwhile, in its report, BNM said that the insurance and takaful sectors — while recording a stronger solvency position of RM16.6 billion compared to RM11.7 billion the year before, and attaining a capital adequacy ratio of 187.6%, which is well above the minimum requirement of 100% (2007: 158.4%) — faced challenges in maintaining the growth in premiums and contributions from new businesses amidst strong competition in the industry.
It said total net premium and contribution income of this industry grew by 2.4%, attributed mainly to the expansion in the market share of takaful business. At the same time, the growth of 5.5% in the general insurance and takaful sectors was driven mainly by the expansion in the fire segment while the modest growth of 1% in the life and family takaful sectors were a result of the weaker demand in investment linked business.
Nevertheless, it noted that the operating profit of the general insurance and takaful business declined by 44.5% to RM0.7 billion, mainly due to unrealised losses and deterioration in the motor insurance portfolio, as reflected in the higher claims ratio of 84.2%. - The Malaysian Reserve, p32, Apr 1, 2009

(This story appeared in The Malaysian Reserve on Mar 30, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

Kurnia on the lookout for 1,000 new agents

2009-03-31T21:52:00.001-07:00

By Lee Cherng Wee
Kurnia Insurans (Malaysia) Bhd aims to hire 1,000 insurance agents as it embarks on new initiatives and diversification. Kurnia's general manager for agency distribution channel Pang Yoke Nam said Kurnia currently has 6,500 agents and is aiming to hire another 1,000 agents starting the next financial year in July.
"It is very critical to add new blood. We have 30 branches nationwide that conduct business opportunity seminars monthly to recruit new agents.
"This line offers a good career, requires low capital and you will not be out of job," he said in an interview with The Malaysian Reserve recently.
With four million policyholders nationwide, Kurnia is the largest general insurer for five consecutive years, controlling a market share of 14.6% based on net written premium. Pang said Kurnia is looking to build long-term relationships and create win-win partnerships with its agents. "We want to make sure that the agents are growing and see how to help them grow their business.
"We conduct seminars to upgrade their technical knowledge and help them to be more professional," he said.
In recognition of its agents' contributions, Kurnia, like most local insurers, holds an annual convention to honour its top selling agents. Pang noted that Kurnia has 150 agents with annual sales above RM1 million.
"The convention is also a platform to communicate with agents on the company's direction and messages from the CEO. We invite renowned motivators to speak during the convention," he added. Moving forward, Kurnia will be its launching new product, Compensation for Assessed Repair Time (CART), on April 15. CART is an extension of the comprehensive motor policy, which provides compensation to policyholder for the number of days the car is being repaired at the workshop according to the loss adjustor's assessment. "We will subsidise customer's travelling expenses when their car is under repair," he said.
Apart from CART, Kurnia has introduced several value added services to improve customer service such as Kurnia Auto Assist and Kurnia Express Service. Under Kurnia Auto Assist, the insurance company has eight personnel riding on motorcycles around the Klang Valley to assist customers whose cars break down.
Meanwhile, under Kurnia Express Service, customers can drive their damaged cars to Kurnia's branch office for small claims of less than RM3,000. Pang said claims are assessed and processed within one hour.
Meanwhile, in anticipation of slower car sales, Kurnia is growing its non-motor insurance business to reduce reliance on its motor insurance segment.
"We still want to maintain our share in the motor segment. But the growth from motor may not be that impressive. "Growth will come from the nonmotor side. We want to grow our non-motor business in an aggressive mode," said Pang.
Currently, motor insurance contributes 84% of Kurnia's income while its non-motor business accounts for 15%. The market leader in motor insurance aims to place greater focus on non-motor insurance products such as fire, property, freight and cargo. The Kurnia management team is headed by Captain K H Chia as its managing director. - The Malaysian Reserve, p32, Apr 1, 2009

Policy brief on MENA insurance sector

2009-03-31T21:48:00.000-07:00

DUBAI: The Hawkamah Institute for Corporate Governance (Hawkamah) and the Arab Forum of Insurance Regulatory Commissions (AFIRC) announced on Mar 22 the release of the policy brief on corporate governance for the insurance industry in the Middle East and North Africa (MENA) region.
It hopes the recommendations contained in the policy brief will form the basis for creating a minimum standard for the MENA insurance sector as agreed upon by the region's insurance industry regulators.
The policy brief concluded that insurance companies operating in the MENA region have varied strengths and currently face significant challenges in view of the ongoing global financial crisis, the two organisations said in a press release.
"The strengths include recognition of the importance of the role of the financial services sector, of maintaining a strong reputation and financials, and of making a contribution to the community. Many institutions have demonstrated their commitment to accountability, transparency, and fulfilling obligations to their stakeholders and policyholders," it said.
Concurrently, it noted that many companies face challenges in achieving proper corporate governance as defined by leading international professional and regulatory agencies.
"Such challenges also exist in most other regulated markets and are often based on accepted practices within those markets," it said.
The actionable items outlined by the brief include committing to good corporate governance; good board practices; adopting and maintaining minimum levels of transparency and disclosure; ensuring an effective control environment; and protection of policyholders and shareholders rights.
Dr Nasser Saidi, board member of Hawkamah, said the lack of good corporate governance contributed to the current global financial crisis, which has affected the insurance industry.
"The need for the global insurance industry to implement sound corporate governance practices is all the more pressing in view of the crisis. This is particularly so in the MENA region, where the insurance industry, both conventional and Islamic, has been underdeveloped, but is now growing fast.
"Within the MENA region, the rapid rise of Shariah-compliant insurance and re-insurance provides an additional incentive for strong standards to be quickly developed," he said.
Dr Bassel Hindawi, director general of the Insurance Commission of Jordan and chairman of AFIRC said commitment to corporate governance standards will reflect positively on the management of the insurance companies, by efficient use of its resources, improve market competitiveness, and strengthening the stability of financial markets." - The Malaysian Reserve, p32, Apr 1, 2009

CAPTION: Shaping policy for MENA press conference was attended by (from right to left) Dr Saidi, Dr Hindawi and Mark Dempsey who is the country director for Jordan and Middle East pepresentative.

Singapore insurance policy bonus set to fall

2009-03-31T21:47:00.000-07:00

In view of the global financial crisis and economic recession, policyholders of participating life insurance policies (popularly known as par policies) can expect non-guaranteed benefits, in the form of bonuses, to be revised downwards for 2008 and into the future, said Singapore's Life Insurance Association (LIA).
These bonus changes are needed due to the poor investment climate in 2008, it added in a recent statement. It said par policies offer both protection and savings through a combination of guaranteed benefits and non-guaranteed benefits in the form of bonuses. Bonuses are determined based on the performance of the par funds.
Like many other financial products and investments, par funds have not been spared from the brunt of the recent financial market meltdown.
The bonuses for par policies in 2008 are therefore expected to be lower than those declared in preceding years.
LIA president Darren Thomson said despite an extremely turbulent past year, all life insurers have been able to maintain the solvency of their par funds. "We remain able to continue to allocate bonuses to par policyholders, albeit at a lower level." - The Malaysian Reserve, p32, Apr 1, 2009

ING Insurance lowers new premiums

2009-03-31T21:46:00.000-07:00

By T Vignesh
ING Insurance Bhd, has lowered its new premiums target to RM830 million in 2009 compared to RM870 million recorded last year.
CEO and president of ING Insurance Bhd Datuk Dr Nirmala Menon said the company has lowered the target due to the tight economic outlook.
"Due to the recession, the amount of money put into a policy may decrease, but the number of policies being sold may increase," she told reporters after the launch of ING's new product — INGeasi for family in Kuala Lumpur on Mar 31.
On the new product, she said it combined varying protection, health, education and investment needs of every member of the family. ING expects to sell between RM50 million and RM60 million of the new product.
Chief financial officer and chief risk officer Anusha Thavarajah who was also present said that INGeasi for family is timely with the current financial climate where it is imperative for families especially to have some form of financial protection at these uncertain times.
She said INGeasi for family is designed to take care of the family income needs with a maintenance fund payment given to the family in the event the breadwinner is no longer able to provide due to unforeseen circumstances.
"With this, the family can have the peace of mind knowing well that they will be financial protected and their lifestyles continue to be safeguarded," she added. For the breadwinner of the house, the plan comprehensively provides protection and health coverage besides education and investment options for their immediate family.
Anusha said in the event that the breadwinner is no longer able to provide, the plan offers them special income protection, which provides monthly income replacement for up to five years. She said for spouses, INGeasi for family offers personalised life protection and this includes critical illnesses and accidental coverage.
In the event of death, total permanent disability or critical illness, a monthly income replacement for up to five years is again provided to the family. Anusha said for children, the plan makes it simpler by providing for education savings to help parents to fulfill their children's educational potential.
In addition, all future premiums for the plan will be waived if the payor is diagnosed with critical illness. "On top of protection and savings, INGeasi for family provides the flexibility to choose from eight different combinations of local and global unit-linked investment funds to suit families changing needs at different stages of their lives and risk levels," she added. - The Malaysian Reserve, p9, Apr 1, 2009

Insurance, takaful industry had a difficult 2008, says BNM

2009-03-30T21:14:00.000-07:00

By Bhupinder Singh
The insurance and takaful industry came out of a difficult year in 2008, with the industry struggling to maintain premiums and contributions from new businesses amidst strong competition in the industry.
This could be seen from the latest figures released by Bank Negara Malaysia (BNM) in its annual report released concurently with the central bank's Financial Stability and Payment Systems 2008 report.
The figures show that the operating profit of the general insurance and takaful business declined by 44.5% to RM0.7 billion [CORRECTED] mainly due to unrealised losses and deterioration in the motor insurance portfolio as reflected in the higher claims ratio of 84.2% last year as compared to 79.6% in 2007.
Total net premium and contribution income of the industry grew by 2.4% attributed mainly to the expansion in the market share of takaful business.
The general insurance and takaful sectors grew by 5.5 % last year mainly driven by an expansion in the fire segment while the life and family takaful sectors expanded by a modest 1% due to weaker demand in investment linked business. The industry, as a whole, recorded a stronger solvency position of RM16.6 billion for the year as compared to RM11.7 billion previously while the capital adequacy ratio stood at 187.6%, well above the minimum requirement of 100%.
BNM's efforts to strengthen the solvency position of the insurance sector made significant progress with the implementation of the Risk-Based Capital (RBC) framework on January 1, 2009.
The framework provides a strong capital foundation for insurance companies to operate at different risk levels that commensurate with the insurers' risk management capabilities. A similar framework was laid for takaful operators last year. The central bank expects the industry on the whole to remain resilient based on stress tests conducted despite results showing that the profitability and capitalisation of some industry players may be impacted under more adverse scenarios.
In an effort to safeguard the stability of the domestic financial sector, BNM has extended a safety net to the insurance and takaful sectors by allowing them to access the bank's ringgit liquidity facility.
BNM also continues to pursue consolidation and rationalisation exercises to address the fragmentation especially in the general insurance sector.
The central bank has revealed that a review for the further liberalisation of the operating costs control guidelines that would allow for greater cost synergies and product innovation in the sector were at an advanced stage.
It has relaxed guidelines on the utilisation of bancassurance as a key distribution channel for insurance companies to further enhance profitability and increase insurance penetration in the country.

(This story appeared in The Malaysian Reserve on Mar 31 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

MCIS Zurich CEO appointed LIAM president

2009-03-30T21:11:00.000-07:00

MCIS Zurich Insurance Bhd chief executive officer Md Adnan Md Zain has been elected at the president of Life Insurance Association of Malaysia (LIAM) at its 35th annual general meeting (AGM) on March 25, taking over the helm of the industry body from Am-Life Insurance Bhd CEO Ng Lian Lu.
Ooi Say Teng (picture, left), their counterpart at Uni.Asia Life Assurance Bhd, was elected as the vice president.
The two top positions at LIAM are elected at every AGM with the maximum term in office of the president being three consecutive years.
Adnan, who began his career in the banking industry with Standard Chartered Bank (SCB) in 1981, headed the bank's key regional corporate banking project based in Hong Kong from 1990 until 1992.
He was the head of global electronic banking, reporting directly to the group head office in London, prior to leaving SCB in 1995. He subsequently held various key management positions within the banking industry, including being the acting CEO of Alliance Merchant Bank in 2003, before going to MCIS Zurich in April 2005 as its deputy CEO and subsequently being appointed as CEO in February 2006.
Md Adnan sits on the boards of the Malaysian Insurance Institute and Malaysian Life Reinsurance Group Bhd.
Ooi, who graduated with a Bachelor of Science (Honours) degree in Actuarial Science from the City University, London, in 1993, has about 26 years of experience in the insurance industry, LIAM said in a statement.
Prior to joining Uni.Asia Life as its CEO in January 2003, he was the assistant general manager of Mayban Life Assurance Bhd from January 2000 to December 2002, and deputy general manager of MBA Life (now known as Allianz Life Insurance Bhd) from 1996 to 1999. Ooi started his career with MCIS Insurance (now known as MCIS Zurich) in 1983 as an actuarial officer. He is a director at Malaysian Life Reinsurance Group Bhd. -- The Malaysian Reserve (Mar 31, 2009)

Moody's cuts ratings on Prudential PLC's UK insurance unit

2009-03-30T20:11:00.001-07:00

Moody's Investors Service cut its credit ratings on Prudential PLC's (PUK) main U.K. insurance business, Prudential Assurance Co., because of lower solvency surplus levels in 2008 as well as the global economic downturn in the fourth quarter, reports Dow Jones.
The solvency surplus levels fell because significant declines in equity values and government-bond yields, as well as increasing stock volatility. Moody's expects the surpluses to remain vulnerable to stock market declines and volatility this year despite the company's hedging strategy. About 40% of Prudential Assurance's business investments were in equity securities and portfolio holdings in unit trusts at the end of 2008, the newswire said.
Another reason for the downgrade was Prudential's focus on higher-margin products despite its increased market share in 2008 and retail business growth of 10%. Despite the downgrade, Senior Credit Officer Dominic Simpson said Prudential Assurance has one of the financially strongest life funds in the U.K, it added.

Kurnia to diversify and grow non-motor segment

2009-03-30T00:30:00.000-07:00

By LEE CHERNG WEE
KURNIA Insurans (Malaysia) Bhd plans to grow its non-motor insurance business to reduce reliance on its motor insurance segment in anticipation of slower car sales.
"We still want to maintain our share in the motor segment. The growth from motor may not be that impressive. Growth will come from the non-motor side. We want to grow our nonmotor business in an aggressive mode," general manager for agency distribution channel Pang Yoke Nam told The Malaysian Reserve in a recent interview.
The Malaysian Automotive Association (MAA) recently reported that February car sales dropped to 36,675 units from 38,527 units in the same month last year. It elaborated that sales of passenger cars fell to 33,281 units in February this year, against 35,437 units in the corresponding month last year while sales of commercial vehicles increased to 3,394 units from 3,090 units.
Currently, motor insurance contributes 84% of Kurnia's income while its nonmotor business accounts for 15%.
Moving forward, the market leader in motor insurance will put greater focus on non-motor insurance products such as fire, property, freight and cargo.
"We have a new team and a chief underwriter has been hired. It's an area where you need a lot of competency. The non-motor chief has put the underwriting and processes in place. We have reorganised and our expansion mode has been looked upon. We now need to train the agents," said Pang.
Pang added that Kurnia has 6,500 agents and is aiming to hire another 1,000 agents starting the next financial year in July.
"We have 30 branches nationwide that conduct business opportunity seminars monthly to attract potential agents," he said.
Meanwhile, Kurnia managing director K H Chia said the company will leverage on its agency network and huge motor policy customer base to cross sell its non-motor insurances.
"We are putting up a call centre and will start cross selling in April," he said.
Kurnia Insurans is a wholly-owned subsidiary of listed insurance group Kurnia Asia Bhd. The latter incurred a group net loss of RM301.79 million for the year ended June 30, 2007 on a turnover of RM1.20 billion.
It suffered a net loss of RM11.99 million, or 0.81 sen a share, for the six months to Dec 31, 2008 compared to a net profit of RM26.72 million, or 1.79 sen a share, in the same period a year ago.

(This story appeared in The Malaysian Reserve on Mar 30, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

Takaful Malaysia sells land, office for RM63m

2009-03-30T00:29:00.000-07:00

SYARIKAT Takaful Malaysia Bhd (STMB) is selling land and an office building worth RM63 million to Export-Import Bank of Malaysia Bhd (Exim).
The properties involved in the proposed transaction are seven pieces of freehold land together with an 18 storey building, all located in Kuala Lumpur.
The transaction would result in a net gain of RM543,000 and would allow the company to focus on its principal activities of managing family and general takaful businesses, STMB said in a statement to Bursa Malaysia on Mar 24.
STMB entered into a conditional sale and purchase agreement with Asian Finance Bank Bhd (AFB) as the financier for EXIM for the transaction.
According to last week's filing, EXIM has obtained a Murabahah term financing-i facility of up to the maximum aggregate principal amount of RM55 million from AFB to finance their purchase of the property. STMB will dispose the said property to AFB, which would then dispose the property to EXIM, the end purchaser, under the Al-Murabahah concept facility.

(This story appeared in The Malaysian Reserve on Mar 30, 2009)

Jerneh Insurance targets 10% premium growth

2009-03-30T00:28:00.000-07:00

Jerneh Insurance Bhd is aiming for 10% growth in gross premiums this year, supported by its partnership with the Automobile Association of Malaysia (AAM).
"That is our target but we have to be conservative and realistic about the economic situation. It is challenging but there is always an opportunity," its chief executive officer Lim Sun told reporters after sealing the partnership document with AAM on Mar 25.
Representing AAM was its chairman Tunku Mudzaffar Tunku Mustapha. The partnership has resulted a new product called AAMJ2U, a comprehensive motor insurance policy.
Exclusively offered to AAM members, AAMJ2U provides policy holders various benefits including door-to-door insurance and road tax service, accident assistance, and post repair inspection. Lim said the partnership is also expected to help increase Jerneh Insurance's market share in the motor insurance business.
The general insurer currently holds two to three percent share of the motor insurance market currently. Motor insurance makes up about 30% of Jerneh Insurance's total general insurance portfolio, while its largest portfolio was properties which accounted for 34% to 40%.
Jerneh Insurance's parent company is the Kuok Group. It is also a subsidiary of Jerneh Asia Bhd, an investing holding company whose primary activity is the underwriting of general insurance business providing a complete range of products and services in Malaysia, Hong Kong, Thailand and Indonesia.
AAM chairman Tunku Mudzaffar meanwhile said due to the challenging business environment, AAM was constantly coming up with new products and putting more value and creativity into its products and services.
"The launch of the AAMJ2U is a manifestation of the many initiatives that are being carried out to serve our members better. It more importantly, reinforces AAM's aim at becoming the most dynamic automobile association in Malaysia," he said. AAM has 300,000 members currently. — Bernama

MAA sees RM100m in premiums in a year from Super Fortune Plan

2009-03-30T00:23:00.000-07:00

Malaysian Assurance Alliance Bhd (MAA) aims to achieve RM100 million inpremiums in a year from its Super Fortune Plan launched yesterday.
The plan is an endowment insurance plan with death and total permanent disability coverage that is catered for individuals aged between 10 and 55 years.
The plan provides guaranteed annual cash payments at a rate of 4% after the 10th policy year and a lump sum cash payment of 120% of the sum assured payable upon maturity, which is about 30 years after the commencement.
"During uncertain times like this, people look for guaranteed plans," said MAA vice president of life business development services Chan Yok Chor. For example, a non-smoker male aged 25 who chooses to pay premium for six years for a basic sum assured of RM100,000 would need to pay annual premiums of RM15,820 or a total premium of RM94,920 over the six years.
Upon maturity at the age 60, he would receive a total guaranteed annual cash payment of RM136,000 and a lump sum cash payment of RM120,000.
"The total return i s RM256,000 together with death and disability coverage. That translates to RM2.70 for every RM1 you put in," said Chan.
The Super Fortune Plan allows customers to choose their premium paying term of six, ten, 15 or 20 years. Customers can also pay their premiums either monthly, quarterly, semi annually or annually.
"Through our surveys, we found out that customers don't like to pay premium for a long period. The plan allows them to pay in a shorter period. Customers can also attach additional benefits or rider plans such as medical and accident," said Chan.
Under the plan, the minimum sum as sured i s RM25,000 and policyholders cannot change the premium paying period.
Meanwhile, MAA CEO Muhamad Umar Swift sees no drop in the general insurance industry amid the economic slowdown.
"The general insurance market has been robust with sales up year-on-year. On life insurance, savings policies have declined while protection-type policies have gone up," he said.
On the sale of a 4.9% stake in MAA Takaful Bhd to AmAssurance Bhd, Muhamad Umar said it would take four to six weeks to finalise and submit documents for authorities' approval.

(This story appeared in The Malaysian Reserve on Mar 24, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

MNRB faces challenging conditions, says MARC

2009-03-19T20:25:00.000-07:00

Malaysian Rating Corp Bhd (MARC) affirms its AAis rating on MNRB Holdings Bhd's (MNRB) RM200 million Islamic medium term notes (IMTN) programme with a Developing Outlook.
The affirmed rating of the investment holding company largely reflects the sustainable business profile of its core operating subsidiary, Malaysian Reinsurance Bhd (Malaysian Re) and its adequate, although weakened recent operating performance in the context of large rising claims and challenging financial market conditions.
The rating also incorporates prudent levels of financial leverage and strong debt service coverage at the holding company level. MNRB remains substantially reliant on dividend upstreaming by Malaysian Re to meet its debt service obligations and for the preservation of its financial flexibility.
The developing outlook reflects the challenging underlying operating conditions in reinsurance and insurance sectors and the likelihood for underwriting performance and investment earnings to remain pressured, both of which could expose MNRB's reinsurance, takaful and retakaful entities to potential volatility in capital strength.
MNRB is the holding company of Malaysian Re, Takaful Ikhlas Sdn Bhd (Ikhlas) and MNRB Retakaful Berhad. Malaysian Re, in turn, holds a 20% stake in Labuan Reinsurance (L) Ltd (Labuan Re).
The main profit contributing entity of the group, Malaysian Re, is the largest player in the domestic reinsurance market with a 61.9% market share of gross reinsurance accepted premiums in 2007.
This reflects existing voluntary cession (VC) market arrangements with local general insurers which will remain in force until end of 2009. Malaysian Re continues to make good progress in preparing for challenges arising from lower cessions from domestic insurers going forward.
This is evidenced by declining dependence on gross premium income generated by its VC business. Local and overseas treaty business has in recent years, contributed more significantly with share of revenue from VC declining to 49.1% in financial year (FY) 2008 (FY07: 53.8%).
Malaysian Re's underwriting results for the year ended March 31, 2008 and for the nine months ending December 2008, were adversely impacted by higher claims incurred.
The reinsurer's financial results for 1H09 showed a 61% drop in pretax profit to RM21.3 million compared to the corresponding period in FY08. The poorer performance is attributed to an underwriting deficit of RM8.8 million and a 25.5% decline in investment income to RM24.8 million (1H08: RM33.3 million).
Malaysian Re's risk-based capital (RBC) adequacy is expected to remain good based on its RBC parallel report as at end March-2008, which places Malaysian Re's total required capital at RM409.3 million against its total capital available of RM607.4 million.

Prudential Plc CEO resigns

2009-03-19T02:10:00.000-07:00

Mark Tucker, Prudential plc group chief executive officer, announced his resignation today (Mar 19) as the company posted a net loss of 396 million pounds compared to a 947 million pounds net profit the year earlier, when calculated according to the basis of International Financial Reporting Standards (IFRS). The company announced chief financial officer Tidjane Thiam will take over the position effective Oct 1. Mark was an executive director of Prudential from 1999 to 2003, and from 1993 to 2003 he was Chief Executive of Prudential Corporation Asia.

LIAM: ‘BNM’s risk-based capital regime has benefitted industry’

2009-03-18T20:47:00.000-07:00

By Habhajan Singh
The central bank's recommendation back in 2001 to establish prudential risk management standards has contributed to a significant strengthening of the life insurance sector, says the nation's life insurance body.
"Insurance companies are now very adequately capitalised based on the risks undertaken by the companies.
"Risk management practices have also been significantly enhanced as a result of a risk-based capital regime," Life Insurance Association of Malaysia (LIAM) president Ng Lian Lu told The Malaysian Reserve in a recent interview.
He was commenting on the position of the industry today since Bank Negara Malaysia (BNM) introduced the Financial Sector Masterplan in 2001, which also involved the insurance sector.
Below are extracts from the interview covering a number of issues facing the industry:

Industry Developments

TMR: What is the latest take on the critical illness scheme with EPF?Ng: We are currently in discussions with various stakeholders on the roll out of the scheme. As the scheme is made available to all EPF members who have been a member for at least three months, the potential number of people signing up for the scheme is very significant. Various bodies have requested information and explanation of the scheme's features, hence we see the need to engage the key stakeholders before the scheme is launched. This is despite the fact that the scheme is not compulsory and members have complete freedom in deciding whether to purchase the product and whether the scheme benefits meet their needs.

TMR: What is the progress of members adopting the Risk-Based Capital (RBC) framework?
Ng: The RBC came into force on Jan 1, 2009. All member companies have adopted the RBC. There was never a doubt that the transition to the new regime would be smooth as companies have conducted parallel runs for two years and all teething problems have been addressed prior to the implementation of the RBC.

TMR: A CEO of an insurance company has suggested that the RBC regime provides an opportunity for consolidation, as the regulatory demands greater levels of judiciousness by insurance companies to manage their capital adequacy levels based on the risks they took. Do you share this view?
Ng: Based on the statistics of BNM as at end-2007, there were eight life insurers, 25 general insurers and eight composite insurers. It is not hard to see that there is high potential for consolidation to happen in the general insurance industry. Under the RBC regime, capital required is linked to risks undertaken, (and) insurance companies need to have a proper capital management plan to ensure the efficient deployment of capital. This creates the opportunity for risk diversification through mergers and acquisitions. Companies that manage capital well may also be able to create value by taking over companies that have not managed capital efficiently. TMR: Are we set to see any major M&As in the life insurance sector? Ng: We do not rule out M&As in the life insurance sector in Malaysia. Personally, I would have thought that more M&A activities are likely to happen in the general insurance industry than the life sector.

(to be continued)

(This story appeared in The Malaysian Reserve on Mar 18, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

Obama tackles AIG anger during California trip

2009-03-18T20:42:00.000-07:00

President Barack Obama pressed his case for an expensive budget and broad financial reforms on Wednesday while anger over bonuses paid at bailed-out insurance giant AIG threatened to overshadow his economic agenda.
During a campaign-style trip to California, a state that has been hard hit by the recession, Obama tried to defuse criticism about the AIG payouts and defend the government's bailout of struggling banks even as he tapped populist anger over the country's financial woes, reports Reuters in a Mar 18 posting from California.
"I know a lot of you are outraged about this -- rightfully so. I'm outraged too," he said of the $165 million in bonuses given top officials at American Insurance Group Inc, which accepted US$180 billion in government aid to keep it from going under. "I'll take responsibility. I'm the president," he told the cheering crowd of some 1,300. It's my job to make sure we fix these messes even if I don't make them."
Reuters reported that the firestorm over AIG and its business-as-usual bonuses threatens Obama's image as a crusader for change and could undermine his efforts to pull the economy out of a deep recession and pass his record US$3.5 trillion budget.
At a brief White House news conference before his trip, Obama expressed confidence in Treasury Secretary Timothy Geithner, who has come under harsh criticism over the bonuses, and his economic team, many of whom stood at his side.

ALLIANZ's ANKEL: Living a life more than ordinary

2009-03-17T21:28:00.000-07:00

By Alfean Hardy
Insurance, at first glance, cannot be called living a life less ordinary. Yet, when young half-German, half-Greek Cornelius Alexander Ioannis Ankel decided to work abroad, insurance was what he took on in order to see the world.
And see the world the has.
Allianz Malaysia Bhd's chief executive officer Alexander Ankel has packed his bags for destinations as varied as Germany, Switzerland, Singapore, Japan and Malaysia.
He joined the Allianz SE Group in 1997 where he has had stints as Allianz Insurance Management Asia Pacific Pte Ltd senior business development manager, Allianz Fire and Marine Insurance Japan Ltd and Allianz General Insurance Malaysia Bhd chief executive officer.
Speaking to The Malaysian Reserve in Kuala Lumpur recently, Ankel said his decision to enter the insurance sector as a young man, was not because he knew what he wanted to do but rather for the sake of wanting to work in a different culture with people from a diverse cultural background.
"At that time, I didn't really know what profession I wanted to have. I only knew that I would like the opportunity to work overseas," he said. Eventually, an uncle persuaded him to consider insurance brokerage and the rest, as they say, is history. Natural Relationship Ankel said his experience as an insurance broker here, handling key German accounts in the region like Robert Bosch in Penang, eventually led to him joining Allianz.
"I knew all the blue chips and, one of my key capacity and risk providers was Allianz. So there was a natural relationship between Allianz as an insurer for German accounts and us doing brokering on the other side.
"The other reason was that Allianz is a great employer, (they) gave me plenty of development opportunities and helped me realise my professional ambitions. "And, amidst all the economic uncertainty, the group is doing considerably well and has proven to be a reliable partner for its clients and employees," he added.
Ankel joined Allianz here in Asia almost 11 years ago and, through his job, managed to realise his dream of working in different environments. He said the travelling he has done thanks to Allianz has allowed him to increase his knowledge about the region. "It has given me the opportunity to meet a lot of interesting people and create lasting friendships," he said.
He added that, professionally, the events that have rocked the region, like the Thai baht crisis, the tsunami and the SARS epidemic, have helped create a bond amongst professionals like himself who live and work in Asia. Turnaround In March 2004, whilst working in Japan, Ankel received the call to be the chief executive officer of Allianz General Insurance Malaysia.
"Those days, it was more of a turnaround scenario. It was not bleeding. It was in a situation where the company was falling behind its competitors and peers. It was an overhaul in all main functions," he said.
Since then, the company has posted double digit growth, varied its distribution network, rehauled its Information Technology systems and diversified its distribution portfolio, amongst others.
"Everything has gone according to plan. We've positioned ourselves in a strong position in the industry, positioned our brand very strongly, satisfied our shareholders, re-listed the company and created a new holding structure and so on," he added.
Ankel said the overhaul, from A-to-Z, took about four years and involved strategies like deliberately shrinking the general insurance business' gross premiums as well as focussing on retaining, retraining and recruting the company's human resource assets. He said, at management level, many lessons were also learnt.
"From today's perspective, we as a management team have all learnt that you can't implement change if staff expect the change to be executed only at the top.
"You have to break that momentum of ownership and responsibility down to the very low levels of the organisation and make sure everyone supports the organisation. It truly makes a difference," he added.

(This story appeared in The Malaysian Reserve on Mar 18, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

Saudi central bank sets rules for foreign insurers

2009-03-17T21:19:00.000-07:00

RIYADH • The Saudi Arabian Monetary Agency (SAMA) ordered foreign insurers working through Saudi agents to halt operations in the country until they get their own licences, reports Bloomberg.
SAMA also put in place new regulations, including mandatory monthly financial performance reports, for licensed foreign insurers operating in the kingdom, according to a statement on the central bank’s website on Mar 15.
Four Saudi insurance companies said earlier this month that they are planning to sell shares to the public to raise 260 million riyals (RM253.53 million). Strict regulation made it harder for Saudi banks and companies to borrow, protecting their balance sheets against the worst of the global credit crunch.
"There are 21 insurance providers already and probably SAMA knows that saturation levels have been reached and limits have to be placed," chief economist at Riyadh-based Saudi British Bank John Sfakianakis said in an email. The country’s central bank governor Mohammad al-Jasser said on Jan 28, that a further tightening of banking restrictions was needed. The financial crisis should stimulate better financial management, al-Jasser said according to the kingdom’s official news service, the Saudi Press Agency.
"There is a need to place important legal parameters on the whole insurance sector, as well as setting limits on new market players," Sfakianakis said, the agency reported.

BCHB to tap Indonesian insurance mart with tie-up

2009-03-17T20:59:00.000-07:00

By Ashwin Raman
Bumiputera-Commerce Holdings Bhd (BCHB) has sold a 49% stake in its Indonesian unit, PT Commerce International (PTCI), to Canada's Sun Life Financial Inc for US$22.7 million (RM84.1 million) to form a joint venture insurance company.
PTCI will be rebranded as CIMB Sun Life and will distribute life insurance products through BCHB's unit, CIMB Niaga, the banking group said in statement on Mar 16. The remaining 51% in CIMB Sun Life will be owned by CIMB Niaga and another unit of BCHB, Commerce International Group Bhd.
BCHB said CIMB Sun Life will be formally launched later this year and will seek to capture a share of the Indonesian insurance market, which recorded total premiums worth US$4.7 billion in 2007.
BCHB's group chief executive officer Datuk Seri Nazir Razak said: "Having successfully merged Bank Niaga and Bank Lippo to form CIMB Niaga, we look forward to delivering more value to CIMB Niaga customers through a bancassurance offering that will result from this partnership."
"The opportunity that exists is huge. We believe that this joint venture will bring with it a compelling proposition to address this market segment, and continue to see CIMB Niaga deliver component of universal banking to its customers."
BCHB said CIMB Sun Life will leverage on the combined strengths of both organisations, specifically Sun Life Financial's insurance expertise and infrastructure and BCHB's extensive treasure capabilities and distribution strength.
It said CIMB Sun Life will aim to become the major provider of life, accident and health insurance products to CIMB Niaga customers through the latter's network of 650 branches and direct channels throughout Indonesia.

CAPTION: Pix 3 - Peter Miller, Director of CIG CIMB Group (no.1 from left), Arwin Rasyid, President Director Bank CIMB Niaga (no. 2 from left), Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group (no. 3 from left), Stephan Rajotte President Sun Life Financial Asia (no. 4 from left) and, Chris Lossin, President Director Sun Life Financial Indonesia (no.5 from left) during the press conference.

(This story appeared in The Malaysian Reserve on Mar 17, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays, edited by Habhajan Singh.)

Non-motor segment helps industry record growth

2009-03-12T03:52:00.000-07:00

The strong performance of the non-motor sector has helped the country’s general insurance industry to record a 3.2% growth in gross direct premium to RM10.5 billion last year, reports The Star, quoting Bank Negara insurance and takaful supervision department director Yap Lai Kuen.
The medical and health, and liabilities classes grew by 16.7% and 10.5% last year as compared with 2007 while the personal accident class posted a 9.2% growth during the same period.
"Even though 2008 has been challenging, the insurance industry has maintained an overall high volume of business," she said when opening the inaugural Sarawak insurance agency seminar in Kuching on Mar 10, the newspaper report.
However, the report said Yap said the life insurance’s new business annual premium equivalent registered RM7.2 billion last year, down from RM7.6 billion in 2007, largely to a decline in sales of investment-linked business.
"It is worthwhile to note that ordinary life recorded a strong growth of 18.6%, thus demonstrating the industry’s ability to adapt to a changing business environment," she added, the report said.

AIG fine-tunes focus to maintain growth

2009-03-09T21:14:00.000-07:00

By Isabele Francis
AIG General Insurance (Malaysia) Bhd (AIG Malaysia), which is eyeing takaful operations here, is hopeful of maintaining a 5% revenue growth in the current fiscal year by shifting focus to smaller outfits from bigger corporations, which are trimming their overheads.
Its CEO Rob Ryan told The Malaysian Reserve that AIG Malaysia will achieve a 5% revenue growth this year by changing its business mix.
Ryan also believes that the reorganisation of the company under AIU Holdings Inc will provide AIG Malaysia with stability and a definitive long-term direction.
The formation of AIU, announced on March 2, follows the bailout plan for Amer ican International Group Inc (AIG Inc), and is aimed at protecting and enhancing the value of the groupÆs general insurance businesses by separating them from AIG Inc. AIU will have a separate board of directors, management team and a brand that is distinct and independent from AIG Inc.
AIU Holdings will assist AIG Inc in preparing for the potential sale of a minority stake in the business.
"The bailout will not have any impact on AIG (Malaysia). However, this will mean that we will report to a different board of directors.
"As part of AIU Holdings, we will be part of a wellcapitalised business that will not be reliant on its parent AIGÆs agreement with the US government to support its financial strength," he added. He said his biggest challenge this year is to grow the business amid a difficult economic climate.
Ryan added that it is harder for a larger corporation to grow, especially those that are export-oriented.
"For example, these companies are likely to see fewer overseas trips. Historically, we donÆt have a big, small and medium enterprises portfolio.
"Insurance is not a luxury. It is good risk management and SMEs should see the value that we can offer," he said in a recent interview.
Meanwhile, on the company's takaful plans, Ryan said: "There is definitely demand for it in Malaysia. We hope to be in the race whenever Bank Negara Malaysia plans to issue more licences."
On the impact of lower interest rates on the local front, Ryan said although the insurer expects lower investment returns, the rates have no bearing on its underwriting businesses.
In the fiscal year 2008, AIG Malaysia posted a net profit of RM36.09 million. Gross premium written was RM494.68 million, and net premium written stood at RM349.89 million.
It posted a net loss incurred (NLI) of RM195.68 million, due to provisions. It also saw a jump in expenses due to starting up costs.
AIG Malaysia's profit margin is about 4% [CORRECTED]. For the year, AIG Malaysia has paid out RM189.99 million to policy holders. Its capital adequacy ratio is at 220% compared to Bank Negara Malaysia's minimum of 130%.
Its capital reserves stood at RM310.8 million and its cash and short-term deposits are in excess of RM220 million. The insurer's gross premium to date for the first quarter 2009 is RM31.4 million, up 4.7%. (This story appeared in The Malaysian Reserve on Mar 6, 2009)

BNP Paribas ‘Better’ Positioned to Weather Crisis With Fortis

2009-03-09T20:59:00.000-07:00

BNP Paribas SA, France’s largest bank, will be better positioned to weather the financial crisis after the purchase of Fortis banking units in Belgium and Luxembourg, Chief Executive Officer Baudouin Prot said in Bloomberg report dated Mar 9.
"This crisis has demonstrated the benefits of having large deposits," Prot said on a call with analysts.
Guarantees provided by Belgium are also a 'significant' buffer for BNP Paribas’s capital level should the crisis worsen, he said.
The report added that BNP Paribas will have more than 540 billion euros (US$683 billion) of deposits, the most in the 16 nations sharing the euro, if it wins over Fortis investors at an April vote.

Insurers’ investment returns to suffer ‘significantly’

2009-03-05T19:45:00.000-08:00

By Habhajan Singh
The expected investment returns for most insurance companies will "suffer significantly" this year as the economy takes a beating, Life Insurance Association of Malaysia (LIAM) president Ng Lian Lu said.
"Achieving a good investment return will be one of the major challenges," he told The Malaysian Reserve recently.
Concerns about investment returns are global, a recent international survey of insurers showed.
In the second Insurance Banana Skins survey by The Centre for the Study of Financial Innovation in association with PricewaterhouseCoopers (PWC), investment performance emerged as the number one risk.
"The ability of insurance companies to get through the crisis depends above all on their investment performance, i.e. achieving sufficient returns to protect capital, remain profitable and meet commitments to customers," the report said.
In the previous survey in 2007, investment performance came in at No. 11. The fallout from the credit crunch and its impact on the strength and profitability of the insurance industry propelled investment performance to the top of the list of concerns for insurers worldwide.
Locally, Ng said the indsutry was not surprised that the sale of single premium products, the main purpose of which is for investment, was affected in 2008.
The association, which represents 18 life insurers including Great Eastern Life Assurance (Malaysia) Bhd, MCIS Zurich Insurance Bhd and Prudential Assurance Malaysia Bhd, expects to see a negative growth of 27% in single premium business.
Despite operating in a difficult economic environment, he noted that the annual premium business managed to achieve a 5.4% positive growth rate in 2008 while group insurance business "performed even better in 2008" with an 18% growth over the year before.
"There are two main reasons why people buy insurance, one is for protection and the other for investment. "In the current economic environment, it is very challenging to deliver good investment returns," he said.
In an earlier statement, when commenting on the life insurance performance for 2008, LIAM said based on preliminary data issued by the association for the entire life insurance business in Malaysia, individual traditional business (savings and protection plans) enjoyed a strong double-digit growth of 19.1%, or RM2.5 billion, in 2008.
It said group insurance also chalked up a healthy 18% growth despite the tough business climate.
"The unfavourable investment environment and economic conditions have resulted in a slowdown in the sale of investment-linked products, which recorded a decline of 32.6%," it added.

(This story appeared in The Malaysian Reserve on Mar 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, edited by Habhajan Singh.)

‘Malaysian insurance companies stronger than in the past’

2009-03-05T19:41:00.000-08:00

By Habhajan Singh
Insurance companies in Malaysia are much stronger than in the past, have more expertise and are run by strong management teams, says Life Insurance Association of Malaysia (LIAM) president Ng Lian Lu.
"I think the local industry is certainly ready to face future challenges," he told The Malaysian Reserve when asked if the players are prepared for the hurdles posed by globalisation.
"In fact, a majority of the present life insurance companies have strategic partnerships with international players," said Ng who is also chief executive officer of AmAssurance Bhd. He said this when commenting on the Financial Sector Masterplan released by Bank Negara Malaysia (BNM) in March 2001.
In the document, which expires next year, it was noted that one of the major challenges facing the insurance industry going forward was the "increasing competition from traditional players as global trends of consolidation and specialisation create international insurers that are larger, better skilled and more focused on core areas of competence".
Asked if this was still an issue, he said: "With the pace of globalisation and increasing presence of global players in the market through various joint ventures in the past few years, competition against international insurers is no longer something new to the local industry." In fact, the local life insurance market has seen the presence of foreign players for many years now.
These include the likes of Singapore-based Great Eastern, UKbased Prudential, Dutch-owned ING Insurance and US-headquartered American International Assurance (AIA). Their life outfits in Malaysia — Great Eastern Life Assurance (Malaysia) Bhd, Prudential Assurance Malaysia Bhd, ING Insurance Bhd and American International Assurance Bhd — have all had a long presence in Malaysia.
Most local insurers have also forged a tie-up with foreign partners. For example, local banking group CIMB Bhd's insurance arm has tied up with Aviva plc, the world's fifth-largest insurance group and the biggest in the UK, to form CIMB Aviva Assurance Bhd.
Incorporated in February 2006, AXA Affin Life Insurance Bhd is a joint venture company between AXA Asia Pacific Holdings Ltd and Affin Holdings Bhd.
AXA Group today is the result of a series of mergers involving French regional mutual insurance companies. Two local players in the life sector without foreign partners are Hong Leong Assurance Bhd and Malaysian Assurance Alliance Bhd. When asked about potential of mergers and acquisitions (M&A) on the life sector side, Ng said association does not rule it out.
"Personally, I would have thought that more M&A activities are likely to happen in the general insurance industry than the life sector," he said.
Other players in Malaysia's life insurance sector are Allianz Life Insurance Malaysia Bhd, Etiqa Insurance Bhd, Hannover Life Re (Malaysian Branch), Malaysian Life Reinsurance Group Bhd, Manulife Insurance Bhd, Mayban Life Assurance Bhd, MCIS Zurich Insurance Bhd, TM Asia Life Malaysia Bhd and Uni.Asia Life Assurance Bhd.
When commenting on the industry outlook, Ng noted that the key challenge in an environment like the present is achieving good investment returns.
"The distribution force will also have to put in extra effort to educate consumers on the importance of having adequate insurance coverage, especially during this difficult time. "Insurance companies will also need to be more innovative taking into account customers needs which may be different in such an environment," he said.
On the industry outlook for 2009, he said the industry foresees that the single premium business to remain stagnant in 2009. "However, the annual premium business should still be able to achieve a single-digit growth. The prospect of group insurance business remains good following a strong performance in 2008," he said.

PHOTOGRAPH: 'Insurance companies will need to be more innovative,' says Ng (2nd left) with fellow members of the management committee (from left) Great Eastern CEO Koh Yaw Hui, AXA Affin Life Insurance CEO Vincent Kwo, ING Insurance MD Datuk Dr Nirmala Menon, UniAsia Life Assurance CEO Ooi Say Teng and MCIS Zurich Insurance CEO Md Adnan Md Zain

(This story appeared in The Malaysian Reserve on Mar 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, edited by Habhajan Singh.)

AIG Asia unit to remains financially strong amid slowdown

2009-03-05T19:39:00.000-08:00

American International Assurance Co, the Asian unit of American International Group Inc, said it remains "financially strong" even after an economic slowdown in the region weakened demand for insurance products, reports Bloomberg.
The AIA group had a combined solvency ratio of more than 200% of the regulatory requirement as of Nov 30, the company said in an emailed statement on March 5. Total assets are currently more than US$60 billion (RM223.65 billion), it said, without providing earlier figures, the report added.
Bloomberg added that AIG, which got its fourth government bailout this week after posting a US$61.7 billion quarterly loss, agreed to place AIA and American Life Insurance Co into trusts to pay down its federal credit line. The insurer last month put together all its AIA units in the Asia-Pacific region to form the AIA group.

China Life looking at overseas banks, says chairman

2009-03-05T19:38:00.000-08:00

China Life Insurance Co is studying overseas acquisition targets, including banks, after deciding not to bid for the Asian unit of American International Group Inc, chairman Yang Chao said on March 3 in Beijing, reports Bloomberg.
The report said buying assets in other countries in the current global financial climate is "risky" although it also brings opportunities, he told reporters at the annual meeting of the Chinese legislature’s advisory body. Chinese companies and banks have spent an estimated US$100 billion (RM372.75 billion) buying up assets in, or making loans to, countries from Russia to Venezuela this year, taking advantage of foreign rivals’ need to raise money.

LIAM denies issuing ranking on insurance companies

2009-03-02T23:48:00.000-08:00

The Life Insurance Association of Malaysia (LIAM) has denied issuing any public information regarding the ranking of life insurance companies in Malaysia.
In a statement released in Kuala Lumpur on March 2, LIAM clarified that the few advertisements placed by a life insurance company recently claiming it was ranked the No.1 life insurer in Malaysia, was inaccurate.
The insurer according to LIAM, cited it as the source of the ranking. But LIAM stated the ranking was not endorsed by it.
LIAM, which has 18 members, of whom 16 are life insurance companies and two life reinsurance companies, however did not name the company.
LIAM meanwhile said that the unfavourable investment and economic conditions had resulted in a slowdown in the sales of investment linked products, which recorded a decrease of 32.6%. — Bernama (Mar 2, 2009)