The insurance industry governing authority is Bank Negara Malaysia (BNM), as legislated by the Insurance Act 1996.  Whilst the Act spells out the broad regulatory framework, detailed monitoring procedures are conveyed to insurers, agents and brokers via the Regulations and Guidelines.  Some major guidelines include:

• A company must obtain the prior approval of BNM before establishing an office in Malaysia.
• Minimum capitalisation for direct insurers is RM100 million.  Brokers and adjusters are to maintain paid-up capital unimpaired by losses of RM500,000 and RM150,000 respectively.
• All appointments relating to principal officer, managing director, director and chief executive shall firstly be approved by BNM.
• Insurance Guarantee Scheme Funds in respect of life and non-life business are established to help discharge either in whole or in part the policy liabilities incurred by insolvent insurers.  Levies, being no more than 1% of the written premiums are made annually (at present levies are imposed only for general insurance business).
• An insurer shall submit statutory returns (covering balance sheets, insurance revenue account, profit and loss account) to BNM in a specified format which shall include a certificate of the auditor.
• All insurers shall maintain their accounts in compliance with accounting standards approved by BNM.
• All liability and property, whether movable or immovable, located in Malaysia, including any ship or aircraft registered in Malaysia shall be insured only with an insurer registered under the Act.
• No insurance broker shall negotiate any contract of insurance with an insurer not authorised to carry on insurance business in Malaysia except where the contract relates to reinsurance business.

As at the end of 2000, there were 64 licensed insurers, 36 brokers and 41 adjusters operating in the country.

Property, Motor and Workmen Compensation insurance is subject to tariff terms and conditions.  For Property, premium rates for risks that are valued to be more than RM50 million may be excluded from the tariff and be subject to a more competitive rating by the Technical Rating Committee.  The tariff also limits commission rates payable to agents and brokers.  Difference in Conditions (DIC) and Difference in Limits (DIL) policies are strictly prohibited.

The motor insurance tariff specifies only the minimum premiums to be charged and allows insurers to add loadings based on the claims experience and discretion of individual insurers.  In the light of mounting losses, a new tariff is being compiled and will be in place later this year.

There are industry guidelines on general reinsurance arrangements designed to assist insurers in the preparation of their reinsurance programmes to ensure prudence and professionalism.

The government-initiated Financial Service Master Plan was launched recently.  To be implemented in three phases over the next 8-10 years, the plan will build up domestic capability as Malaysia readies itself for the market deregulation and liberalisation required by the World Trade Organisation.  The plan envisions, among other things:

• eventual removal of all existing tariffs.
• elimination of compulsory reinsurance cession to the government-owned reinsurance company.
• lifting of restrictions on the employment of expatriates.
• higher limits of foreign ownership in local companies.