Insurance Legislation Flashcards
What was the Historical Development in the insurance industry in Malaysia?
On 1st of January 1997, “Insurance Act 1963” was replaced by “Insurance Act 1996”.
In 2005, the Act was amended to put in place the legislative licensing framework for Financial Advisers in Malaysia. The amendments came into effect in August 2005 with the gazetting of the Insurance Act 2005.
What happens in the Changes in Equity?
The Insurance Act 1996 required a Malaysian incorporated licensee to maintain a minimum paid-up capital as prescribed by BNM.
Licensed foreign-incorporated insurers are required to maintain a corresponding surplus of assets over liabilities in Malaysia.
What is the minimum paid-up capital or surplus of assets over liabilities prescribed by the Act?
- RM 100 million for local/foreign direct insurers and local professional general reinsurers.
- RM 50 million for local professional life reinsurers.
- RM 20 million for foreign professional life and general reinsurers
- Insurance brokers and adjusters are required to maintain a paid-up capital of RM 500K and RM 150K respectively.
What are the roles followed by the Central Bank of Malaysia?
Under the Central Bank of Malaysia Act 2009, there are four key regulatory objectives:
- Foster fair, responsible and professional business conduct of financial institutions.
- Strive to protect the rights and interests of financial consumers.
- Keep a close watch on solvency and market conduct to enhance professional standards and consumer confidence in the insurance industry
- Promote monetary and financial stability conducive to the sustainable growth of the economy.
What is a Risk-Based Capital Framework?
It is a method of measuring the minimum amount of capital appropriate for a reporting entity to support its overall business operations in consideration of its size and risk profile.
Who introduced RBC Framework and when did it come into force?
Bank Negara Malaysia introduced RBC Framework on the 1st of January 2009.
Why was RBC Framework introduced?
It is to determine the Capital Adequacy Ratio of insurance companies in Malaysia and to conform to international trends towards RBC Framework.
What are the following objectives to better reflect risk profiles?
- Determine the CAR of the insurance and shareholder’s funds.
- Preserve the fundamental principle that the valuation surplus of the participating life insurance fund is not used to support the capital requirements of other insurance or shareholder’s funds.
- Ensure capital is available to protect policyholders against insolvencies of insurance companies.
What is the formula for CAR?
CAR = Total Capital Available (TCA) / Total Capital Required (TCR) X 100%
What happened in the New Legislation Period?
FSA 2013 and IFSA 2013 have repealed the Insurance Act 1996 and Takaful Act 1984. This new act came into force on 30th June 2013.
These new laws consolidate several separate laws in respect of financial services in Malaysia i.e. conventional banking and insurance as well as Islamic banking and takaful.
This made regulations and supervision of financial institutions now under a single legislative framework.
What is the purpose of the New Legislation of FSA and IFSA 2013?
- Greater clarity and transparency in administration by the Central Bank of Malaysia
- Focus on Shariah compliance and governance
- Provisions for differentiated regulatory requirements that reflect the nature of financial intermediation activities and their risks to the overall system
- Provisions to regulate financial holding companies and non-regulated entities
- Strengthened business conduct and consumer protection requirements to promote consumer confidence in the use of financial services and products
- Strengthened provisions for effective and early enforcement and supervisory intervention
