29th November 2022 - 3 min read
Bank Negara Malaysia (BNM) has said that it is looking to award up to five licences to eligible digital insurers and takaful operators (DITOs) soon. This is following the issuance of the exposure draft on the Licensing and Regulatory Framework for DITOs last week to invite written feedback.
In a statement, BNM said that the exposure draft outlines a proposed framework that can be used to ease the entry of DITOs into Malaysia. Additionally, it ensures that the selected entities can offer strong value propositions, thereby heightening inclusion, competition, and efficiency in the industry.
“The exposure draft specifies licensing and application procedures, as well as specific requirements on the eligible business models and distribution channels of DITOs. This is intended to promote sustainable business operations, while delivering value to policyholders,” said the central bank, adding that DITOs will also have to comply with the existing requirements under the Financial Services Act 2013 or Islamic Financial Services Act 2013.
BNM further said that DITOs are expected to carry their insurance or takaful business wholly – or almost wholly – through digital and electronic means. In turn, this is expected to drive new types of business and operating models, as well as offer wider product choices and more efficient service quality to meet consumer needs.
Moreover, the central bank explained that just like Malaysia’s first five digital banks, the DITOs that are eventually selected will need to go through a foundational phase of three to five years. During this period, they will be allowed to operate with lower minimum paid-up capital requirements and some regulatory flexibilities that are commensurate with their early stage of operations. In turn, they are expected to prove their capabilities in serving the Malaysian public and achieving BNM’s goals set for them. Those who are unable to do so by the end of the foundational phase will need to implement an exit plan, as per indicated in the exposure draft.
In terms of timeline, BNM is accepting written feedback for the current exposure draft until 28 April 2023. Following that, it aims to finalise the policy document and invite applications for the five licences in 2023. Meanwhile, the central bank had already issued the discussion paper on the Licensing and Regulatory Framework for DITOs earlier this year.
(Source: Bank Negara Malaysia)
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