2011 Bank Negara Malaysia’s Guidelines & Circulars | Malaysia Insurance News

• The Guidelines : 1 January 2012
• Paragraph 6.18 : 18 November 2011
• Paragraphs 8.2, 8.3 & 8.4 : To both new and existing customers by 1 July 2012
• Paragraph 8.6 : Payment allocation requirement for financing products other than credit card facilities : 1 July 2012

Applicable to the following financial service providers (FSPs):

• Banking institutions licensed under the Banking and Financial Institutions Act 1989 (BAFIA);
• Islamic banking institutions licensed under the Islamic Banking Act 1983;
• Life insurers licensed under the Insurance Act 1996 (IA);
• Takaful operators registered under the Takaful Act 1984 (TA);
• Development financial institutions prescribed under the Development Financial Institutions Act 2002 (DFIA); and
• Designated payment instrument issuers approved under the Payment Systems Act 2003 (PSA).

These Guidelines outline supervisory expectations on retail financing practices in order to inculcate responsible lending conduct by FSPs in their dealings with retail customers in the current competitive and dynamic environment.

Consumer and Market Conduct Department

01 November 2011

All Insurance Companies and Takaful Operators

This circular is to inform all insurance companies and takaful operators to submit actuarial certificates and the relevant supporting documents to the Bank in electronic format.

Jabatan Penyeliaan Insurans dan Takaful

The consultation period of this concept paper ends on 7 October 2011

All licensed insurers

Insurers are required to have in place an Internal Capital Adequacy Assessment Process (ICAAP) to ensure that it maintains adequate capital on an ongoing basis. The Guidelines describe key elements required of an ICAAP, including the determination of an Individual Target Capital Level (ITCL) that is commensurate with an insurer’s risk profile and control environment, as well as sound capital management to ensure that insurers operate at levels above the ITCL at all times.

These Guidelines are issued as a concept paper for insurers’ feedback and comments. Insurers are required to provide constructive comments and feedback to Bank Negara Malaysia latest by 7 October 2011 addressed to:

Pengarah
Jabatan Penyeliaan Insurans dan Takaful
Bank Negara Malaysia
Jalan Dato’ Onn
50480 Kuala Lumpur

Jabatan Penyeliaan Insurans dan Takaful

1 January 2012

All takaful operators registered under the Takaful Act 1984

The Guidelines serves as guidance for takaful operators in conducting their operations, to ensure business activities and innovations are within their risk management capacity and do not compromise prudence, as it outlines parameters within which takaful operations shall take place. The Guidelines emphasizes on the need for takaful operators to put in place comprehensive internal procedures and safeguards to ensure long-term sustainability of the business and that interests of the stakeholders are safeguarded.

Highlights of 5 September 2011 Updates
The Guidelines is updated to incorporate the following:
a) clarification on the definition of deficit which requires qard in takaful fund and consequential refinement on deficit rectification management; and
b) latest Shariah Advisory Council’s decision on inward retakaful business from, and outward retakaful business to, conventional insurance and reinsurance companies.
Selected FAQs have also been removed from the Attachment 1, in view of the above updates.

Islamic Banking and Takaful Department

22 October 2008. This document was last updated on 29 August 2011

These guidelines are applicable to all institutions licensed under the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983 (IBA), Insurance Act 1996 (IA) and Takaful Act 1984 (TA). Other institutions which are part of a financial group are also encouraged to adopt the principles contained in these guidelines, where appropriate.

These guidelines set out the guiding principles and the Bank’s supervisory expectations on sound data management and management information system (MIS) practices that financial institutions should consider when developing their internal data management capabilities.

The attached implementation guidance serves to provide further clarification on operational and implementation issues raised by the banking and insurance industry on the concept paper issued in January 2008.

Highlights of the latest update

The guidelines are being updated to encourage financial institutions to obtain a MS ISO/IEC 27001:2007 Information Security Management Systems (ISMS) certification for critical systems, particularly the payment and settlement systems.

Prudential Financial Policy Department

18 July 2011

All licensed insurers and takaful operators.

The guidelines set the minimum standards for the management and administration of investment-linked insurance/takaful business. It provides flexibility in the management of investment-linked insurance/takaful business, while strengthening expectations on the fair treatment of customers, including enhanced disclosures and internal oversight arrangements for the management and control of investment-linked business.

Highlights of the 18 July 2011 updates

The guidelines will supersede the Guidelines on Investment-Linked Business issued on 12 November 2010. The changes made are:

• Revised investment limits on foreign assets with specific treatment for foreign currency-denominated and Ringgit-denominated investment-linked funds.

Jabatan Dasar Kewangan Pruden

21-January-2011

This circular is applicable to all insurers and reinsurers

This circular informs all licensed insurers and reinsurers that the submission of the Annual Remuneration Statement for Directors/Chief Executive Officers (CEOs) of Insurers (ARS) via the online Financial Institutions Corporate Profile System (FICPS) is no longer required

Jabatan Dasar Kewangan Pruden

1 May 2011

All general insurers and reinsurers licensed under the Insurance Act 1996

The circular sets out the temporary measure to exclude the motor insurance liabilities, underwritten and accounted for under the MMIP, from the general insurance risk capital charges computation.

Any queries on the framework may be directed to rbc@bnm.gov.my or the address below:

Pengarah
Jabatan Dasar Kewangan Pruden
Tingkat 10, Blok B,
Bank Negara Malaysia
Jalan Dato’ Onn
50480 Kuala Lumpur

Jabatan Dasar Kewangan Pruden

9 June 2011

All insurers and reinsurers licensed under the Insurance Act 1996

The circular sets out the reporting requirements corresponding to the Risk Based Capital Framework for Insurers (Revised Version 2.0) issued on 10 May 2011.

Any queries on the framework may be directed to rbc@bnm.gov.my or the address below:

Pengarah
Jabatan Dasar Kewangan Pruden
Tingkat 10, Blok B,
Bank Negara Malaysia
Jalan Dato’ Onn
50480 Kuala Lumpur

Jabatan Dasar Kewangan Pruden

3-Jun-2011

• Banking and Financial Institutions Act 1989;
• Islamic Banking Act 1983;
• Development Financial Institutions Act 2002;
• Insurance Act 1996; and
• Takaful Act 1984

The Guidelines on Business Continuity Management issued in December 2007 have been revised to incorporate changes to the report submission requirements. A summary of the revision is as follows:

(i) LIs are no longer required to submit the following reports to Bank Negara Malaysia (the Bank);

a. Appendix 1 – Level of Disruption
b. Appendix 3 – BCP and DRP Test Matrix
c. Appendix 4 – BCP and DRP Post-Test Analysis Report

(ii) Despite changes in the submission requirement, LIs are still required to prepare and maintain Appendices 1, 3 and 4 and to make these reports readily available for review, when requested;

(iii) The internal auditors of the LIs are required to undertake periodic review on the BCP and DRP Post-Test Analysis Report (Appendix 4) and provide their assessment to the Bank quarterly; and

(iv) LIs are still required to submit the Executive Summary of BCP and DRP Audit Report to the Bank within two months after being formally endorsed by the Audit Committee.

Financial Conglomerates Supervision Department

13-August-2011

All direct insurers carrying on life insurance business under the Insurance Act 1996.

• The circular specifies the requirement on commission payment for products with paid-up option.
• In ensuring that consumers’ interests are safeguarded, commission level payable during the minimum premium payment term shall be pro-rated based on the minimum premium payment term. As an example, for a 20-year premium payment term product with option to cease payment of premium in 10th policy year, the commission payment shall be based on a 10-year pro-rated commission scale instead of a 20-year commission scale during the minimum premium payment term.

Financial Sector Development Department

11-Jan-2011

Licensed life and composite insurers and licensed life and composite reinsurers.

The circular sets out the requirements for the companies stated to submit their Form Form E3 – Valuation Result, Allocation and Movement of Surplus, for Calendar Year ending 31 December for each year, for example 31 December 2010 and 31 December 2011.

Please submit the above statistics in soft copy and hard copy by the last working day of January the following year. For example, Results for Calendar Year ending 31 December 2010 should be submitted by 31 January 2011.

Should you require further clarification, please contact Mr. Saiful Adli Aziz at 22635000 ext 2765.

Jabatan Penyeliaan Insurans dan Takaful

1-Jan-2011

All life insurers and reinsurers

The circular set outs the removal of the temporary flexibility on the use of the risk-free discount rates to be used for valuation and capital charges computation purposes under the RBC Framework for insurers.

Any queries on the framework may be directed to rbc@bnm.gov.my or the address below:

Pengarah
Jabatan Dasar Kewangan Pruden
Tingkat 10, Blok B,
Bank Negara Malaysia
Jalan Dato’ Onn
50480 Kuala Lumpur

Jabatan Dasar Kewangan Pruden

• The Guidelines : 1 January 2010
• Disclosure requirements on Negotiable Instruments of Deposit and Islamic Negotiable Instruments : 18 May 2009
• Commission disclosure for investment-linked insurance products and investment-linked takaful products including any riders attached to the policies / certificates : 15 April 2010
• Commission disclosure for general insurance / takaful, standalone medical and health insurance / takaful and group medical and health insurance / takaful and group medical and health insurance / takaful : 15 April 2010
• Legal documents to be made available in Bahasa Malaysia : 1 January 2011
• Contracts, agreements and policy documents to be presented in plain language : 1 January 2011
• Commission disclosure for ordinary life insurance products and ordinary family takaful products including any riders attached to the policies / certificates : 1 June 2011

• Banking institutions;
• Islamic banking institutions;
• Life insurers and general insurers;
• Takaful operators;
• Development financial institutions; and
• Designated payment instrument issuers and remittance service providers.

These Guidelines establish a consistent and comprehensive disclosure regime aimed at improving information disclosure on products and services offered by financial service providers.

With the incorporation of the requirements on Negotiable Instruments of Deposit (NID) and Islamic Negotiable Instruments (INI) into these Guidelines and the Guidelines on Introduction of New Products, the Guidelines on Negotiable Instruments of Deposit issued on 15 June 2006 and the Guidelines on Islamic Negotiable Instruments issued on 8 September 2000 will no longer be applicable with effect from 18 May 2009. Financial institutions may refer to the “Explanatory Notes on NID and INI”, which can be obtained from the FAST website at https://fast.bnm.gov.my/fastweb, for additional guidance and reference.

Jabatan Konsumer dan Amalan Pemasaran

1-Aug-2011

General insurers licensed under the Insurance Act 1996 and takaful operators registered under the Takaful Act 1984, and their intermediaries.

The circular requires insurers / takaful operators and their agents to advise consumers during the pre-contractual stage or renewal of motor insurance / takaful cover on the present market value of motor vehicles, the importance of insuring the vehicle at the appropriate market value and the effect of over-insurance and under-insurance when a claim is made.

Jabatan Konsumer dan Amalan Pemasaran