From Insurance Levy to PIDM Premium | Malaysia Deposit Insurance Corporation Act 2011

The PIDM Guidelines 2011 (for Takaful and Insurance benefits Protection System {TIPS} – submission and returns on calculation of premium)….

…..has just been introduced.

Except for the issue date of this guidelines that was on 11 March 2011 nothing much was mentioned about the implementation date. Nonetheless the guide did mention about the insurers and takaful operators being obliged to pay up the prescribed premium when due – at least we know the first premium payment date is on 31st May 2011

What is PIDM? Objectives of TIPS?
Perbadanan Insurans Deposit Malaysia (“PIDM”) is an independent statutory body established under the Malaysia Deposit Insurance Corporation Act 2011 (“the Act”).

PIDM’s mandated objects are to:

(a) administer a deposit insurance system and a takaful and insurance benefits protection system under the Act;

(b) provide insurance against the loss of part or all of deposits for which a deposit-taking member is liable and provide protection against the loss of part or all of takaful or insurance benefits for which an insurer member is liable;

(c) provide incentives for sound risk management in the financial system; and

(d) promote or contribute to the stability of the financial system.

Assess & Collect premiums:
PIDM’s functions, among others, are to assess and collect premiums from takaful operators and insurance companies for the assessment year in which they become insurer members (“first premium”), and premiums for each assessment year following the assessment year in which they become member institutions (“annual premium”).

Dropping the “levy” to Bank Negara but Paying up as premiums…. to PIDM

We are not going to write anymore stuff that are full of technicalities here and there…., suffice to say insurers and takaful operators (“industry players”) must now pay up those TIPS related premium when due. But, it is good to point out that the premium to be paid to PIDM is in fact related to those levies that “industry players” used to pay to the Bank Negara Malaysia (“BNM”) before. The levy imposed then was 0.25%  of the gross premium charged (in respect to original policies issued) by the industry players.

“No more imposing levy of 0.25% on gross premium…… to be channeled to BNM….

“What is this levy? Levy is in fact charges for the Insurance Guarantee Scheme Fund (IGSF) that was imposed to help safeguard policyholders in any event an industry player goes down….

This means industry players need not pay anymore levy to BNM (effective date is not made known) but instead pay premium into PIDM’s coffer…. however, the payment rate is not based on the “previous BNM” levy rate of 0.25%. If you need to check out the rate… do grab a copy of the PIDM Guidelines by registering your interest in the Opt-in box below, we shall have the documents delivered to your doorstep electronically.

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Alternatively, you can subscribe to either read it in google reader or some other google feeds……

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Premium payable to PIDM is based on retained premium…. no longer on full gross premium from policies issued….

The premiums payable to PIDM is based on a particular rate being applied to specified classes of insurance premiums within the business books of industry players…. but limited to gross retained premium only. This means industry players no longer need to apply levy on the following forms of premium:

  1. Facultative Outwards premiums (likewise, players are not expected to be billed by their counterparts iro facultative Inwards premiums)
  2. Cession premiums to proportional treaty

“No need to pay premium to PIDM for portion of premium NOT being retained……

“What is meant by retained premium? Simpy put, premiums that are not shared out to any other parties, like (re)insurers….

The main issue is really with the facultative exchanges….

Coordination between industry players is important…..

While the implementation is straightforward but when it comes to making it works can be a real problem – simply because no cut-off date was put forth for this shift from the previous “0.25%-levy” regime to the new PIDM-driven premium rates….

The main problem is in the facultative RI premium…. Some players are adopting their date for implementation and expecting their counterparts to adopt it equally so that inwards and outwards facultative premiums can be easily reconciled for the purpose of computing the amount of PIDM premium…. this somehow does not work. Most (re)insurers have no issue with any implementation date set by their facultative exchange partners but they are not prepared to have a common date….(at least for the industry or rather nobody really be bothered about the whole affair)

In reality personnel of some industry players were not even aware of what is going on except for the fact that the company needs to pay some premiums to PIDM for insurance cover provided. Guessed, there is no other ways out, we just need to prepare the adoption in the following manner:

  1. Set your own date for implementation but let your facultative partners set theirs….
  2. If your organisation is levied on the facultative inwards premium, just pay up (usually this would be reflected in the CAB transactions)…. but take this premium portion out of the “retained premium” when computing for the premium payment to PIDM…. Of course the facultative exchange partner(s) who have levied those portions of premium would have to report such portion as having retained….(or will they?)

(Ranting…) like it or not, the longer your organisation takes to implement this new thingy, the better it is for the organisation…..

“When a player continues to collect that 0.25% levy on the facultative outwards premiums but pays up only their PIDM- premium on the actual retained premium, the heck…. that player stands to gain handsomely!”

What do you think?


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3 comments for “From Insurance Levy to PIDM Premium | Malaysia Deposit Insurance Corporation Act 2011

  1. Jun Public
    April 16, 2015 at 19:00

    Betul keluarga ,keluaran PIDM boleh jamin saya dapat Sehingga RM 500,000 ..Macam mana jamin …?

    • May 18, 2015 at 05:47

      Jaminan ini ada kaitan dengan kegagalan bank atau sykt insuran atau takaful.

  2. Anonymous
    June 27, 2011 at 11:38

    Yep. There is no coordination the industry can’t even figure out a common cut off date for such a simple implementation.

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