Insurance (Exemption) Order 2009 and Order 2012?

The Insurance (Exemption) Order 2009 was introduced pursuant to some liberalisation measures that were taken under the ASEAN Framework Agreement on Services. In a nutshell and nevertheless these measures are connected to the liberalisation of selected insurance transactions across the ASEAN borders – meaning, risk owners residing or having registered in any ASEAN states are allowed to place any of those selected risks with an insurer in other ASEAN member states. In that sense, Malaysian risk owners are now allowed to place such risks with an insurer in any ASEAN member states including placing it directly with any insurer licensed by the Labuan Financial Services Authority (Labuan FSA), and vice versa the other ASEAN risk owners are also allowed to transact in similar fashion.

This liberalisation was also effected after taking into account the insurance industry’s capacity in the underwriting of such risks which is relatively limited and where substantial reinsurance support abroad is required.

Those selected categories of risks are:

  1. Malaysian international maritime shipping risks;
  2. Malaysian international commercial aviation risks;
  3. Any liability deriving from such risks in (a) and (b); and
  4. Risks relating to goods in international transit (also termed as international MAT risks)

In 2012, the following orders were also introduced under the Insurance Act 1996 (now repealed and replaced by Financial Services Act 2013) to strength those liberalisation measures:

  1. Insurance (Exemption)(No. 2) Order 2012;
  2. Insurance (Exemption)(Amendment) Order 2012; and
  3. Insurance (Approved International Marine, Aviation and Transit Insurance Brokers) Regulations 2012

Those 2012 Orders enabled the following activities….

  1. Beginning 2012, risks owners in Malaysia are allowed to engage insurance brokers which are licensed, registered, approved or otherwise regualted and supervised in an ASEAN member state or licensed by Labuan FSA for the placement of their international MAT risks with an ASEAN insurer or Labuan insurer.
  2. These ASEAN and Labuan based insurance brokers are allowed to carry on insurance broking business only in respect of international MAT risks for risk owners in Malaysia subject to registration with, and approval by, the Bank.

These Orders were introduced by Central Bank (BNM) as part of Malaysia’s liberalisation concession to ASEAN member states in 2009 and 2012 to signify Malaysia’s support for regional integration, particularly the realisation of the ASEAN Economic Community (AEC), which envisions greater cross-border flows of trade and services.

In that sense, the previous requirement in the 2009 Order for Malaysian risk owners to seek advice of a local broker prior to placing their international MAT risks with an ASEAN or Labuan insurer has been removed (Insurance (Exemption)(Amendment) Order 2012.

Further, the liberalisation was effected to provide greater choice and flexibility to local risk owners in the placement of their international MAT risks.

International Maritime Shipping

Nevertheless, it is important to note MAT risks are those relevant to international maritime shipping or international marine, which serves to define MAT risks from the perspective of international commercial. This means private yachts registered in Malaysia including Labuan for personal usage do not qualify under those Orders. Likewise, private vessels not used for commercial purposes do not qualify as such….

Notably any “near-coastal” trade covering trading by way of voyages along coastal areas of other countries such as Brunei, Philippines and Indonesia shall fall within the ambit of international maritime shipping.

International Commercial Aviation 

Similar to private yachts and vessels not for international commercial usage, private jets registered in Malaysia shall deem to fall outside the scope of those Orders.

Licensed Insurance Broker

A licensed broker as referred in the Order would mean an insurance broker which was licensed by BNM under the Financial Services Act (FSA) and not a Labuan insurance broker licensed by the Labuan FSA. However under the Order 2012 (beginning June 2012), ASEAN and Labuan insurance brokers are now allowed entry into the Malaysian markets connected to those targeted MAT risks.

While it is a requirement that international MAT risks must be placed by licensed brokers, such is not a requirement for the takaful segment of international MAT risks. The takaful operators can if they so desired, to place such risks directly with any ASEAN insurer or Labuan insurer, i.e. without having a licensed insurance broker to do so.

What do you think about this. ..?

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2 comments for “Insurance (Exemption) Order 2009 and Order 2012?

  1. Anonymous
    August 3, 2014 at 00:02

    Dear sirs, can I get a copy of the circular?

    • September 20, 2014 at 07:57

      Will find the time to upload the file onto this site since you did not provide us your email.

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