Bank Negara Malaysia replaces Policy Document on Investment-linked Business

Bank Negara Malaysia (‘BNM’) issued a Policy Document on Investment-linked Business on 13 February 2023 (‘Replacement Policy Document’).
The Replacement Policy Document applies to: 
  • licensed insurers carrying on life business under the Financial Services Act 2013 (‘FSA’) which offer, market or sell investment-linked policies; and
  • licensed takaful operators carrying on family takaful business under the Islamic Financial Services Act 2013 (‘IFSA’) which offer, market or sell investment-linked takaful certificates, 
(such business is collectively referred to as ‘investment-linked business’).
The Replacement Policy Document came into effect on 13 February 2023 and superseded the following documents: 
  • Investment-linked Business Policy Document issued on 11 January 2019 (BNM/RH/PD 029-36);
  • Specifications relating to Product Illustration Rate for Investment-Linked (IL) Insurance Policy/ Takaful Certificate under the Policy Document on Investment-linked Business issued on 7 October 2020 (JKAP7500/POL/4/3/7); and
  • Specification pursuant to sections 47, 123 and 143 of the FSA and sections 57, 135 and 155 of the IFSA in respect of the Investment-linked Business Policy Document issued on 22 March 2021 (JKAP7500/POL/4/3/7). 
The principal objective of the Replacement Policy Document is to ensure that licensed persons provide fair treatment to policy owners/ takaful participants in preserving the value of the policy owners’/ takaful participants’ investment-linked policy/ takaful certificates. Accordingly, the Replacement Policy Document requires licensed persons to: 
  • promote and maintain high levels of corporate governance and professionalism in the administration of investment-linked business;
  • ensure professional and proper conduct in the sale and marketing of investment-linked products1; and
  • enhance product transparency and disclosure to protect the interests of policy owners/ takaful participants. 
To achieve the above objectives, the Replacement Policy Document sets out the requirements relating to the following: 
  • approval from BNM to carry on investment-linked business;
  • role and responsibilities of board and senior management of a licensed person;
  • management of investment-linked funds;
  • product design, including Minimum Allocation Rates (MAR) and sustainability cover;
  • fees, charges and expenses;
  • disclosure;
  • principles and limits for investment;
  • valuation of assets and liabilities of investment-linked funds; and
  • restriction on marketing of investment-linked products. 
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine. 
1 An investment-linked product is an insurance/ takaful product whereby premiums/ takaful contributions paid by a policy owner/ takaful participant are invested in investment-linked fund(s) offered by the licensed person, and the investment is used to fund the coverage of the policy owner’s/ takaful participant’s insurance/ takaful protection.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact