Licensing and Regulatory Framework for Digital Insurers and Takaful Operators

Licensing and Regulatory Framework for Digital Insurers and Takaful Operators 

In line with Bank Negara Malaysia’s (“BNM“) objectives of advancing digitalisation of the financial sector and closing protection gaps, BNM has issued its policy document on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators (“DITOs”).

Effective 2 January 2025, this policy document will impact:

• Applicants seeking to operate in the digital insurance or takaful space;
• Existing licensed digital insurers and takaful operators; and
• Shareholders and prospective shareholders of licensed DITOs.

This policy document serves as an invaluable resource for fresh applicants, providing a comprehensive guide to understanding the regulatory landscape and navigating the digital insurance and takaful sectors effectively. It is also crucial for existing licensed Insurance and Takaful Operators (“ITOs”) to review the new policy document to ensure compliance and preparedness for the upcoming changes.

Applicability

This policy document applies to:

(a) applicants under Section 10 of the Financial Services Act 2013 (“FSA”) who wish to carry on a digital insurance business;

(b) applicants under Section 10 of the FSA who wish to carry on a digital takaful business;

(c) licensed digital insurers;

(d) license digital takaful operators; and

(e) shareholders and prospective shareholders of licensed DITOs.

Value Propositions

Applicants must demonstrate, to BNM’s satisfaction, their commitment to drive all of the following outcomes in a sustainable manner:

1. Inclusion – To enhance the financial resilience of consumers whose protection needs are unserved or underserved.
2. Competition – Come up with innovative insurance/takaful products to cater to diverse protection needs.
3. Efficiency – Ensure a convenient and seamless consumer experience with greater costs savings.

Application Procedures

On or before 31 December 2026, an applicant interested in applying for a digital insurance business licence or a digital takaful business licence must submit a formal application and a shareholders’ application to BNM.

Please note however, that existing licensed ITOs are not required to obtain another licence to digitalise their operations.

Regulatory Requirements

Licensed DITOs must:

• operate for a minimum of 3 years but no more than 7 years in the foundational phase;
• have a minimum paid-up capital of RM30 million at point of entry & foundational phase;
• submit an implementation progress and compliance report annually;
• establish a registered office in Malaysia for specified uses only;
• ensure critical functions are carried out wholly/mostly wholly through digital/electronic means;
• ensure that embedded insurance/takaful products are only allowed on an ‘opt-in’ basis.

*Please note that this list is not exhaustive.