Issued on: 28 June Granting of Credit Facilities

Transcription

1

2 TABLE OF CONTENT PART A OVERVIEW Introduction Applicability Legal provisions Effective date Interpretation Policy documents superseded... 2 PART B REQUIREMENT ON GRANTING A CREDIT FACILITY General requirements Credit facilities for insurance agents or takaful agents Requirements applicable to Agency Financing chemes... 5 APPENDICE... 6 Appendix I List of policy documents superseded... 6 Appendix II Agency Financing chemes... 7

3 1/12 PART A OVERVIEW 1. Introduction cope of policy 1.1 This policy document sets out the requirements and conditions to be complied with by a licensed insurer and licensed takaful operator for granting a credit facility, including: (a) specific conditions relating to agents; and (b) specific requirements on Agency Financing chemes for life insurers and family takaful operators. 2. Applicability 2.1 This policy document is applicable to all insurers licensed under the Financial ervices Act 2013 (FA) and takaful operators licensed under the Islamic Financial ervices Act 2013 (IFA). 3. Legal provisions 3.1 The requirements in this policy document are specified pursuant to section 47(1) of the FA and section 57(1) of the IFA 3.2 The requirements in this policy document must be read together with section 133 of the Companies Act 1965.

4 2/12 4. Effective date 4.1 This policy document comes into effect on 30 June Interpretation 5.1 The terms and expressions used in this policy document shall have the same meanings assigned to them in the FA and IFA unless otherwise defined in this policy document. 5.2 For the purposes of this policy document- denotes a standard, requirement or specification that must be complied with. Failure to comply may result in one or more enforcement actions; G denotes guidance which may consist of such information, advice or recommendation intended to promote common understanding and sound industry practices which are encouraged to be adopted; licensed person collectively refers to a licensed insurer and licensed takaful operator, unless otherwise specified. 6. Circulars superseded 6.1 The circular listed in Appendix I is superseded.

5 3/12 PART B REQUIREMENT ON GRANTING A CREDIT FACILITY 7. General requirements 7.1 A licensed person must obtain the prior written approval of the Bank to: (a) act, or arrange with any person to act, as a guarantor for a credit facility granted to any person; and (b) grant a credit facility to any person specified in paragraph 7.2, subject to section For the purposes of paragraph 7.1(b) a specified person is- (a) any of a licensed person s directors; (b) a company or firm in which a licensed person has any interest as controller, manager or agent; (c) a company or firm in which any of a licensed person s directors has any interest as director, partner, controller, manager or agent; (d) an individual for whom or a company or firm for which any of a licensed person s directors is a guarantor; (e) a company in which a licensed person, or any one or more of its directors has an interest in voting shares of 20% or more; (f) a company which has an interest in voting shares of 20% or more in a licensed person; and (g) a company in which the company in paragraph 7.2(f) above has an interest in voting shares of 20% or more. 7.3 The Bank s prior written approval under paragraph 7.1(b) is not required for the grant of a credit facility to a director of a licensed person if the credit facility is secured in full by a life policy or family takaful certificate held by the director which does not exceed the surrender value of the policy or certificate.

6 4/ For the purposes of paragraphs 7.2 and 7.3, director includes a relative of a director. G 7.5 The purchase of private debt securities or Islamic private debt securities in the secondary market is not deemed to be the granting of credit facilities. 8. Credit facilities for insurance agents or takaful agents 8.1 Any credit facility granted by a licensed person to its insurance agent or takaful agent, as the case may be, may only be granted from the licensed person s shareholders funds. 8.2 In granting an unsecured credit facility to its insurance agent or takaful agent, as the case may be, a licensed person must comply with the following requirements: (a) (b) (c) for loans or financing for the purchase of- (i) a new vehicle, the loan or financing must not exceed 80% of the cost of the vehicle or RM120,000, whichever amount is lower; and (ii) a second hand vehicle, the loan or financing must not exceed 70% of the value of the vehicle or RM80,000, whichever amount is lower; loans or financing for the purchase of computers must not exceed the purchase price of the computer or RM5,000, whichever amount is lower; and requirements as may be specified by the Bank to be applied to loans or financing provided under an Agency Financing cheme.

7 5/12 9. Requirements applicable to Agency Financing chemes 9.1 For the purposes of the requirements on Agency Financing chemes, licensed person refers to a licensed life insurer and a licensed family takaful operator collectively. 9.2 Pursuant to paragraph 8.2 (c) of this document, a licensed person must comply with the requirements recommended by the Life Insurance Association of Malaysia (LIAM) and the Malaysian Takaful Association (MTA), and approved by the Bank in relation to the Agency Development Financing and Personal Development Financing chemes, as attached in Appendix II.

8 6/12 APPENDICE Appendix I Circular superseded 1. Grant of Credit By Licensed Insurers and Takaful Operators (Consolidated) issued on 31 December 2012

9 7/12 Appendix II Agency Financing chemes 1. General requirements for Agency Financing chemes 1.1 A licensed person may only provide an Agency Financing cheme (AF) for its insurance agents or takaful agents, as the case may be, for the purposes of Agency Development Financing, as set out in ection 2 of Appendix II and Personal Development Financing, as set out in ection 3 of Appendix II. 1.2 An insurance agent or takaful agent is only eligible to participate in an AF if the agent- (a) (b) (c) (d) (e) (f) (g) (h) is at least 18 years old; has completed the PM/MCE or 11 years of formal education; is not a bankrupt; is not involved in criminal acts and has not been dismissed for malpractices or fraud in his previous employment 1 ; complies with LIAM's Code of Ethics / MTA s Code of Ethics; is registered with the licensed person; is involved in selling life insurance or marketing family takaful; and provides at least one guarantor who is either an agency manager (AM), agency supervisor (A) or any person who directly reports to the licensed person and is approved by the licensed person to be the guarantor. 1.3 The licensed person must assess the ability of the guarantor to meet the guarantee commitments in the event of default of the insurance agent or takaful agent in respect of whom the guarantee has been given. The licensed person must exercise appropriate care to ensure maximum recovery of a loan or financing extended under an AF. This includes setting appropriate internal 1 Any non-disclosure on past conduct would result in termination

10 8/12 loan or financing exposure limits for every guarantor and taking into consideration relevant factors such as the financial resources of the guarantor. 1.4 The licensed person must put in place internal policies and procedures to ensure that the ongoing eligibility criteria for an AF set out in paragraphs 2.2 and 3.6 of Appendix II are met. 2. Agency Development Financing 2.1 An AF includes an Agency Development Financing cheme (ADF) and a Personal Development Financing cheme (PDF). An ADF serves to assist newly recruited insurance agents or takaful agents, as the case may be, and newly appointed agency leaders, to stabilise their income during the initial stages of their career and to encourage part-time agents to become full-time agents, by providing qualified agents with profit-free or subsidised unsecured loans or financing. 2.2 In addition to the criteria set out in paragraph 1.2 of Appendix II, only an insurance agent or takaful agent who meets the following criteria is eligible for an ADF: (a) for a newly appointed agent: (i) a minimum production quota of three insurance policies or takaful certificates and RM4,000 annualised first year premiums or contributions (FYP) at the end of the second quarter and each quarter thereafter; and (ii) a minimum persistency rate of 85%, if the agent has been in service for more than one year; and (b) for a newly appointed agency leader: (i) a minimum of three new agents; and

11 9/12 (ii) a minimum group production quota of RM30,000 annualised FYP at the end of the first quarter and each quarter thereafter. 2.3 The conditions in paragraph 2.2 of Appendix II are only applicable to the disbursements in the second and subsequent quarter of the loan or financing. In the first quarter, the grant of loans or financing is unconditional. 2.4 The limits and conditions for an ADF are as follows: (a) for a newly appointed insurance agent or takaful agent: Maximum disbursement per month Maximum loan or financing Maximum repayment Period RM5,000 (or 80% of last drawn salary, whichever amount is higher) RM60, months from the last agency development loan or financing disbursement, for the particular loan or financing (by way of deduction from the agent s commissions, with options for early repayment).

12 10/12 (b) for a newly appointed agency leader: Maximum disbursement per month Maximum loan or financing Maximum repayment Period RM10,000 (or 80% of last drawn salary, whichever amount is higher) RM120, months from the last agency development loan or financing disbursement, for the particular loan or financing (by way of deduction from agent s commissions, with options for early repayment). 2.5 All disbursements of an ADF by a licensed person must be made directly to the newly recruited insurance agent or takaful agent, as the case may be, or the newly appointed agency leader. 2.6 A licensed person must not continue to extend the ADF to an insurance agent, takaful agent or agency leader who does not meet the minimum production and persistency requirements in paragraph 2.2 of Appendix II. Disbursement must cease immediately if the requirements are not met. 3. Personal Development Financing 3.1 A Personal Development Financing cheme (PDF) is used to assist insurance agents or takaful agents, as the case may be, to finance their training or development costs to enhance their knowledge, technical skills and quality of service. Training or development programmes include courses that are offered by the Malaysian Insurance Institute (MII), the Islamic Banking and Finance Institute Malaysia (IBFIM) and those endorsed by the Life Insurance Association of Malaysia (LlAM) or the Malaysian Takaful Association (MTA). Apart from course fees, a PDF may cover related transportation and accommodation costs.

13 11/ A new insurance agent or takaful agent, as the case may be, that qualifies for an ADF will also be eligible for a PDF. 3.3 In addition, an existing insurance agent or takaful agent must meet a minimum persistency rate of 85% and the following criteria to be eligible for a PDF: (a) for an AM, a minimum production of RM100,000 per annum annualised FYP under his supervision; (b) for an A, a minimum production of RM50,000 per annum annualised FYP under his supervision; and (c) for an ordinary agent, a minimum of nine insurance policies or takaful certificates or RM6,000 per annum annualised FYP. 3.4 The limits and conditions for a PDF are as follows: (a) (b) (c) the loan or financing must not exceed the actual amount of the training or development costs incurred; the amount of the cumulative loan or financing to an insurance agent or takaful agent at any one time must not exceed RM5,000; and the repayment period must not be more than 12 months, beginning from the disbursement date, and must be deducted from the insurance agent or takaful agent s commissions, with options for early repayment. 3.5 Disbursements under this scheme must be made directly to the provider of the training or development programme. 3.6 ubsequent disbursements of loans or financing under this scheme must be subject to an insurance agent or takaful agent meeting the following maintenance rules for each quarter: (a) for an existing insurance agent or takaful agent, meeting the criteria set out in paragraph 3.3 of Appendix II; and (b) for a new insurance agent or takaful agent, meeting a continued minimum

14 12/12 production quota of three insurance policies or takaful certificates or RM2,000 annualised FYP. 3.7 A licensed person must not continue to extend the ADF to an insurance agent or takaful agent who does not meet the minimum production and persistency requirements in paragraph 3.6 of Appendix II. Disbursement must cease immediately if the requirements are not met.