MALAYSIA'S insurance industry is moving towards a more principle-based regulatory regime that allows greater flexibility for players to compete and improve their performance, Bank Negara Malaysia assistant governor Datuk Muhammad Ibrahim said yesterday.

"Later this year, Bank Negara will consult the industry on risk management standards that insurers are expected to observe as part of this evolution," he said in his keynote address at the LOMA/LIMRA 17th Annual Strategic Issues Conference in Kuala Lumpur yesterday.

Next month, insurers in Malaysia must comply with the "Guidelines on Introduction of New Products" which will mainly ensure that consumers are clearly and fully informed of the nature and risks associated with the products.

Part of the industry's progression includes the implementation of the risk-based capital framework beginning this year, intended to improve risk management practices and capital implications.

Muhammad said the distribution channels for insurance products and services had also been broadened significantly with the development of bancassurance and financial advisers.

"These will contribute towards enhancing revenue and reducing costs, while enhancing consumer protection and improving the insurance penetration rate in Malaysia," he said.

In April this year, the central bank announced a liberalisation package that included the issuance of new family takaful licences with higher limits of up to 70 per cent on foreign equity participation, as well as incentives for the consolidation and rationalisation of the insurance industry.

They also removed restrictions on the establishment of branches and bancassurance tie-ups, and gave greater flexibility to employ specialist expatriates.

"These developments will create opportunities for insurers to build financial solidity, restore consumer confidence and respond proactively to changing consumer needs in a more uncertain environment," he said.

Meanwhile, the conference, themed "The New Global Economy: Resilience in Challenging Times", was jointly organised with the Life Insurance Association of Malaysia (LIAM).

LOMA is an international association engaged in research and educational activities to improve company operations, whereas LIMRA provides research, consulting, and other services to insurance and financial services companies worldwide.