The IFSA, which has been enacted but pending implementation, requires existing composite licence of insurers to be separated into two capitalised legal entities, namely life insurance or family takaful and general insurance.
It has been reported that the minimum capital for each company will be RM100 million.
Among companies that are mulling the sale of their general takaful business are HSBC Amanah Takaful (Malaysia) Sdn Bhd, Prudential BSN Takaful Bhd and Hong Leong MSIG Takaful.
It was reported that CIMB Aviva Takaful Bhd may also relinquish its general business now that it has been acquired by Khazanah Nasional Bhd and Sun Life Financial Inc, a life insurance company.
A takaful company executive said most bank-backed takaful companies' are not willing to pump the additional capital to set up a separate general takaful unit since the non-life segment is a small contributor to their overall business.
"These companies have very small general insurance business and it makes sense for them to forgo that business, which is rather small compared with their life (insurance) segment," he told SunBiz.
"Pumping more capital to keep an unprofitable or marginal general takaful business makes no sense for these companies. They would rather sell or surrender their general insurance licence than pump in more capital," said another industry executive.
The industry executive believes that the takaful operators will instead focus on retaining and building their life insurance or family takaful business, which is more profitable.
"Although Islamic insurers have a five-year period to segregate their life and non-life businesses, companies like HSBC Amanah Takaful, Prudential BSN Takaful and Hong Leong MSIG Takaful are already strategising plans to dispose their general business units," he said.
He added that apart from selling or surrendering their licence, insurers can consider various options to dispose of their general business.
"A companies may sell a stake in a new or strong foreign insurer before splitting the business later. A merger of the three or four general takaful companies could also happen."
OSK Research in a recent report said the IFSA coupled with the requirements of the Malaysian Competition Act may trigger mergers and acquisitions among takaful players as they attempt to pool capital and size in order to compete in the market.
"The IFSA is a way of forcing insurers to be serious about their non-life business," it said.
According to Bank Negara Malaysia's Annual Takaful Statistics 2012, of the RM5.88 billion net contributions income in the takaful industry last year, the general takaful segment accounted for only 0.1% of the country's gross national income and the family segment 0.6%.
The report also noted that the general takaful business only accounted for 15% of the industry total fund assets of RM2.7 billion in 2012.
There are a higher number of takaful insurers with composite licences in Malaysia than conventional insurers. Out of the 11 takaful insurers in the country, eight are with composite licences namely CIMB Aviva Takaful, Etiqa Takaful Bhd, Great Eastern Takaful Sdn Bhd, Hong Leong MSIG Takaful, HSBC Amanah Takaful, MAA Takaful Bhd, Prudential BSN Takaful, Syarikat Takaful Malaysia Bhd and Takaful Ikhlas Sdn Bhd.
However, the IFSA would not apply to the three takaful companies that secured the latest family takaful licences, which are not composite licences, in 2010, namely AmFamily Takaful, Great Eastern Takaful, and AIA Public Takaful Bhd.
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