(AFP) - Bank Negara today extended by three months a June 30 deadline for insurance companies involved in merger exercises to raise their minimum paid-up capital.

Insurance companies were required to increase their paid-up capital to a minimum 100 million ringgit (26.3 million dollars) by end-June from 50 million previously.

Bank Negara said in a statement that it would extend the deadline to 30 September to allow some 13 insurers to complete their merger exercises.

It said 17 companies already had a paid-up capital of above 100 million prior to the ruling.

Thirteen insurers have since raised their capital, nine others are expected to meet the requirement by July 31 while the 13 firms were now in various stages of mergers to raise capital.

"This capital raising exercise has been the catalyst for industry consolidation... the merger and acquisition activities have continued to be a market-driven process," Bank Negara said.

It said the industry consolidation would reduce the number of companies from 52 to 41, comprising 29 domestic insurers and 12 foreign-owned firms.

The industry's capitalisation is estimated to reach at least 4.6 billion ringgit following the consolidation, it added.

Bank Negara said it foresees further consolidation in the industry amid rising competitiveness due to greater globalisation and market liberalisation.