Four new captives registered between Jan to June 2019, making the jurisdiction the fastest growing captive domicile in Asia.
“Risk management in the form of self-insurance or captives is on the rise, due to it being an overall cost-efficient and customisable risk mitigating tool,” said Danial Mah, Director General, Labuan Financial Services Association (Labuan FSA) at the launch of Labuan International Business and Financial Centre (Labuan IBFC) and Swiss Re Corporate Solutions’s event entitled “Adding Confidence to Captives: Managing Volatility via Self Insurance” today in Kuala Lumpur.
Andre Martin, Head of Innovative Risk Solutions APAC, Swiss Re Corporate Solutions added it was great to share more on the benefits captives can bring to organisations as a comprehensive risk financing strategy. “Today we see a rise in demand for captive insurance across the region including Malaysia and expect this to increase as the risk management function advances and the corporate landscape evolves,” he said. “We look forward to continue working with customers to provide solutions in the captive space and are encouraged by the interest in alternative risk transfer solutions from this event.”
Meanwhile Mah pointed out that captives have gained widespread acceptance around the world including international standard setting bodies. “Asia in particular has shown tremendous potential for growth in captives over the coming years,” added Mah. Earlier this year rating agency, AM Best, stated that it expects to see a significant growth in the Asia Pacific domiciles for captives, including Labuan IBFC.
Mah shared that captives remain a vital business segment in Labuan IBFC, being the leading jurisdiction in Asia for captive formations compared to other jurisdictions in the region such as Singapore and Hong Kong. This leadership is further entrenched in 2019, when 4 new captives were approved in Labuan IBFC between January to June 2019, totalling 51 captives registered in the jurisdiction as of June 2019. This represents a growth of 8.5% year on year and is significant when contrasted with the fact that for the whole of 2018, 6 captives were approved.
“In terms of gross written premiums, Labuan’s captive insurance business increased by 12.8% to USD288 million in June 2019, compared with USD255 million of the same period in 2018,” Mah said, adding that most of the premiums are of Asian origins, particularly from Indonesia and Japan. In contrast for the whole of 2018, Labuan IBFC recorded a 11% growth in total gross premiums for its captive insurance business amounting to USD400.5 million.
He attributes the steady growth momentum of Labuan captives to the growing awareness around the benefits of captives in Asia. Other reasons include changes in the international tax landscape, which have prompted companies looking for alternative jurisdictions to re-domicile their captives to ensure tax compliance, which requires amongst others for captives to have substantive presence in domiciles from which they operate.
“Captive prospects will always be facilitated by our intermediaries and Labuan FSA for their substance compliance,” Mah reassures. As a midshore jurisdiction with adherence to high standards of integrity, transparency and compliance, Labuan IBFC is seen as a substance-enabling and credible jurisdiction that investors can count on. “We will continue to facilitate business development, ease of conducting business and support market innovation, in particular the captive business to ensure it remains relevant,” Mah added.
Farah Jaafar-Crossby CEO of Labuan IBFC Inc, the market development arm of Labuan FSA said that the fact that Labuan IBFC is home to one of Asia’s largest reinsurance and retrocession market is also a significant advantage to captive owners.
“Being a licensed insurance related entity in such a large risk management eco-system provides for great access to coverage for these captives. Labuan IBFC is home to more than 200 insurance and risk management licensees and the industry Association, the Labuan International Insurance Association is the single largest industry group in the jurisdiction,” Jaafar-Crossby added.
As a whole Labuan IBFC’s insurance sector registered strong growth in 2018 with total gross written premiums posting a significant increase to USD1.7 billion, rising 19.1% from the previous year, of which foreign insurance business accounted for 64.7% of the total premiums underwritten – shedding a common misconception that Labuan IBFC’s role as a reinsurance hub is purely Malaysian centric, she said.
The jurisdiction offers Asia’s widest range of self-insurance structures aside from pure single captives, with structure offerings that include mutual and association captives, rent-a-captives as well as the region’s only protected cell company and the Shariah-compliant takaful captives. Labuan IBFC is also home to more than 50 banks, numerous company secretaries, auditors, and other service providers, allowing Labuan based captives access to the complete array of service providers required in the management of captives.
The conference was attended by more than 160 attendees consisting of risk management professionals, business owners, corporate leader, and advisers. For more information on Labuan IBFC and Swiss Re Corporate Solutions, log on to www.labuanibfc.com and https://corporatesolutions.swissre.com/.
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ABOUT LABUAN IBFC
ASIA PACIFIC’S MIDSHORE INTERNATIONAL BUSINESS AND FINANCIAL CENTRE
Labuan International Business and Financial Centre (Labuan IBFC), Malaysia, through our internationally recognised yet business-friendly legal framework, is the preferred international business and financial centre in Asia. Established in 1990, Labuan IBFC is regulated by the Labuan Financial Services Authority (Labuan FSA), statutory Regulator under the purview of the Ministry of Finance, Malaysia.
As a midshore jurisdiction, we offer global investors and businesses the benefits of being in a well-regulated and supervised jurisdiction, which adheres to international standards of compliance in tax transparency. We also provide fiscal neutrality and certainty in a currency neutral operating environment.
Labuan IBFC, located in the centre of Asia, boasts a cost-efficient enabling environment making it an ideal location for substance creation for both global businesses looking at penetrating Asia or Asian entities aiming to go global. Offering a wide range of business structures and investment solutions catered to cross-border transactions and international business dealings including fintech or digital related solutions. We also provide services and solutions in niches such as risk management, commodity trading, reinsurance, wealth management, international business companies and Islamic financial services.
Operating with clear and comprehensive legal provisions, guidelines and practice notes, enforced by a single regulator, Labuan FSA, Labuan IBFC provides an ideal jurisdiction for both corporates and high-net-worth individuals with international exposure.
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About Swiss Re Corporate Solutions
Swiss Re Corporate Solutions provides risk transfer solutions to large and mid-sized corporations around the world. Its innovative, highly customised products and standard insurance covers help to make businesses more resilient, while its industry-leading claims service provides additional peace of mind. Swiss Re Corporate Solutions serves clients from over 50 offices worldwide and is backed by the financial strength of the Swiss Re Group.