Kuala Lumpur
28 April 2017
Reporter: Becky Butcher

Captive business in Labuan on the rise

Labuan’s total earned premium for captive insurance business increased by 18.8 percent to $252 million in 2016, despite an overall decrease in total gross premium.

The Labuan Financial Services Authority (LFSA) Annual Report suggested that the increase in total earned premium for captive business was due to higher retention for all sectors, while the 6.9 percent decrease in total gross premiums was experience in the engineering sector.

It also found that most of the total gross premiums for the captive insurance business were derived from outside Malaysia, “reflecting the centre’s efforts to promote international business in support of insuring group risks”.

According to the report, Labuan is “fast becoming one of the largest captive jurisdictions in Asia”.

Since Labuan’s first captive was established by a property developer company in 1998, the sector has been “growing rapidly”, reaching approximately 40 captives in 2016 and contributing to an aggregated written premium value of $348.6 million.

Within Labuan’s captive market, risk owners in Asia have been the main contributors, taking almost 75 percent of the market, while the remainder is made up of EU and US parented captives.

This positive trend is expected to continue as the Labuan International Business and Financial Centre (IBFC) concentrates on “strengthening its grip on Asian captive markets”.

Labuan currently offers business owners various options, including the pure captive and protected cell company structures.

The LFSA said in its annual report: “The variety of captive structures to select from, coupled with other business enablers designed to provide legal stability with minimal setup and operating costs, make Labuan IBFC the region’s choice for captive market.”

In March, Labuan IBFC suggested that the increasing interest among Asian corporates to establish captives as a risk management strategy also presents immense opportunities in offering risk solutions that complement onshore activities.

The IBFC also revealed that it will focus on sectors including leasing, commodity trading and wealth management.

Danial Mah Abdullah, CEO of Labuan IBFC, said: “We believe the changes in the way cross-border investment and trade are conducted due to demands for greater transparency is a business enabler for Labuan IBFC.”

“We will be focusing on developing the niches with high-growth potential and these sectors have been showing a positive upward trend in driving the mid-shore centre development in the recent years.”

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