The overlapping markets of the mutual, captive and takaful industries are likely to provide an important impetus for the wider use of group captives among small and medium-sized enterprises (SMEs), Bank Negara Malaysia governor Mr Muhammad Ibrahim has said.
Speaking at the inaugural Asian Captive Conference 2017 hosted by Labuan International Business and Financial Centre earlier this week, he added that captive insurers are poised to move beyond the predominant focus on the single parent-captive model and the exclusive domain of large corporates. He said that many non-profits entities in the US and an increasing number of SMEs are accessing captives via group captive models that pool assets and share risks across its members. Captive insurance could be a powerful catalyst for more mature risk management practices and culture among SMEs.
Southeast Asia is well placed to harness this potential, given the vibrancy of SMEs and fast growing takaful market, said Mr Muhammad.
“Southeast Asia alone contributes almost 30% to global takaful contributions, and this offers an opportunity, as Malaysia has long sought to develop a facilitative regulatory environment to drive an innovative, competitive and sustainable growth of Islamic finance,” he said.
He also said the industry is likely to see greater traction in efforts to understand captives from a regulatory and supervisory perspective.
Globally, there is a greater appreciation of the role and importance of captive insurers, including by the International Association of Insurance Supervisors (IAIS).
However, Mr Muhammad added that the industry’s ability to design suitable regulatory frameworks for captives remains constrained by the paucity of data on captives, and this needs to be addressed as a matter of priority.
Technology will be key driver for new captive models, according to Mr Muhammad, as it could help to modernise legacy processes and systems, strengthen risk management capabilities and capture efficiency gains.
“At the frontier of development, the evolution of Big Data and Insurtech has opened up significant new possibilities for segmenting and pooling of risk and capital, and tailoring solutions to specific needs and profiles,” he added, pointing to new online platforms based on group captive models and P2P insurance concepts.