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Labuan IBFC as Asia's leading captive domicile

Source: Asia Insurance Review | Oct 2017

Malaysia Property & Casualty Reinsurance Risk Management

A recent survey commissioned by the Labuan International Business and Financial Centre (Labuan IBFC) showed that the risk management and insurance community are confident that the mid-shore centre has the right ingredients for businesses to establish their captive insurance companies. 

   Entitled “Attitudes towards Captive Insurance in Asia”, and conducted by the world’s leading captive trade publication, Captive Review, the survey found that close to 70% of the respondents are “very comfortable” using Labuan IBFC as their domicile choice for their captives. 
 
Regulatory provisions the main provision 
In addition, respondents agreed that access to regulators and strong legal as well as regulatory provisions are found to be the main consideration of 61% of the respondents when choosing a captive domicile. The availability of local captive infrastructure is also an essential requirement for most respondents (57%).
 
   On the back of these requirements, more than half of those surveyed also agreed that Labuan IBFC retains a favourable reputation as a domicile, with more than 30% agreeing that the mid-shore jurisdiction is a “strong” captive domicile. 
 
Labuan IBFC one of the fastest growing risk management centres in Asia
“We are pleased to see such positive responses and this reaffirms Labuan IBFC’s position as a business-friendly yet well-regulated jurisdiction for the region’s risk management needs. Labuan IBFC, in this aspect, possesses all the right elements,” said Chairman of Labuan IBFC Inc Sdn Bhd Datuk Mohammed Azlan Hashim at the inaugural Asian Captive Conference 2017 (ACC 2017) held in August in Kuala Lumpur, Malaysia. 
 
   He added: “Many might not realise, but Labuan IBFC is one of the fastest growing risk management centres in Asia. The captive insurance sector has been growing steadily over the years. As of second quarter of this year, there are 43 captives established in Labuan IBFC.”
 
   According to him, Labuan IBFC recorded a total of an aggregated written premium value of US$348.6 million for its captive insurance sector last year and close to 75% of the total captive market contributions are from risk owners in Asia.
 
A steady increase in take-up rate of captives in the region
As the mid-shore centre continues to adapt and evolve its self-insurance, especially on the captive framework, Labuan IBFC Inc CEO Danial Mah Abdullah said that the jurisdiction is expecting to see a steady increase in the take up of captives in the region in the near future as it offers a substance-enabling location with a strong risk management eco system, manned by experienced captive managers and intermediaries. 
 
   “Labuan IBFC has always conformed to the international regulatory requirements and as a substance-enabling jurisdiction, the mid-shore centre also offers good captive infrastructure as well as experienced captive managers and intermediaries that understand both the local regulatory requirements and the international risk environment,” he said. 
 
Inaugural ACC 2017
The inaugural ACC 2017 with the theme ‘De-Risking Asia: The Growing Role of Self-Insurance’, was attended by more than 300 local and international delegates. 
 
   Keynote speaker, Governor Bank Negara Malaysia Muhammad bin Ibrahim gave three trends on the future of captives that he said are worth noting.
 
   First, captives are poised to move beyond the predominant focus on the single-parent captive model and the exclusive domain of largest corporates. “Many non-profit 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,” he said. 
 
   Second, “technology will be a key driver and opportunity for new captive models” while thirdly, “we are likely to see greater traction in efforts to understand captives from a regulatory and supervisory perspective”.
 
Winds of change
On the third trend, Datuk Muhammad said: “To a large extent, our ability to design suitable regulatory frameworks for captives remains constrained by the paucity of data on captives. This needs to be addressed as a matter of priority. Broader measures need to be taken, both at a national and global level, to collect better data on captives to understand their nature, evolution and impact on macro-financial developments.”
 
   He added: “Winds of change are likely to pick up speed for captives. And they will change the way captives have operated in the past. Very likely it would pave the way for the transformation of offshore financial centres. Captives could metaphorsise from perceived brass plates models into legitimate commercial vehicles that serve a real economic purpose. Perception management is pivotal for the future existence of captives.”
 
   He concluded that captives must be seen as supporting and contributing to the broader economic transformation and growth and there is definitely a growing space for captives to play a role. A 
 
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