Labuan IBFC is the "right" home for captive insurance companies

KUALA LUMPUR: Labuan International Business and Financial Centre Inc Sdn Bhd (Labuan IBFC) is confident that it has the right ingredients for businesses to establish their captive insurance companies there, especially cost-efficiency in a substance-enabling jurisdiction.
Captive insurance is an alternative to self-insurance in which a parent group or groups create a licensed insurance company to provide coverage for itself. In Asia Pacific, many large conglomerates are beginning to recognise captives as a key element in facilitating business efficiency.
The ratio of the take-up of self-insurance, especially captives, as a comparison to the level of economic growth, is still relatively small.
Currently, less than 2% of the total number of captives worldwide are Asian-based corporates.  
Labuan IBFC CEO Danial Mah Abdullah said Labuan IBFC is a business-friendly yet well-regulated jurisdiction for the region's risk management needs. As of second quarter of this year, there are 43 captives established in Labuan IBFC, from 39 last year.
He said 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 ecosystem, manned by experienced captive managers and intermediaries. 
"Asia Pacific has eight captives last year. If we get three out of eight, in a way, we're there," Danial told a press conference at the inaugural Asian Captive Conference 2017 here today.  
Labuan IBFC chairman Datuk Mohammed Azlan Hashim said 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. 
"We envisage this positive trend to continue as Labuan IBFC is focused on strengthening its presence in the captive market of Asia. We've indeed been cultivating this niche in self-insurance, particularly in captive insurance and will continue to do so," Azlan said.
This is confirmed by Labuan IBFC's recent survey "Attitudes towards Captive Insurance in Asia", conducted by the world's leading captive trade publication Captive Review, which found that close to 70% of the respondents are "very comfortable" using Labuan IBFC as their domicile choice for their captives. 
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 midshore jurisdiction is a "strong" captive domicile. 
Azlan said Labuan IBFC is one of the fastest growing risk management centres in Asia, adding that it is the only jurisdiction in Asia that offers protected cell companies and syariah-compliant captives. 
To establish a captive in Labuan IBFC, applicants must have a minimum paid-up capital or working fund of RM300,000.