LABUAN IBFC REINFORCES POSITION AS FASTEST GROWING CAPTIVE INSURANCE CENTRE IN ASIA

By Jailani Hassan

KUALA LUMPUR, April 6 -- A leading global trade publication, Captive Review has recently highlighted Labuan International Business and Financial Centre’s (Labuan IBFC) achievement in charting a strong captive growth in 2020, with its total number of captives increasing by 15.4 per cent.

The World Domicile Update 2020 report, which canvassed all global jurisdictions offering this form of self-insurance vehicle, confirmed that Labuan IBFC licensed a quarter of all captives in Asia, and Middle East and North Africa (MENA), thereby reinforcing its position as the fastest growing captive centre in Asia.

Captives are self-insurance vehicles licensed as reinsurance companies set up as a strategic risk management facilitator, as these licensed entities have direct access to the reinsurance market, providing it the ability to reduce the cost of risk coverage while simultaneously facilitating a holistic risk management strategy for the entire organisation.

The report also shows that although global captive numbers fell slightly in 2020, there was a surge in captive cell formations, which provides an efficient and convenient alternative to single parent captive structures.

Labuan IBFC is the only jurisdiction in Asia which provides for the formation of protected cell companies and this has been the largest growth vertical within the self-insurance industry in 2020.

Labuan IBFC Incorporated chief executive officer Farah Jaafar-Crossby said 2020 was a boon year for Labuan captive business.

“We had eight new captives formed, totalling 55 captives now licensed by the jurisdiction. This was the highest number of captives formed in both Asia and MENA in 2020.

“We are also extremely proud to be listed as 16th out of 71 global domiciles with the greatest number of captive formations in 2020, leading the captive industry in Asia and MENA. It is worth noting that the report also indicated that Asia was the fastest growing captive region in the world with a year-on-year growth of 6.3 per cent,” she said in a statement to Bernama today.

She said looking ahead,  Labuan IBFC’s growth momentum in 2021 would exceed that of 2020, bolstered by renewed growth of Asian economies, a hardening reinsurance market, the need to cover more esoteric risk like cyber, greater awareness of self-insurance vehicles, and its recognition as a key jurisdiction for these vehicles.

“In terms of gross written premiums, Labuan’s captive insurance business already accounts for 31.2 per cent of the total gross premiums underwritten in Labuan IBFC amounting to US$497.5 million, with 65.4 per cent of the total premiums originating from international markets.

“These numbers clearly indicate a coming of age and maturity of the market, making Labuan IBFC a truly global domicile of choice,” she said.

Labuan International Insurance Association (LIIA) chairman Roy Sharma said the growth of captives has been in tandem with the increase in the association membership, as well as ancillary service providers in Labuan.

“We now have more than 220 insurance and risk management licensee and LIIA plays a pivotal role in Labuan IBFC,” he said.

He added that LIIA would be setting up a captive sub-committee within the association to further develop the captives’ space and for it to have an even stronger voice in the jurisdiction.

Labuan IBFC celebrated its 30th year of establishment in 2020, with more than 800 licensed financial intermediating entities, including banks, insurance and insurance related entities, corporate service providers, wealth management vehicles, and digital financial service providers. 

The jurisdiction is expected to announce its full 2020 performance numbers later this month with indications pointing to a respectable double-digit growth in reinsurance, banking, digital financial services, and corporate service providers.

-- BERNAMA