Captive insurance is an emerging niche that will be targeted by the Labuan International Business and Financial Centre (Labuan IBFC) in its strategic roadmap for 2022-2026, designed to support the region’s momentum of economic recovery.
The roadmap was detailed in a speech by Malaysia’s finance minister, Tengku Zafrul Aziz, who noted that the strategic plan represents an opportunity for the Labuan Financial Services Authority (Labuan FSA) to charter the course for Labuan IBFC’s business expansion over the next five years.
He noted the roadmap is also designed to strengthen Labuan IBFC’s resilience to future challenges posed by the changing landscape of the global economy.
With the underlying theme of market sustainability, the strategic roadmap is based on the current strengths of the jurisdiction and expansion of sectors with growth potential.
The first focus is diversification into innovative business solutions by revitalising niche sectors and promoting captive structures. Global corporations from Europe and West Asia looking to expand into East Asian markets will be encouraged to establish captives in Labuan.
Labuan IBFC is currently home to 229 insurers and insurance intermediaries, with total premiums underwritten worth approximately US$2 billion as at year-end 2021. Captives have become the second largest insurance segment, with gross premiums of US$569 million, more than 60 per cent of which came from international markets.
In his speech, Aziz noted that Labuan stands out as a unique domicile owing to its protected cell company (PCC) legislation, which allows for the establishment of PCCs as a cost-effective, ‘democratised’ alternative to traditional pure captives.
Aziz added: “To keep Labuan IBFC ahead of the curve, the Centre has nurtured and promoted the development of innovative business solutions not only as a game changer to move away from traditional business offerings, but also as a means of building the Centre’s unique offerings and branding within Asia.”
The strategic roadmap acknowledges the importance of digitalisation in fostering these market innovations, noting that Labuan IBFC now has a diverse range of fintech-related offerings, from simple digital trading platforms for fiat and virtual currencies to more complex digital banking and digital tokenisation activities.
As well as captive insurance, the strategic roadmap is focused on promoting market facilitation and visibility through intra-Labuan business synergy, and enhancing the IBFC’s complementary roles to Malaysia’s financial markets through consolidated international ties with Asia.
The final key pillar of the roadmap is implementation of modern, relevant and proportionate regulations via ongoing upscaling of the prudential regulatory and legal framework in accordance with international standards.