Datuk Iskandar Mohd Nuli, executive chairman cum CEO of Labuan IBFC Incorporated Sdn Bhd, explains how Labuan’s international business and financial centre provides a captive-centric ecosystem
Labuan International Business and Financial Centre (Labuan IBFC) was established by the Malaysian government in 1990. The financial centre is regulated by a single authority, Labuan Financial Services Authority (Labuan FSA), a statutory body of Malaysia’s Ministry of Finance. Labuan IBFC Incorporated Sdn Bhd (Labuan IBFC Inc), a wholly-owned subsidiary of Labuan FSA, serves as the financial centre’s official promotional and marketing agency.
Labuan IBFC adheres to international standards and best practices with access to Malaysia’s double taxation agreement with over 70 countries. It offers fiscal neutrality and certainty while adhering to guidelines set by international bodies such as the Organisation for Economic Co-operation and Development, Asia/Pacific Group on Money Laundering and Financial Action Task Force. The financial centre is now home to licensed institutions and international companies from 125 countries.
Labuan IBFC caters to global investors and businesses by providing a wide range of business structures and investment solutions to facilitate cross-border transactions and international business dealings. These include banking, insurance, wealth management, business related to the capital markets, leasing, money broking and commodity trading, with the suite of solutions available in conventional, Shariah-compliant and digital forms.
The Labuan IBFC Strategic Roadmap 2022 – 2026
The Labuan IBFC Strategic Roadmap 2022 – 2026 positions the financial centre as the region’s captive hub. Central to this is the financial centre’s comprehensive legal framework, making it an ideal hub for the intermediation of risk.
Labuan IBFC also ensures that regulatory requirements are continuously reviewed and met, with the International Association of Insurance Supervisors’ core principles and captive guidance observed to preserve a business-friendly market environment.
Labuan IBFC provides a cost-efficient operating base with a wide range of innovative captive solutions, such as protected cell companies, master-rent-a-captive, mutual captives and association captives. This range of solutions enables businesses that establish their operations in the financial centre maximum flexibility as they develop and mature over their individual lifecycles, which facilitates sustained global interest.
This has resulted in the formation of Labuan-based cell captives for global businesses, including several European- and Australian-headquartered businesses. The financial centre is also home to the world’s first Shariah-compliant captive.
Labuan IBFC strongly believes in a collaborative agenda as Asia’s premier international financial hub. Labuan FSA and Labuan IBFC’s partnership with Labuan International Insurance Association (LIIA) has been key to the growth and development of the financial centre’s reinsurance industry, specifically the captive industry. LIIA is the largest industry grouping in Labuan IBFC with more than 200 license holders, all of which operate in the insurance, reinsurance and self-insurance space, creating a robust ecosystem for the captive sector to thrive.
Amid a challenging environment
Against the backdrop of a challenging economic environment, which has contributed to a hard market, the Labuan captive sector continued to gain momentum with five new players and total gross premiums registering at US $571 million in 2022. More than 62 per cent of the premiums were generated from the international insurance business.
Labuan IBFC is currently home to 67 captives, which include the subsidiaries of well-known global companies. This underscores Labuan IBFC’s prominence as the captive market of choice regionally and globally.
True to its positioning as a regional captive hub, Labuan IBFC and LIIA will be jointly organising the region’s flagship captive event, the Asian Captive Conference (ACC), on 7 September 2023 at the Sime Darby Convention Centre, Kuala Lumpur, Malaysia.
This will provide attendees with a golden opportunity to meet key stakeholders in the captive space, which will encompass representatives from regulatory bodies to captive owners, as well as service providers that specialise in end-to-end services pertaining to setting up a captive.
ACC 2023
The ACC 2023 is themed: ‘The Connected Risk Journey in Self-Insurance’. Given that we are slowly but surely moving towards a digital and borderless business world, captive insurance is poised to cater to this changing landscape, by providing tailor-made insurance policies while having direct access to the global wholesale reinsurance market to meet non-conventional risks. This addresses long-term risk, connecting businesses to collectively provide risk management solutions for a more robust risk environment.
The conference will open with a presentation and discussion on how IFRS17 will impact self-insurance. This will be followed by a dialogue on how captives can be used to manage emerging risks in cyber and employee benefits. The seminar will also feature breakaway sessions for those seeking to establish captives and for those pursuing further benefits from their already established captives. The use of captives to meet the ESG agenda, facilitated by parametric insurance, will bookend the conference.
Looking at 2024 and beyond, Labuan IBFC’s comprehensive digital services and offerings have resulted in an influx of digital financial services providers interested in and entering the region. Among these are insurtech providers that have revolutionised the conventional forms of financial offerings in the financial centre, including the possibility of setting up purely digital captives.
The Labuan captive space has much to offer despite the current challenging financial landscape domestically and regionally. Labuan IBFC is poised to further strengthen its position as a leading captive centre.
