The Labuan Financial Services Authority (FSA) has revealed that its insurance industry showed “modest top-line growth but higher profitability performance” last year, according to its Labuan International Business and Financial Centre (IBFC) market performance report for 2019.
The report revealed that total gross premiums were transacted at $1.5 billion with 89 percent of the total premiums originating from the Asian market.
The industry’s profitability grew by 43.7 percent to $190.5 million, which the Labuan IBFC said was mainly due to improved underwriting performance and better cost management.
Labuan IBFC is the second-largest captive market in Asia, after first being established in 1994.
At the end of 2019, Labuan had 52 captives operating after licensing three new captives and having one closure.
The report also showed that Asian companies are embracing the use of captive as alternative risk management.
Labuan IBFC said it will continue to tap on this potential with suitable captive structures supported by a strong pool of intermediaries and insurers.
Overall in Labuan, the report noted that the IBFC “remained resilient in the face of challenges in the global market”.
It said: “The centre maintained its growth in key business sectors and witnessed a surge in innovative business ventures - in tandem with Labuan IBFC’s progressive shift towards more digital-based financial business.”
While 2019 had been a year of growth for Labuan IBFC, it was noted that the start of 2020 had been challenging as global markets were impacted by the COVID-19 pandemic and distressed oil prices.
The report said: “Considering the uncertainties looming in the international business scene, Labuan FSA has been closely monitoring the situation and taken pre-emptive measures to maintain stability and sustainability of the industry.”
“A set of regulatory reliefs which provided administrative flexibilities and financial reliefs was given to Labuan entities to cushion the impact and minimise disruption to business operations arising from the COVID-19 outbreak.”
The Labuan FSA said that it remains optimistic that the centre would continue to grow in strength and expand its regional prominence.
It explained that this is made possible by industry players’ business agility coupled with robust capabilities and capacities that allow them to realise their strategies while at the same time adapt to new business norms.
In a recent interview with Captive Insurance Times, Stuart Herbert of Marsh Management Singapore said: “Last year proved to be an interesting year for Labuan captives; there were several formations but this was unfortunately offset by a few closures as well.”
Herbert added: “We are seeing growth for Labuan coming from Malaysia and also Japan with the last six captives being a 50/50 split from these locations.”