The use of self-insurance techniques through captives and protected cell companies is expected to expand in Asia, but education for potential corporate risk transfer sponsors needs to increase, according to the Labuan International Business and Financial Centre (Labuan IBFC).
Farah Jaafar-Crossby, CEO of Labuan IBFC Inc., explained, “The self-insurance sector is a niche market and we believe that there is a huge potential for structures such as captives and protected cell companies as a self-insurance tool, to grow in this region, especially with the ever-evolving risk landscape in the region.
“The captive insurance concept is nascent in Asia but unknown to many in the region, the concept has been used as a risk management tool for decades, starting in the 1950s in the United States.”
Jaafar-Crossby stressed the need for educational efforts to continue, to help build an understanding of the risk management and risk transfer options available among Asian corporations.
She also explained that self-insurance is not just for big corporations, that it can be a suitable solution for medium-sized enterprises, or even groups with shared interest. Group captives have been popular in other parts of the world, where there are advantages and the pooling of risk can result in cost-efficiencies for participants.
Explaining the wide range of options available, she said, “Captive insurance is a unique concept and it can be structured according to the needs of the business or indeed the idiosyncratic demands of the risk being mitigated. Indeed, Labuan IBFC offers a wide range of self-insurance solutions include group or association captives, which much like the protected cell companies, is unique to Labuan IBFC.”
“For instance, tech startups that often have unique business models and risk profiles – with very much of their competitive edge stemming from concepts and technologies that are new to the market – their unique risks can be tailored underwritten by setting up a group or association captive and this could be used alongside with the traditional insurance approach,” she continued.
With reinsurance and risk transfer set to grow dramatically in Asia, especially to cover the evident protection gaps that exist in the region, captives and self-insurance will have an important role to play in helping corporations and smaller enterprises to become better at managing their risk in a cost-effective way.
The Labuan IBFC is jointly holding the second year of the Asian Captive Conference on August 1st and 2nd 2018 in Kuala Lumpur, Malaysia.
Source: https://www.reinsurancene.ws/asia-ripe-for-self-insurance-sector-growth/
