A recent survey commissioned by the Labuan International Business and Financial Centre (Labuan IBFC) showed that the risk management and insurance community are confident that the midshore centre has the right ingredients for businesses to establish their captive insurance companies.
Entitled ‘Attitudes towards Captive Insurance in Asia’, and conducted by the world’s leading captive trade publication, Captive Review, the survey found that close to 70% of the respondents are “very comfortable” using Labuan IBFC as their domicile choice for their captives.
In addition, respondents agreed that access to regulators and strong legal as well as regulatory provisions are found to be the main consideration of 61% of the respondents when choosing a captive domicile. The availability of local captive infrastructure is also an essential requirement for most respondents (57%).
On the back of these requirements, more than half of those surveyed also agreed that Labuan IBFC retains a favourable reputation as a domicile, with more than 30% agreeing that the midshore jurisdiction is a “strong” captive domicile.
“We are pleased to see such positive responses and this reaffirms Labuan IBFC’s position as a business-friendly yet well-regulated jurisdiction for the region’s risk management needs. Labuan IBFC, in this aspect, possesses all the right elements,” said Chairman of Labuan IBFC Inc Sdn Bhd Datuk Mohammed Azlan Hashim at the inaugural Asian Captive Conference 2017 (ACC 2017) held today in Kuala Lumpur, Malaysia.
He added: “Many might not realise, but Labuan IBFC is one of the fastest growing risk management centres in Asia. The captive insurance sector has been growing steadily over the years. As of second quarter of this year, there are 43 captives established in Labuan IBFC.”
According to him, Labuan IBFC recorded a total of an aggregated written premium value of USD348.6 million for its captive insurance sector last year and close to 75% of the total captive market contributions are from risk owners in Asia.
As the midshore centre continues to adapt and evolve its self-insurance, especially on the captive framework, Labuan IBFC Inc Chief Executive Officer Danial Mah Abdullah said that the jurisdiction is expecting to see a steady increase in the take up of captives in the region in the near future as it offers a substance-enabling location with a strong risk management eco system, manned by experienced captive managers and intermediaries.
“With the Base Erosion and Profit Shifting (BEPS) increased measures on substance by the Organisation for Economic Co-operation and Development (OECD), corporates looking for a domicile for their captives have started to seek out well-regulated jurisdictions, which works well in Labuan IBFC’s favour.
“Labuan IBFC has always conformed to the international regulatory requirements and as a substance-enabling jurisdiction, the midshore centre also offers good captive infrastructure as well as experienced captive managers and intermediaries that understand both the local regulatory requirements and the international risk environment,” Danial said.
Other key findings of the survey include:
- 75% of the respondents said that a “lack of commitment” from internal decision makers is a key factor holding back the captive utilisation in Asia while the soft insurance market and a “lack of understanding” were also cited as the reasons.
- Three-fourths of the respondents acknowledged that the captive concept is mostly known to large Asian companies while 61% think that maturing risk management culture and natural evolution of the company are the top common factors driving the Asian companies to consider setting up a captive.
- 57% of the respondents foresee that the momentum of captive insurance will continue at the current pace while 36% believe that there is a strong growth potential in the region.
The survey is aimed at finding out why the concept of captive insurance is still very nascent in Asia, despite the high take-up rates in Europe and the United States. The findings were presented during the ACC 2017, jointly organised by Labuan IBFC and Labuan International Insurance Association. The latter represents an industry body representing the insurance industry in Labuan IBFC.
Themed ‘De-Risking Asia: The Growing Role of Self-Insurance’, the ACC 2017 is aimed at enhancing the awareness of the role of self-insurance, specifically captives, in Asia. The conference also discussed various key areas in risk management including insurance technology and block chains, and the effects of BEPS and tax transparency in business.
The ACC 2017 was attended by more than 300 local and international delegates.
