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Labuan: Law of Offshore

Insurance Law

The Labuan Financial Services and Securities Act 2010, which replaced the Offshore Insurance Act 1990 (OIA) governs, the licensing and regulation of offshore insurance and offshore insurance-related activities in the Labuan IOFC.

Labuan insurance business means insurance business that is transacted in foreign currency and includes life, general, reinsurance and captive insurance but does not include domestic insurance business. Labuan insurance business may carry on reinsurance of domestic insurance business, in Malaysian currency and such other business as specified by Labuan FSA.

The application submitted by the applicant for a licence to carry on offshore insurance business should contain the following information:

  • the type of offshore insurance business the applicant proposes to carry out under the licence;
  • business plans of the proposed company;
  • authenticated copy of the proposed Memorandum of Association and Article of Association of the applicant company;
  • certified extracts of the resolutions of the Board and the general meeting, if any, authorising the applicant to apply for a licence;
  • certified copy of the certificate of incorporation or registration;
    • the applicant may submit evidence of incorporation after receiving the LOFSA's approval. However, the licence will be issued only upon sighting the certificate of incorporation.
  • a copy of the applicant's audited annual accounts for the preceding three years;
  • applicant's corporate profile, which includes:
    • the name, place and date of establishment of the applicant;
    • the names, addresses, qualifications and experience of the directors and officers responsible for the overall management of the affairs of the applicant; and
    • the name and address of each member who holds 10% or more of the voting shares of the applicant.
  • declaration by the applicant on probity of its directors and officers who are responsible for the management of the offshore insurer.

The requirements were as follows at the time of writing:

Type of Licence
Min. Paid-Up Capital
Solvency Requirement
Captive
RM 0.3m
RM 0.3m
General
RM 7.5m
RM 7.5m or 20% of premium income
Life
RM 7.5m
RM 7.5m or 3% of liabilities
Composite
RM 7.5m
RM 7.5m or the sum of 20% of general premiums and 3% of life liabilities
Insurance
RM 10m
RM 10m

The applicant must submit a banker's certificate as evidence that the working funds are maintained in the account of the applicant with a bank in Labuan; and may apply for flexibility to pay up less than 100% of the working funds required, subject to the provision of adequate guarantee, acceptable to LOFSA for the difference in amount.

The applicant must establish its management in Labuan with at least one director resident in Labuan or has appointed or will appoint a licensed offshore underwriting manager in Labuan; may set up a marketing office in Kuala Lumpur to facilitate meetings and business dealing with clients. The number of staff at the marketing office should not exceed four, comprising of two officers at a junior level, a secretary and a driver; and the controller, director and chief executive officer must be a fit and proper person.

All licensees are required to pay to LOFSA annual licence fees on or before January 15 of each year. The levels at the time of writing were:

  • General/life insurer : RM 30,000
  • Composite insurer : RM 60,000
  • Captive insurer : RM 10,000
  • Master-rent-a-captive and subsidiary rent-a-captive RM13,000 and RM3,000 each.

Offshore insurers are required to submit within six months after close of each financial year-end:

  • 4 copies each of their audited annual balance sheet, profit and loss account, revenue account and, in the case of life insurance business, also an actuarial valuation report;
  • a foreign offshore insurers established as a branch in Labuan is also required to submit the latest audited annual balance sheet of its parent company; and in the case of other insurance-related entities, they are only required to submit 4 copies each of their audited annual balance sheet and profit and loss account.

Offshore insurance managers and offshore underwriting managers are required to submit within 30 days from the close of a financial year, a list of all offshore insurers for whom such licensed offshore insurance managers provide administration services or such licensed offshore underwriting managers provide underwriting services.

 

 

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