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Labuan: Offshore Business Sectors

Insurance

The Labuan Financial Services and Securities Act 2010 provides the legislation for licensing and regulating persons carrying on offshore insurance businesses such as captive insurance, direct insurance, reinsurance and other insurance related activities such as underwriting, insurance management and insurance broking.

The offshore insurance business covers all type of insurance business other than domestic direct insurance except for the insurance of high net worth individuals.

The Government is determined to boost the captive insurance business. A legislative amendment in April 1997 was made to lower the capital requirement for the setting up of captive insurance companies in Labuan from RM1m to RM300,000. Steps were also taken to allow domestic insurance brokers to establish offices in Labuan.

Offshore insurance business may be carried on in Labuan by an offshore company, a foreign offshore company and a branch of a licensed Malaysian insurer. The application for an offshore insurance licence is vetted by LOFSA and approved by the Minister of Finance.

An annual licence fee is payable on or before 15 January as follows:

  • General insurance RM 30,000;
  • Life insurance RM 30,000;
  • Life and general RM 60,000;
  • Captive insurance RM 10,000;
  • Master-rent-a-captive and subsidiary rent-a-captive RM13,000 and RM3,000 each.

There are minimum working funds and solvency requirements for offshore insurance business in Labuan. Rent-a-captives have been introduced into Labuan.

In July 2009, it emerged that the Labuan International Business and Financial Centre (IBFC) was developing guidelines on shariah-compliant insurance, and it is now possible to set up takaful or retakaful windows under the Labuan Islamic Financial Services and Securities Act 2010.

The setting up of takaful or retakaful windows do not require a separate license and there is also no additional license fee involved. Application made under the Labuan Islamic Financial Services and Securities Act 2010 to set up takaful windows or retakaful windows will be considered from Labuan FSA by an applicant of existing licensees under the Labuan Financial Services and Securities Act 2010 and is based on the following submissions:

  • Certified true copy (CTC) of Board Resolution pertaining to the proposed establishment of takaful or retakaful window;
  • Business plan;
  • 3-years financial projections for the takaful or retakaful activities; and
  • Information on its own internal Shariah Advisory Board.

Protected cell companies may also now be formed in Labuan. A PCC is structured with core capital, cellular capital, cellular assets and liabilities, and core assets and liabilities. The various businesses within each 'cell' are ring-fenced and insolvency of one cell should not affect the solvency of the whole entity or the performance of the other cells. For any contract the PCC discloses which cell is contracting or whether it is a 'core' contract. 'Cellular' or 'non-cellular' shares may be issued, depending on whether they represent an equity interest in a specific business cell or in the core assets. The entity keeps accounts showing the corresponding patrimonial divisions among the segregated cells and the core cell.

Marine and aviation risks, including goods in international transit, can now be handled by Labuan-based insurance companies, whereas before April 1, 2009, the risks had to be insured through a local onshore insurance company.

 

 

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