The insurance industry in the Labuan International Business and Financial Centre (LIBFC) showed higher profitability in 2019, according to the Labuan Financial Services Authority (Labuan FSA) in its Market Report 2019 released yesterday.
The industry’s profits grew by 43.7% to $190.5m mainly due to improved underwriting performance and better cost management. Profits for 2018 reached MYR132.6m.
Total gross premiums amounted to $1.5bn last year, with 89% of the total premiums originating from the Asian market. In comparison, GWP posted in 2018 stood at $1.7bn.
Meanwhile, Labuan IBFC is the second largest captive market in Asia with 52 captives operating in the Centre. Increasingly Asian companies are embracing the use of captive as alternative risk management. Labuan IBFC will continue to tap this potential with suitable captive structures supported by a strong pool of intermediaries and insurers.
Overall, in 2019, the LIBFC remained resilient in the face of challenges in the global market. 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.
In 2019, one of the watershed events was the rollout of the new Labuan IBFC tax framework, which has in many ways changed the Labuan IBFC’s business landscape. The salient features of the new framework included removal of the MYR20,000 ($4,600) tax option, removal of ring-fencing elements and the introduction of substance requirements. The substance requirements will enhance Labuan IBFC’s market players’ contributions towards the island’s economic growth by increasing their business presence.
Among other developments, Labuan IBFC continued to attract digital financial services (DFS) setups with its facilitative regulation, with 28 new licences approved last year. A total of 34 DFS provide digital-based services including InsurTech, payment services, and digital exchange in Labuan IBFC.
Considering the uncertainties looming on the international business scene as a result of the COVID-19 pandemic, Labuan FSA is closely monitoring the situation and has taken pre-emptive measures to maintain the stability and sustainability of the industry. A set of regulatory relief measures which facilitated administrative flexibility and financial relief was given to Labuan entities to cushion the impact and minimise disruption to business operations arising from the pandemic.
30th anniversary and beyond
Labuan IBFC as a jurisdiction is celebrating the 30th year of its establishment this year. Mr Danial Mah Abdullah (see picture), director general of Labuan FSA, commenting on the progress made since 1990, said, “Labuan IBFC has morphed over the years from a traditional plain vanilla offshore centre to one that has a lot more business value propositions for the Asian region/
“And this has been done through rebranding exercises, amendments to laws and regulations, facilitative business guidelines, and introduction of new products and services. But the real key success is the presence of a wide spectrum of many service providers and financial institutions to conduct the businesses and serve clients, regionally or globally. We can set the rules, regulations etc, but we need the institutions to make Labuan a business centre.
Looking ahead, he said, “We are optimistic about the growth prospects of Labuan IBFC for the next 30 years. Labuan IBFC has a good spectrum of financial infrastructure or service providers, and we have been and are focusing on an intermediating role for a very large market i.e. the Asian market, that we believe will continue to lead global economic growth in the future.
“Just like for other regional economies, Labuan IBFC plays an intermediation role in facilitating trade, investments, credit and financial capacity flows into Malaysia. And this invariably contributed to the economic growth of Malaysia. At the same time, Labuan has been the conduit for the outward investments of Malaysian conglomerates. All these will also help spur economic growth of Labuan island itself. Labuan is part of Malaysia, so we will continue to ensure the centre contributes positively to the economic growth of Malaysia.
“Moving ahead, we will remain focused on wholesale financial products and services, risk management solutions, wealth management, and company administration and management services. We are also riding on the trend of digital business. The intake of players in this business in Labuan IBFC has been strong and the momentum will continue.”