IBFC To Maintain Strong Growth Momentum In Captive Insurance Sector

KUALA LUMPUR: The Labuan International Business and Financial Centre (Labuan IBFC) hopes to maintain the growth of its earned premiums for captive insurance business at 18.8% this year, supported by the premiums contributed by the local giant companies.

Chief executive officer (CEO) Danial Mah Abdullah said last year, the financial centre’s earned premiums for captive insurance business rose 18.8% to US$252mil (RM1.09bil) due to the higher retention for all sectors, including the fire, marine, engineering and motor sectors.


“Currently, local giant companies such as Petroliam Nasional Bhd (Petronas), Sime Darby Bhd, AirAsia Bhd and Genting Bhd had set up their captives in Labuan.

“With the premium pass through their captives, we are confident that the earned premium contributed by them would be quite significant,” he told a media briefing entitled “Understanding Self-Insurance 101: The Ins and Outs of Captives” in Kuala Lumpur on Tuesday.

A captive insurer is a wholly-owned insurance company that insures the assets, liabilities and other risks of its parent company.

Usually, it is located in a jurisdiction where taxation, solvency and reporting requirements are less onerous.

Mah said thus far, Labuan IBFC had registered 41 captives, of which 39 recorded gross written premiums of US$348.6mil by end of last year.

“Of the 39 captives, 46.3% are local companies, about 10 from Japan, and several others from countries such as Singapore, Bermuda and Sri Lanka,” he said.

He revealed that the financial centre was still approaching several companies, including those from Thailand, the Philippines and Australia to establish their captives in Labuan.

“The Asian market for captive is relatively unexplored and the potential for growth is immense, with the penetration level of only 2.3% out of the total number of 6,939 captives established worldwide in 2016,” he said.

Meanwhile, Energas Insurance (L) Ltd, the sole captive insurer of Petronas, has enabled its parent company to save about 25% of insurance premium cost annually since its establishment in March 2005.

Energas CEO/director Raziyah Yahya said between mid 90s and 2005, Petronas had forked out about RM1bil annually for insurance premium to other conventional insurance companies.

“However, with the establishment of the captive in Labuan, the costs saved every five years is equivalent to the premium that we could spend annually,” she said.

Raziyah disclosed that Petronas spent US$10.5mil to set up the captive in 2005 as it was involved in high-risk business.

The minimum paid-up capital for a Labuan captive is RM300,000 for a pure captive or RM500,000 for an association captive or protected cell structure, with a 20% margin of solvency required, and where appropriate, a parental guarantee may be required by the regulator.