Labuan IBFC Insurance Industry
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Labuan IBFC’s insurance industry continues its vibrant growth in the past few years. Comprising not just reinsurers and direct insurers, Labuan IBFC also provides unique underwriting vehicles in the form of captives. Aside from conventional (re)insurance services, Labuan IBFC also offers Islamic (re)insurance, also known as (re)takaful, for those seeking Shariah-compliant protection. Other insurance-related businesses such as Insurance brokers, underwriting managers as well as insurance managers complete the supply chain by offering the needed services within the sector. Below are insurance products available in Labuan IBFC to meet sophisticated clientele needs and expectations.

LABUAN INSURANCE BUSINESS

A Labuan insurance business is defined as an insurance business that is transacted in foreign currency and includes general, life, reinsurance, Labuan takaful and retakaful windows and captive insurance.

  • Labuan General Insurance Business A Labuan general insurance business is defined as an insurance business which is not life insurance but includes accident, medical, surgical and hospital expenses insurance.

  • Labuan Life Insurance Business A Labuan life insurance business is defined as an insurance business connected with any policy by which payment of policy monies is insured on death or on the happening of any contingency dependent on the termination or continuation of human life and includes any incidental extension of cover and reinsurance of such business.

  • Labuan Reinsurance Business A Labuan reinsurance business is defined as an insurance business whereby the reinsurer assumes a part of the liability under an original contract of insurance of another insurer or reinsurer. A Labuan reinsurer may be conducting either a general or life reinsurance business.

  • Labuan Takaful and Retakaful Windows The setting up of takaful or retakaful windows do not require a separate licence and there is also no additional licence fee involved. Applications made by applicants of existing licensees under the Labuan Islamic Financial Services and Securities Act 2010 to set up takaful or retakaful windows will be considered by Labuan Financial Services Authority (FSA).

  • Labuan Captive Business A Labuan captive business is defined as an insurance business where the insured is a related corporation or an associated corporation of the Labuan insurer or where the insured is any other person in respect of whom the Labuan insurer is authorised by the Labuan FSA to provide insurance or reinsurance.

LABUAN INSURANCE-RELATED BUSINESS

A Labuan insurance business is defined as an insurance business that is transacted in foreign currency and includes general, life, reinsurance, Labuan takaful and retakaful windows and captive insurance.

  • Labuan Insurance Broker Labuan insurance broker is defined as a person who is licensed to arrange Labuan insurance business on behalf of prospective or existing policy owners and arrange Labuan reinsurance business on behalf of any insurer seeking reinsurance. In addition, following the enactment of new legislation, a Labuan insurance broker may carry on financial planning activities. A Labuan insurance broker is prohibited from dealing with residents (except for high-net-worth individuals, reinsurance and others as defined by Labuan FSA from time to time) and broke for direct Malaysian risks.

  • Labuan Insurance Manager A Labuan insurance manager is defined as a person who is licensed to provide management or administration services related to a Labuan insurance business but does not include a Labuan underwriting manager.

  • Labuan Underwriting Manager A Labuan underwriting manager is defined as a person who is licensed to provide underwriting services, including the administration of the business, to one or more Labuan insurers.


LABUAN GENERAL TAKAFUL BUSINESS

A Labuan insurance business is defined as an insurance business that is transacted in foreign currency and includes general, life, reinsurance, Labuan takaful and retakaful windows and captive insurance.

  • Labuan Family Takaful Business A Labuan family takaful business is defined as a takaful business relating to family takaful. Family takaful means takaful for the benefit of the individual and his or her family.

  • Labuan Retakaful Business A Labuan retakaful business is defined as a business in compliance with Shariah principles whereby the Labuan retakaful operator assumes a part of the liability under an original contract of takaful of another takaful operator or retakaful operator.

Below are procedures for application for Labuan Insurance and Insurance-related activities and Operational Requirements:-


APPLICATION FOR LICENCE

Application for a licence to carry out Labuan Insurance and Insurance-related activities can be made to the Director General of Labuan FSA.

In general, the submission should include but not restricted to the following:-

  • Business plans of the proposed company.
  • Authenticated copy of the proposed Memorandum and Articles of Association of the applicant company.
  • Certified extracts of resolutions of the Board and general meeting, if any, authorizing the applicant to apply for a licence.
  • A copy of the applicant’s audited annual accounts for the preceding three years.
  • Applicant’s corporate profile, which includes:-
    • Name, place and date of establishment of the applicant;
    • Names, addresses, qualifications and experience of the directors and officers responsible for the overall management of the affairs of the applicant; and
    • Nameandaddressofeachmemberwhoholds10%ormoreofthevotingsharesoftheapplicant.
  • Declaration by the applicant on probity of its directors and officers who are responsible for the management of the Labuan insurance entity.


CAPITALISATION / WORKING FUND AND SOLVENCY REQUIREMENTS

Type of Licence Minimum Paid-up capital/Net Working Funds Minimum Solvency Margin
Single Owner / group association & Multiple Owner Captive (including Islamic) RM0.3 million
  • RM300,000 paid up capital unimpaired by losses; and/or
  • RM300,000 or 20% of net premium income of the preceding year or 3% of the actuarial valuation of liabilities for life insurance, whichever is greater.
Rent-A-Captive / Cell Captive or Similar Vehicle (including Islamic) RM0.5 million
  • RM500,000 paid up capital unimpaired by losses; and
  • RM500,000 or 20% of net premium income of the preceding year or 3% of the actuarial valuation of liabilities for life insurance, whichever is greater.
General / Life (including general/ family takaful operator) RM7.5 million
  • RM7.5 million paid up capital unimpaired by losses; and
  • General Insurer/Takaful Operator RM7.5 million or 20% of net premium/contribution income of the preceding year, whichever is greater.

    Life Insurer/Family Takaful Operator RM7.5 million or 3% of the latest actuarial valuation of life insurance/ family takaful liabilities, whichever is greater.
Composite – General/ Life (including general/ family Islamic composite and retakaful operator) RM10.0 million
  • RM10 million paid up capital unimpaired by losses; and
  • RM7.5 million or aggregate of 20% of net premium income of the preceding year and 3% of the latest actuarial valuation of life insurance liabilities, whichever is greater.
Reinsurance RM10.0 million
  • RM10 million paid up capital unimpaired by losses; and
  • General Insurer/Takaful Operator RM10 million or 20% of net premium/contribution income of the preceding year, whichever is greater.

    Life Insurer/Family Takaful Operator RM10 million or 3% of the latest actuarial valuation of life insurance/ family takaful liabilities, whichever is greater.
Underwriting Manager, Insurance Manager and Broker (including takaful underwriting manager, takaful manager and takaful broker) RM0.3 million Surplus of assets over liabilities of RM300,000 unimpaired by losses.


MAINTAINING OF FUNDS IN LABUAN
  • The applicant must submit banker’s certificate as evidence that the working funds are maintained in the account of the applicant with a bank in Labuan;
  • The minimum paid up capital or working fund shall be maintained throughout the business operation in any foreign currency denomination equivalent to prescribed amount in Ringgit Malaysia.
  • Labuan FSA may, based on its supervisory assessment on case-to-case basis, impose higher capital requirements that commensurate with the applicant’s business activities and risk exposures.

MANAGEMENT
  • To establish management office in Labuan or has appointed or will appoint a licensed Labuan insurance / underwriting manager in Labuan;
  • Applicant for broker’s licence can establish its management in Labuan or appoint an insurance manager;
  • The applicant may set up a marketing office in Kuala Lumpur to facilitate meetings and business dealing with clients. The number of staff in the marketing office must balance should commensurate with the number of staff in the Management Office in Labuan (not applicable to captive and insurance broker); and
  • The person in control, director and principal officer must be a fit and proper person.

CAPITALISATION / WORKING FUND AND SOLVENCY REQUIREMENTS

Type of Licence Licence Fee (RM)
Captive Insurer 10,000
Master Rent-A-Captive 13,000
Subsidiart Rent-A-Captive 3,000
General Insurer/ Reinsurer 50,000
Life Insurer/ Reinsurer 50,000
Composite Insurer 100,000
Underwriting Manager 20,000
Insurance Manager 20,000
Broker 20,000


REPORTING REQUIREMENT
  • Labuan insurers are required to submit within six (6) months after close of each financial year-end, four (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 Labuan insurer established as a branch in Labuan is also required to submit the latest audited annual balance sheet of its parent company;
  • In the case of other Labuan insurance-related entities, they are only required to submit four (4) copies each of their audited annual balance sheet and profit and loss account; and
  • Provide statistic and information required in relation to prudential regulation and business operation to Labuan FSA from time to time.


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