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A Labuan insurance and insurance related company in Labuan IBFC is governed by Part VII of Financial Services & Securities Act 2010 (LFSSA), which was specially drafted in a manner designed to provide a simple and helpful operating environment.
Labuan insurance broker” means a person who is licensed to-
- arrange Labuan insurance business on behalf of prospective or existing policy owners;
- arrange Labuan reinsurance business on behalf of any insurer seeking reinsurance; or
- analyse the financial circumstances of another person and provides a plan to meet that other person’s financial needs and objectives, whether or not a fee is charged in relation thereto
- Approved activities:
- Direct insurance business: The Labuan insurance broking company may broke direct insurance business (except direct Malaysian risks) with any insurance companies irrespective of whether they are licensed under LFSSA or not.
- Life insurance: The Labuan insurance broking company may broke life insurance policy for high net worth Malaysian with life insurance companies licensed under LFSSA.
- Reinsurance business: The Labuan insurance broking company may broke reinsurance of direct Malaysian risks transacted in Malaysian Ringgit.
- Restriction business activities:
The Labuan insurance broking company 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.
“High net worth individuals” in the above context are defined as persons who spend an equivalent of not less than RM20,000 in any foreign currency on single premium policy or an equivalent of not less than RM15,000 per person in any foreign currency on annual premium policy.
- A minimum paid-up capital of RM300,000 its equivalent in any foreign currency unimpaired by losses or a net working fund of at least RM300,000. The working capital is to be maintained in an account with a licensed bank in Labuan.
- Must have a professional indemnity insurance coverage of not less than RM2.5 million or its equivalent in any foreign currency or such other higher amount as may be specified and shall remain indemnified under such policy throughout its operation in Labuan IBFC.
- The person in control or director or principal officer of the Labuan insurance broking company must be a fit and proper person.
- The Labuan insurance broking company must maintain a registered office in Labuan and have at least one resident director or secretary.
- A Labuan insurance broking company can be managed by a management company licensed in Labuan instead of establishing its own office. The entire administration can therefore be handled by the insurance manager which has the facility to reduce administration costs to the minimum and relieves management of the overhead cost running an office and human resources.
- The Labuan insurance broker can establish a marketing office in Kuala Lumpur and/or Iskandar region or co-located office in Malaysia.
- All licensed Labuan insurance broker must be a member of the Labuan International Insurance Association and an annual subscription fee is payable.
- A Labuan insurance broker may establish a takaful broking window and no separate licence is required.
- A Labuan insurance broker can handle the reinsurance of domestic insurance business, including the reinsurance of domestic business transacted in Ringgit Malaysia.
- A Labuan insurance broker can choose the principal currency (other than Ringgit Malaysia) in which they will operate and maintain in the accounting records. Also, the company has the freedom to follow any recognised accounting standard or standard agreed with the Labuan Financial Services Authority (Labuan FSA). The accounts should be audited by an approved auditor in Labuan.
The company is to submit to Labuan FSA within six (6) months after the close of each financial year, four (4) copies of its audited annual balance sheet and profit and loss account.
- Labuan insurance broking company has the freedom to invest funds in manner considered appropriate by the management of the company.
- The licensed Labuan insurance broker must notify Labuan FSA of any amendments or alteration to any information furnished to Labuan FSA during the application.
- A Labuan insurance broking company is subject to the Labuan Business Activity Tax Act 1990. The Labuan company shall pay either 3% of net profits as per audited accounts OR RM20,000, upon election annually.
The Labuan insurance broking company is to undertake the following:
- It must conduct its business with due diligence and sound insurance principles, maintain adequate and proper records and books of accounts and indicate clearly its names and licence number on its letterhead, stationery and other documents;
- It must obtain approval of Labuan FSA for any change of business plan; and
- It must make known to its clients the names and domiciles of insurers whose insurance products the applicant company is “selling” or intends to “sell”.
Application for a licence to carry out Labuan insurance broking activities can be made to the Director General of Labuan FSA.
Eligible applicant for a Labuan insurance broking licence:-
- A Labuan company or a foreign Labuan company established or registered under the Labuan Companies Act 1990 (LCA);
- Any institutions licensed under the Insurance Act 1996 and Takaful Act 1984.
The applicant company is required to submit a business plan for the first three years of its operation together with other supporting documentation stated in the LFSA Application Form.
|Labuan FSA license processing fee||RM1,000 (once-off)|
|Labuan FSA annual license fee||
The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.