Application Requirements

An applicant is required to submit the prescribed forms relevant to the type of licence being applied. In general, the submission should include, but is not restricted to the following:

• Business plan of the proposed company
• Authenticated copy of the proposed Memorandum of Association and Articles of Association of the applicant
• Certified extracts of  the resolutions of the Board and the general meeting, if any, authorising the applicant to apply for a licence
• Copy of the applicant's audited annual accounts for three preceding years
• The applicant must submit a banker's certificate as evidence that working funds are maintained in the account of the applicant with a bank in Labuan
• Applicant's corporate profile, which includes:
  a)  The name, place and date of establishment of the applicant
  b)  The names, addresses, qualifications and experience of the directors and officer responsible for the overall management of the affairs of the applicant
  c)  The name and  address of each member who holds  10% or more of the voting shares of the applicant
• Declaration by the applicant on the probity of its directors and officers responsible for the management of the Labuan insurance and insurance-related entity.

Operational Requirements

The table below details operational requirements for each category of insurance license holder.

Type of licence	Management office in Labuan?	Marketing Office?	Remarks
Insurer Reinsurer Insurance Manager Underwriting Manager	Optional	√	Either - Establish its management office in Labuan; or appoint a licensed underwriting manager or insurance manager in Labuan. Establishment of marketing office is subject to having a management office in Labuan.
Captive	Optional	√	Either - Establish its management office in Labuan; or appoint a licensed underwriting manager in Labuan. If the Captive intends to set up a marketing office, it is excluded from also having a management office in Labuan.
Insurance Broker	Optional	√	Either - Establish its management office in Labuan; or appoint a licensed insurance manager in Labuan. If an Insurance Broker intends to set up a marketing office, it is excluded from also having a management office in Labuan

All Labuan insurance entities are required to carry on business in any currency other than the Malaysian Ringgit except as permitted by the relevant authorities and it must ensure that the controller, director and Chief Executive Officer are fit and proper persons.

Should the applicant conduct takaful and/or retakaful activities, it may open operational offices anywhere in Malaysia, and subject to the prior approval of Labuan FSA, it may be exempted from also maintaining any operational office in Labuan.

Capitalisation/Working Fund and Solvency Requirements

Please refer to the table below, for capital requirements applicable to each category of insurance license.

Type of Licence	Minimum Paid-up Capital/Net Working Funds or its equivalent in any foreign currency	Minimum Solvency Margin
Single Owner/Multiple Owner Captive	MYR0.3 million	MYR0.3 million
Rent-A-Captive/Cell Captive or Similar Vehicle	MYR0.5 million	MYR0.5 million or 20% of net premium income of the preceding year or 3% of the actuarial valuation of liabilities for life insurance, whichever greater.
General	MYR7.5 million	MYR7.5 million or 20% of net premium income of the preceding year, whichever greater.
Life	MYR7.5 million	MYR7.5 million or 3% of the latest actuarial valuation of liabilities, whichever greater.
Reinsurance	MYR10.0 million	Similar to that of direct insurance business but the minimum requirement is MYR10.0 million instead of MYR7.5 million.
Underwriting Manager, Insurance Manager and Broker	MYR0.3 million	Not applicable

In addition, the applicant must submit a bankers certificate evidencing that its working funds are maintained in its account in a bank in Labuan.  However, the applicant may apply to provide less than 100% of the working fund required, subject to the provision of adequate guarantee acceptable to Labuan FSA for the difference in amount required.

Reporting Requirements

• Labuan insurers are required to submit within six months after close of each financial year-end, 4 copies each of their audited annual balance sheet, profit and loss account, revenue account and in the case of life insurance business, an actuarial valuation report
• A foreign Labuan insurer established as a branch in Labuan is also required to also 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 4 copies  each of their audited annual balance sheet and profit and loss account, and
• Provide statistics and information required in relation to prudential regulation and business operation to Labuan FSA from time to time.

Annual Fee

All licensees are required to pay to Labuan FSA annual license fees described below, on or before 15 January of each year:

Type of License	License Fee
Captive Insurer	MYR 10,000
Master Rent-A-Captive	MYR 13,000
Subsidiary Rent-A-Captive	MYR   3,000
General Insurer/Life Insurer/Reinsurer	MYR 30,000
Underwriting Manager	MYR 10,000
Insurance Manager	MYR 10,000
Insurance Broker	MYR 10,000

In addition, the applicant must submit a banker’s certificate evidencing that its working funds are maintained in its account in a bank in Labuan.  However, the applicant may apply to provide less than 100% of the working fund required, subject to the provision of adequate guarantee acceptable to Labuan FSA for the difference in amount required.

Please click here for guidelines for Protected Cell Company structure.  

In 2010, the insurance industry in Labuan continued to dominate the business activities of Labuan IBFC. This was reflected by the high growth in premiums and entrance of international reinsurers and underwriting managers including Lloyd's syndicates and a state-owned reinsurer from India. In addition, a Tunisia-based international reinsurer conducting retakaful business redomiciled its entire head office operations to Labuan. The profile of Labuan insurance industry was also enhanced with the assignment of "A (Excellent)" rating to a home-grown captive insurer by an international credit rating agency.

The continued interest from international institutions to establish insurance and insurance-related companies in Labuan has led to the rise in the number of approved entities to a total of 169 (2009: 149) as at end-2010. During the year under review, 22 new licences were approved, comprising nine insurance brokers, seven underwriting managers, three reinsurers, two captive insurers and one general insurer. However, two captive insurers surrendered their licences.

In terms of country of origin, 74 insurance and insurance-related licensees originated from the Asia Pacific region, comprising Malaysia (40), Japan (9), Singapore (8), Indonesia (5), Hong Kong (4), Australia (4), India (2), Korea (1) and Taiwan (1). The remaining licensees were from Europe (56), the Americas and Carribean (28) and the Middle East and Africa (11).

As at end-2010, the total assets of the insurance industry increased by 26.1% to USD3.1 billion (2009: USD2.4 billion). Fixed deposits and money market instruments remained the highest asset type of the industry, amounting to USD1.2 billion (37.5% of the total assets). Other assets were amounts due from ceding/related companies (19.4%), cash and bank balances (10.3%), investments (7.7%), fixed assets (0.6%) and others (24.5%).

WHAT IS LABUAN INSURANCE?

Labuan insurance is insurance business that is not domestic in nature, including Labuan captive insurance business, and is transacted in foreign currency. Labuan insurance business is strict in terms of secrecy and confidentiality in relation to the disclosure of the affairs of the policyholder.

WHAT TYPES OF INSURANCE ACTIVITIES ARE BEING PROMOTED BY LABUAN IBFC?

Direct insurance (life and general), reinsurance and insurance-related activities such as insurance underwriting, insurance management and insurance broking. Other insurance activities that are being promoted in Labuan IBFC are Alternative Risk Transfer arrangement, investment-linked life insurance products, bancassurance, retirement and pension schemes, marine and hull insurance as well as Islamic insurance (Takaful and reTakaful). Captive insurance and their related activities including the protected cell company structure are also being promoted.

WHAT ARE THE PROCEDURES AND REQUIREMENTS TO SETTING UP AN INSURANCE ENTITY IN LABUAN IBFC?

Applications for licences must be submitted to the Minister of Finance through Labuan FSA. An applicant is eligible to apply for a licence to conduct Labuan insurance business and insurance-related activities in Labuan IBFC if it meets the following criteria:

• It is a well-established insurer with international standing
• Has a good financial performance track record, at least in the three years preceding the application
• Has the necessary expertise (management competency) and staffed with appropriate and adequate personnel
• Has no adverse report from the respective home regulatory authorities or announcement in financial journals, newspaper or any other reliable sources
• And has a good business plan

The applicant may either incorporate a Labuan insurance company or register a foreign Labuan company in order to establish its operation in Labuan. The applicant shall engage the services of a Trust company in Labuan to incorporate/register such a company.

WHAT ANNUAL FEES ARE IMPOSED ON INSURANCE ENTITIES IN LABUAN IBFC?

The annual license fee is MYR30,000 for general or life insurer, MYR60,000 for composite insurer and MYR10,000 for a captive, insurance manager, underwriting manager and insurance broker. For master rent-a-captives and subsidiary rent-a-captives the annual license fees are MYR13,000 and MYR3,000 respectively.

WHAT BUSINESS INCENTIVES ARE GIVEN TO LABUAN INSURANCE BUSINESSES IN LABUAN IBFC?

Labuan reinsurers are given the "right of second refusal" for Malaysian reinsurance business before being ceded abroad, whilst general insurers are allowed to underwrite selected direct Malaysian risks under the Malaysian Large and Specialised Risk Scheme and the Insurance Act 1996 (Exemption Order) of 1 April 2009. Labuan life insurers are allowed to market their life policies including investment-linked insurance products to high net-worth Malaysian individuals.

Labuan insurance brokers are allowed to place insurance business with any foreign insurers irrespective of whether the latter are licensed under the LFSSA or not. They are also permitted to broke life insurance policies with Malaysian citizens provided their activities do not contravene the Capital Market and Services Act 2007 (CMSA) and arrange reinsurance of Malaysian risks.

For captive insurance business, large Malaysian corporations are able to obtain permission to set up captives in Labuan to insure their large and selected risks, although in some cases, a domestic fronting company will be required.

As a way to expand their distribution channels, Labuan life insurers are also allowed to market their products through Labuan banks.

WHAT ARE THE REGULATORY REQUIREMENTS FOR SELLING A UNIT-LIKE LIFE INSURANCE PRODUCT TO RESIDENTS OF MALAYSIA?

A life insurer that is not licensed in Malaysia, whether under the LFSSA or the Domestic Insurance Act 1996, is prohibited from selling its life insurance products directly to Malaysians as well as to expatriates living in Malaysia. Nevertheless, a foreign company is allowed to sell its products to expatriates in Malaysia provided they are sold through a Labuan insurance broker licensed under the LFSSA. If a foreign company intends to sell its products to high net-worth Malaysians, the company must first be licensed under the LFSSA.