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.