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KUALA LUMPUR: The captive insurance market via the Labuan financial centre is expected to expand sharply next year as more corporations look to the region to expand their range of insurance coverage.
International Business and Financial Centre Malaysia (IBFC) chief executive officer David Kinloch said next year, IBFC is likely to attract several large European and Asian corporations involved in the banking and finance, heavy manufacturing and electrical and electronic sector.
"Labuan can be the automatic destination for captive insurance as the region becomes more sophisticated in risk management and its insurance buy," Kinloch told a media briefing on the sidelines of the two-day First Asian Captives Conference yesterday.
To date, there are 35 captives but Kinloch felt that there is a big potential as Labuan has been drawing business back from other jurisdictions both in wealth management, banking and insurance.
Captive insurance is a long-term business which can take companies about three years to conduct feasibility and secure approvals. Additionally, there are about 15 jurisdictions to pick from, of which Labuan is one.
"We have been pitching hard over the last three years and expect our efforts to bear fruit in 2012," he said.
The international financial market has been changing rapidly and this has resulted in the captive insurance market to become regionalised as seen in the case of Bermuda, for instance. Bermuda is strong on the US market but has been losing its "appeal" to places like the British Virgin Island and Luxembourg to meet the demand of the European insurance captive market.
Closer home, the Far East is still at the infancy stage, providing a choice between Singapore and Labuan.
Kinloch admitted that in the past Singapore had had an advantage, having been on the captive insurance scene since the 1980s but Labuan has been gaining in its appeal with the legislation and structures put in as well as the cost advantages which are in place.
"No longer a sleepy hollow, Labuan can do a lot of thing which cannot be done in the case of Singapore or Hong Kong such as civil law trust (partnerships)."
The financial centre is now widely recognised as a hidden gem, thanks to Malaysia's place in the Islamic finance arena, its 79 double taxation agreements which is one of the highest, and its transparent jurisdiction.
"We're seeing an influx of private and corporate wealth from other parts of the world. For the first time, I say, we are taking business away from competitors in Guernsey, Panama, Mauritius, Seychelles and Singapore," he said.
More than 10 major Malaysian-listed companies have one or more captives in Labuan, including plantation conglomerate Sime Darby Bhd and national oil corporation Petronas.
As at 2010, there are 169 insurance licences in Labuan captive insurance market, with total assets to the tune of US$3.07 billion (RM9.58 billion) and total gross premiums totalling US$1.2 billion (RM3.74 billion).
"We can target 100 such large companies which have the potential of setting up captive insurance in Labuan but have overlooked it in the past. But more companies will turn to Labuan as they look to the sophisticated ways they can buy insurance and manage their risks internally," Kinloch said.
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