More companies across Asia are open to the idea of using captives, according to officials from the Labuan Financial Services Association and Swiss Re Corporate Solutions.
The pair recently held an event at the Labuan International Business and Financial Centre in Kuala Lumpur called ‘Adding Confidence to Captives: Managing Volatility via Self Insurance’.
“Risk management in the form of self-insurance or captives is on the rise, due to it being an overall cost-efficient and customisable risk mitigating tool,” said Danial Mah, director general, Labuan Financial Services Association.
Mah pointed out that captives have gained widespread acceptance around the world including international standard setting bodies. “Asia in particular has shown tremendous potential for growth in captives over the coming years,” added Mah. Earlier this year rating agency, AM Best, stated that it expects to see a significant growth in the Asia Pacific domiciles for captives, including Labuan IBFC.
Mah said that captives remain a vital business segment in Labuan IBFC, being the leading jurisdiction in Asia for captive formations compared to other jurisdictions in the region such as Singapore and Hong Kong. In 2019, January to June 2019, four new captives were approved in Labuan IBFC, totalling 51 captives registered in the jurisdiction as of June 2019. This represents a growth of 8.5 percent year on year and is significant when contrasted with the fact that for the whole of 2018, six captives were approved.
“In terms of gross written premiums, Labuan’s captive insurance business increased by 12.8 percent to $288 million in June 2019, compared with $255 million of the same period in 2018,” Mah said, adding that most of the premiums are of Asian origins, particularly from Indonesia and Japan. In contrast for the whole of 2018, Labuan IBFC recorded a 11 percent growth in total gross premiums for its captive insurance business amounting to $400.5 million.
He attributes the steady growth momentum of Labuan captives to the growing awareness around the benefits of captives in Asia. Other reasons include changes in the international tax landscape, which have prompted companies looking for alternative jurisdictions to re-domicile their captives to ensure tax compliance, which requires amongst others for captives to have substantive presence in domiciles from which they operate.
Andre Martin, Head of Innovative Risk Solutions APAC, Swiss Re Corporate Solutions added it was great to share more on the benefits captives can bring to organisations as a comprehensive risk financing strategy. “Today we see a rise in demand for captive insurance across the region including Malaysia and expect this to increase as the risk management function advances and the corporate landscape evolves,” he said. “We look forward to continue working with customers to provide solutions in the captive space and are encouraged by the interest in alternative risk transfer solutions from this event.”
Mah added: “Captive prospects will always be facilitated by our intermediaries and Labuan FSA for their substance compliance. We will continue to facilitate business development, ease of conducting business and support market innovation, in particular the captive business to ensure it remains relevant.”
Labuan, Swiss Re, Captive Insurance, Risk Management, Danial Mah, Japan, Asia