The Labuan International Business and Financial Centre (Labuan IBFC) has continued to attract financial services companies globally in 2020. Over 800 licensed entities currently operate in this midshore jurisdiction due to a more than 50% increase in licensing application approvals in the first half of the year.
Offshore jurisdictions typically provide advantageous tax rates and other benefits that onshore jurisdictions may not. Midshore jurisdictions like Labuan IBFC provide a balance between client confidentiality, compliance with international standards and best practices, a business-friendly environment, a straightforward and attractive tax system, and a strong, modern, and internationally recognized legal framework enforced by its regulator, Labuan Financial Services Authority (Labuan FSA).
Datuk Danial Mah Abdullah, Director-General of Labuan FSA, stated in his welcome speech at the third Asian Captive Conference (ACC), “Despite the challenges and movement restrictions due to the COVID-19 outbreak, we are pleased to continue to see growth, an increase in licenses approved during the first half of 2020.”
He added, “That said, we are cautiously optimistic about the outcome in the second half of the year but optimistic that we will pull through this ‘COVID-19 rollercoaster year’ on a positive note.”
In addition to the COVID-19 safety precautions, Mah stated that regulatory relief measures were implemented to assist in alleviating operational challenges. He added, “We will continue to support market participants during these difficult and challenging times as we navigate the new normal together. This is an ongoing discussion we are having with our players.”
Mah noted that Labuan IBFC, as a midshore jurisdiction, takes a balanced approach to regulation and market engagement, adding that this approach is appropriate in times of change and uncertainty and will serve the jurisdiction well going forward. He explained that Labuan IBFC is a “whitelisted” jurisdiction by the European Union and is considered largely compliant by the Organisation for Economic Co-operation and Development. Combined with Labuan FSA’s continued commitment to upholding the highest regulatory and supervisory standards, Mah is confident that the global financial services industry will continue to view Labuan IBFC favorably.
Labuan IBFC Inc. CEO Farah Jaafar-Crossby said, “The growth in licensed entities definitely evidences Labuan IBFC’s relevance as intermediaries continue to look for safe harbour jurisdictions, that are well regulated to international standards set by global multilateral organisations.”
Labuan IBFC continued to experience growth in the insurance industry, particularly in reinsurance, with 11 new licenses approved, including seven captive insurance entities, strengthening the jurisdiction’s dominance in the Asian captive market.
“Captive insurance is certainly growing in size as it now attributes 31.4% of total gross premiums underwritten in Labuan IBFC, amounting to US$267.9 million with 72.8% of the total captive premiums from international markets,” Mah said.
He continued, “This is in line with Labuan IBFC’s status as a regional wholesale risk intermediating center. In fact, during the first half of 2020, 64.5% of the reinsurance industry’s total gross written premiums came from international markets.”
“We anticipate this percentage to rise as we further establish Labuan as a hub for risk management and reinsurance through innovation. Labuan IBFC, for example, is the only jurisdiction in Asia that offers protected cell companies (PCCs).”
He added that it is a natural progression that as the community of financial institutions in Labuan grows, so will intra-Labuan IBFC trade. “This is a natural progression for a jurisdiction with more than 800 licensees, with the insurance market accounting for nearly 30%, or 220. As we mature as a financial center, business cross-pollination is a natural part of a development cycle that strengthens a vibrant intra-Labuan business ecosystem for all institutions to participate in,” Mah said.