Labuan Captive 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 Authority (Labuan FSA) at an event on captive insurance organised by Labuan IBFC in Kuala Lumpur on 7 Aug 2019.

For companies would like to take control of their insurance destiny and risk, they should consider setting up a Labuan captive to provide insurance to the risks of its parents or related/associated corporations or group of companies, at the same time they can save huge chunk insurance cost. In short, captives are defined as independently owned and operated insurance companies that provide insurance to and are controlled by, their owners. Labuan captive insurance is also permissible to underwrite for a third party, subject to the approval of Labuan FSA.

The Labuan captive is also very flexible which can be structured to specific needs for their coverage and no longer subject to the unpredictability of the external insurer or conventional insurance.

The underwriting profit made by the Labuan captive insurance company made can be redistributed back in a form of dividends. Dividends income is zero tax in Labuan.

The uniqueness of setting up of Labuan captive insurance in Labuan is a substance-enabling jurisdiction at an affordable cost!

This can easily satisfy the global implementation of the Action Plan on Base Erosion and Profit Shifting (BEPS) by the Organisation for Economic Co-operation and Development (OECD) where it is essential for a business to be able to demonstrate its commercial substance in the jurisdiction the captive is domiciled in.

Examples of what may constitute commercial substance include:

  • Annual General Shareholders and Board of Directors Meetings
  • Directors’ meetings held in the captive’s domicile
  • Directors’ duties are performed in the domicile
  • Accounting books and records are prepared and maintained in the domicile
  • The operational bank account in domicile
  • There is participation in the management of the captive by a resident of the domicile
  • Key management decisions are made at the domicile
  • Operation office in Labuan with minimum 4 staffs as per the requirement by the legislation

6 distinctive advantages of Labuan captive insurance:

  • Lower insurance costs
  • Total control over the group's insurance program
  • Able to customize coverage to meet specific needs and "uninsured" risks
  • Full control over risk management
  • Able to ensure with Syariah compliant option
  • Permissible to underwrite third party insurance

6 types of Labuan captive insurance entity you can set up in Labuan:

  • Pure/Single captive
  • Group/Association captive
  • Master rent-a-captive
  • Subsidiary rent-a-captive
  • Captive using Protected Cell Company (PCC)
  • Multi-owner captive

6 major tax advantages of a Labuan captive insurance:

  • Tax of 3% on net audited profit
  • No withholding tax on dividends/interest/royalty payments
  • No stamp duties on Labuan shares transfer and all other instruments
  • Access Malaysia wide treaty network of over 70 double taxation agreements
  • Premiums on insurance and reinsurance that are 100% deductible
  • Dividends are non-taxable

TRICOR TRUSTCO provides a one-stop application solution for your Labuan Captive set up seamlessly:

  1. Preparation of your profile for Labuan Captive License application
  2. Recommending and appointment of the Labuan captive manager/underwriter
  3. Manage the approval process with Labuan FSA
  4. Once the license approved, incorporate the Labuan company or Protected Cell
  5. Operation office set up, bank account for the capital injection and staff hiring to meet the license requirements
  6. Set up the membership with Labuan Insurance Association
  7. Assist in annual compliance with Labuan FSA and Inland Revenue Board

The paid-up capital and annual license fee of the Labuan captive insurance varies according to the type of set up you apply for:

WHY TRICOR TRUSTCO for Your LABUAN SET UP?

We are a full-fledged licensed Labuan Trust Company (Trust License No. LT 0034) with a highly experienced team of dedicated professionals handle all license applications. We provide complete “one-stop” solutions in pre-assess, meet, planning, structuring, establishment and corporate service for your Labuan Captive Business, ensuring you get a bespoke service that meets your insurance business needs as well as onwards operation.

Feel free to contact us at +603 2783 9191 (Labuan Division) for more information on Labuan Captive at Tricor.KLMO@my.tricorglobal.com. TRICOR’s One Labuan Platform easy to elevate your Labuan operation efficiently!

Daniel Mah (Labuan FSA) shared 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. This leadership is further entrenched in 2019, when 4 new captives were approved in Labuan IBFC between January to June 2019, totalling 51 captives registered in the jurisdiction as of June 2019. This represents a growth of 8.5% year on year and is significant when contrasted with the fact that for the whole of 2018, 6 captives were approved.

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