Labuan IBFC Reinsurance And Retakaful Business

Labuan IBFC’s insurance industry continues its vibrant growth in the past few years. Comprising not just reinsurers and direct insurers, Labuan IBFC also provides unique underwriting vehicles in the form of captives. Aside from conventional (re)insurance services, Labuan IBFC also offers Islamic (re)insurance, also known as (re)takaful, for those seeking Shariah-compliant protection. Other insurance-related businesses such as Insurance brokers, underwriting managers as well as insurance managers complete the supply chain by offering the needed services within the sector.

A Labuan insurance business is defined as an insurance business that is transacted in foreign currency and includes general, life, reinsurance, Labuan takaful and retakaful windows and captive insurance.

 

DEFINITION OF LABUAN REINSURANCE BUSINESS

An insurance business whereby the reinsurer assumes a part of the liability under an original contract of insurance of another insurer or reinsurer. A Labuan reinsurer may be conducting either a general or life reinsurance business.

DEFINITION OF LABUAN RETAKAFUL BUSINESS

A business in compliance with Shariah principles whereby the Labuan retakaful operator assumes a part of the liability under an original contract of takaful of another takaful operator or retakaful operator. 

APPLICATION FOR LABUAN REINSURANCE LICENCE

Application for a licence to carry out Labuan Insurance and Insurance-related activities can be made to the Director General of Labuan FSA.

The setting up of takaful or retakaful windows do not require a separate licence and there is also no additional licence fee involved. Labuan retakaful operators are expected to observe the objectives, management and activities of investments are in compliance with Shariah principles at all times.

Kensington Trust Labuan Limited is a licensed trust company in Labuan and may assist you with license application, establishment and administration of your Labuan Company or branch.

ANNUAL LICENCE FEE

All licensees are required to pay to Labuan FSA annual licence fees upon approval of the license application and subsequently, on or before 15 January of each year:-

                                                                                          Minimum Capital and Capital Adequacy/Solvency Requirements
Type of LicenseSubsidiaryBranch
Labuan Reinsurance
(including retakaful)
paid-up shares capital of RM10 million unimpaired by losses; anda surplus of assets over liabilities of RM10 million 1 unimpaired by losses; and
Labuan Reinsurance (including retakaful)General Reinsurer/ Retakaful Operator
RM10 million or 20% of net premium/contribution income of the preceding year, whichever is greater.

Life Reinsurer/Family Retakaful Operator
RM10 million or 3% of the latest actuarial valuation of life insurance/family takaful liabilities, whichever is greater.

General Reinsurer/ Retakaful Operator
RM10 million or 20% of net premium/ contribution income of the preceding year, whichever is greater.

Life Reinsurer/Family Retakaful Operator
RM10 million or 3% of the latest actuarial valuation of life insurance/family takaful liabilities, whichever is greater

Notes:

1 The surplus of assets is to be maintained by the branch licensee in the books of its office in Labuan.

The Labuan licensed entity must maintain a minimum paid-up capital or working funds as required above with a bank in Labuan.

“Capital requirement” and “Capital adequacy” shall be applied to the insurance licensees of subsidiary and branch set-ups as illustrated below:-

Insurance Licensees Minimum Paid-up Capital Minimum Working Funds Margin of Solvency

Entry / Licensing

 

Subsidiary                      √  
Branch                   √ 
On-GoingSubsidiary                  √
Branch                  √

The term “unimpaired by losses” means that the paid-up capital amount and/or working funds shall be maintained at all times and shall not be impaired by any losses. In the event it is impaired, further capital injection is required to restore it to the required level.

LICENSING AND OPERATIONAL REQUIREMENTS

  1. The Labuan licensed entity must be a member of the Labuan International Insurance Association.
  2. The Labuan licensed entity must provide a letter of guarantee or undertaking from the parent company to Labuan FSA.
  3. Applicant for a licence to carry on a reinsurance business in Labuan must:
    • establish an operational management office in Labuan managed by a management team that has adequate knowledge and expertise in the insurance business; or
    • appoint a licensed Labuan underwriting manager.
  4. Appointment of any person in control, director or principal officer (PO) of a Labuan reinsurer must obtain prior approval from Labuan FSA. Notwithstanding, Labuan reinsurers that are established as a branch are not required to obtain approval on the appointment of their directors.
  5. The person in control, director and PO of a Labuan reinsurer must be fit and proper persons and shall not be subject of any adverse report from any reliable sources.

 

The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.