Guide to Setting up a Labuan Captive Insurance Business

In the realm of captive companies, offshore jurisdictions are the preferred domicile due to their business-friendly environments. If you are seeking to establish your captive company in a cost-effective manner, Labuan emerges as a prime choice! The benefits that Labuan offers surpass those of many other jurisdictions, making it a strategic destination for your business endeavours. From cost-effectiveness to regulatory support, Labuan offers a comprehensive array of benefits that cater to the unique needs of captive companies.

What is a Labuan Captive Insurance Business?

A captive insurance company is essentially an in-house insurance company, created to insure the assets, liabilities and various risks of its parent company. Beyond mere protection, it benefits from the captive insurer’s underwriting profits, solidifying its role as a strategic financial arm.

In simpler terms, Labuan captive insurance business is an insurance business where the insured may encompass a related corporation, an associated corporation of the Labuan insurer or any individual whom the Labuan insurer is authorised by the Labuan Financial Services Authority (Labuan FSA) to provide insurance or reinsurance.

Labuan – situated uniquely within Asia – stands as the sole jurisdiction that permits the establishment of companies involved in Captive Insurance, Reinsurance, Takaful, and Retakaful.

Why Choose Labuan

Strategic location to tap into the Asia Pacific market

Shared time zone with major Asian cities for seamless interaction

Excellent infrastructure and regulations within the Labuan IBFC

OECD whitelist jurisdiction status

Recognised by prominent exchanges for entity listing (such as Hong Kong, Singapore, Malaysia, Australia, and Dubai Exchanges)

100% foreign ownership with a minimum requirement of 1 shareholder and 2 directors

Low corporate tax rate of 3%

Absence of withholding tax, stamp duty, GST, import duty, sales or service tax, capital gains tax, inheritance tax

Void of tax on dividends to shareholders

Void of tax on director fees for foreign directors

Permissible Business Activities of a Labuan Captive Insurance License

1

Underwrite direct insurance / reinsurance (general or life) business risk of their own Group or third party risks subject to Labuan FSA’s approval.

2

Obtain reinsurance coverage from any insurance company within or outside Labuan irrespective of whether it is licensed under the Labuan Financial Services and Securities Act 2010 (LFSSA).

3

Deal with direct Malaysian risks for activities as prescribed by law.

4

Labuan captive insurance businesses also include:

Pure / Single Owner
Group / Association
Multi-Owner
Rent-a-Captive
Protected Cell Company (PCC)

Type of Labuan Captive Insurance Business

Labuan Captive Insurance Business	Description
Pure / Single Owner Captive	Owned and controlled by one owner, typically the parent organization, and is formed as a subsidiary. The captive subsidiary underwrites policies for the parent and solely bears the risks.
Group Captive / Association Captive	Owned and controlled by multiple groups. They may or may not be related entities or part of a homogeneous group like industry or trade groups.
Multi-Owner Captive	Owned by two or more unrelated persons or organizations. Established and designed to write and insure the risks of its owner and/or affiliates.
Master Rent-a-Captive	Acts as a master captive, which provides captive facilities and services to subsidiary rent-a-captives.
Subsidiary Rent-a-Captive	An entity with separate licenses, assets and accounts but using the working capital of a master captive at the same time.
PCC Captive (Core / Cell)	Where legislation protects each individual cell or account from the liabilities of other cells within the captive.

Licensing & Operational Requirements of a Labuan Captive Insurance Business

Licensing Requirements Operational Requirements

Labuan Captive Insurance Business Structure	Minimum Paid-Up Capital	Annual License Fee
Pure / Single Captive	MYR 300,000*	USD 3,000
Group Captive / Association Captive	MYR 300,000*	USD 3,000
Multi-owner Captive	MYR 300,000*	USD 3,000
Master Rent-a-Captive	MYR 500,000*	USD 4,000
Subsidiary Rent-a-Captive	MYR 500,000*	USD 1,000
PCC Captive (Core) PCC Captive (Cell)	MYR 500,000*	USD 9,500 USD 3,000

*or its equivalent in any foreign currency The minimum paid-up capital and annual license fee differ depending on the type of Captive Insurance License.The annual license fee is due upon approval and remains valid until the end of the calendar year, 31st December. Subsequent annual fees are required to be paid by 15th January of each year.

Insurer must be a member of the Labuan International Insurance Association.
Maintain a minimum paid-up capital or working funds in accordance with the specific type of captive insurance license.
Establish an operational office in Labuan or appoint a licensed Labuan underwriting manager.
Appoint a person in control, director or principal officer (PO) who must obtain prior approval from Labuan FSA. They must be fit and proper and shall not be subject to any adverse report from any reliable sources.
Margin of solvency compliance:
- Maintain at all times a surplus of assets over liabilities, equivalent to or exceeding the amount of working fund; or
- Ensure a surplus of 20% of the net premium income for the preceding year for general insurance business, or 3% of the actuarial valuation of the liabilities for life insurance business as at the last valuation date, whichever is greater.
Comply with annual corporate tax filing to Labuan Inland Revenue Board and Labuan FSA.

FA Advisory offers one-stop application solutions for your Labuan Life Insurance Business, encompassing:

Consultation on eligibility and procedural guidance tailored to your profile.
Profiling, due diligence and guidance on documentation preparation.
Preparation of Business Plan, Financial Forecast and Operation Manuals.
Submission and supervision of the application process until approval.
Acting as your liaison and contact point with LFSA, arranging for interviews (if any).
Tracking the license approval and handling all queries from LFSA.
Advisory services on the appropriate company structure post-approval.
Assistance in setting up onshore and offshore bank accounts.
Assistance in establishing operational and marketing or co-located offices.
Staff provision and office space rental.
Internal audit and compliance advisory.

About FA Advisory

Comprising a team of seasoned professionals well-versed in Labuan’s business landscape, FA Advisory Limited extends a comprehensive suite of services covering corporate services, private wealth management, and licensing compliance administration, all tailored to meet the unique needs of our clients.

At FA Advisory Limited, our expertise lies in delivering Labuan insights that facilitate business expansion, simplifying intricate processes, and offering valuable information to guide you through various facets of your journey.

Choose FA Advisory as your trusted partner in navigating the dynamic business landscape of Asia. With our commitment, we are your gateway to success in Labuan and beyond.

Email: advisory@finarkasia.com | Phone number: +6010-931 6678