Labuan Captive Insurance

A. General

A) Labuan Companies Act 1990

B) Labuan Financial Securities and Services Act 2010

Captives are increasingly being recognised for their value as strategic enablers, beyond their traditional role in supporting traditional insurance placements. There is a range of long-term solutions offered by captive techniques to achieve financial, operational, risk control and governance objectives.

A Labuan Captive Insurer may underwrite direct insurance / reinsurance (general or life) business risks of their own Group third party risks subject to Labuan FSA’s approval.

A Labuan Captive Insurer may obtain reinsurance coverage from any insurance company in or outside Labuan irrespective of whether it is licensed under the LFSSA.

A Labuan Captive Insurer may deal with direct Malaysian risks for activities as prescribed by law.

A captive insurance business includes but not limited to the following:-

  1. Pure/single captives may include single parent company writing only the risks of their owner or affiliates;
  2. Group captives/association captives may include multi-owned insurance companies writing only the risks of their owners and/or affiliates, usually within a specific trade or activity or a captive formed or owned by members of a common industry or trade association to share risks of that industry among its members;
  3. Master rent-a-captive acts as a master captive, which provides captive facilities and services to subsidiary rent-a-captive;
  4. Subsidiary rent-a-captive is an entity with separate licenses, assets and accounts but at the same time using the working capital of master captive;
  5. Cell captives may include protected cell captive, where legislation protects each individual cell or account from the liabilities of other cells within the captive; and
  6. Multi owner captive is owned by two or more unrelated persons or organisations and writing the risks of its owner and/or affiliates and is designed to insure the risks of these different entities

B. Corporate Features OF A LABUAN COMPANY

Residents and non-residents of Malaysia are permitted to establish a Labuan company.

(a) Any currency except Malaysian Ringgit (MYR).

(b) A Labuan company business in not permitted to transact in Malaysian Ringgit (MYR) other than:-

  1. For the purpose of defraying its administrative expenses and statutory expenses;
  2. For the holding of investments in a domestic company; and
  3. For the holding of debt obligations in a domestic company and as specified under Section 7(4) of the Labuan Companies Act 1990.

The applicant must appoint a licensed Labuan trust company

  1. Minimum of one (either individual or corporate entity)
  2. No bearer shares are allowed
  3. Shares shall be of no par value

Minimum of one (either individual or corporate entity)

The principal office of a Labuan trust company

Compulsory ( a Labuan trust company shall be appointed as the nominated secretary)

Filed annually not later than 30 days prior to the anniversary of the date of its incorporation

On or before the anniversary date of its incorporation

a) Compulsory

b) Shall be carried out by the Auditors approved by the Labuan FSA

a) Account shall kept in Labuan

b) All Labuan companies (including branches and subsidiaries) shall maintain all accounting records for a period not less than 6 years from the date an account transaction has been completed

Change in domicile is permitted

There are no publicly accessible records of Labuan companies

  1. 3% of net audited profits
  2. Non-trading activities: Zero Tax
  3. No withholding tax, no capital gain tax, no stamp duty on offshore instruments
  1. The Labuan company that carrying out Labuan business activity that specified in the Schedule of Labuan Business Activity Tax (Requirements For Labuan Business Activity) Regulations 2018 (“LBATR”) shall have the number of full time employees and an amount of annual operating expenditures as specified in the said Schedule of the LBATR.
  2. A copy of LBATR is available at http://qxgroup.my/legal/LBATR.pdf

a) Limited to facilitate meetings with clients and establish contacts with potential clients of the Labuan company

b) No maintenance of books and records (including trading activities) shall be done through, from or in the Marketing Office

c) Anywhere in Malaysia

d) With the exception of insurance brokers and captives, all Labuan companies that have a Marketing Office are required to maintain a Management Office in Labuan.

e) Location and address

  1. The Marketing Office must be segregated and independent from office of other entity/company and has its own phone line, fax machine and computer terminal separate from other entity/company.
  2. The premise of the Marketing Office should strictly be used for the purposes as specified under paragraph 16(s) and not for personal use or accommodation.

f) The number of staff in each of the Marketing Office should not exceed four.

g) Name and Signboard

  1. The name of the Labuan company must be easily legible in Romanised characters, printed on a signboard affixed at the entrance of the Marketing Office.
  2. The signboard must contain the company’s name, incorporation/ registration number and licensed number (if applicable).

h) The Labuan company must also comply with requirements of the relevant local authorities with regard to the signboard and Marketing Office, wherever applicable.

A copy of the Guidelines on Establishment of Labuan Marketing Office is available at http://qx-trust.com/legal/LMO.pdf

C. PROCEDURES

http://qxgroup.my/bdd/Procedures-P2IALC-v3.pdf

http://qxgroup.my/bdd/Procedures-P2CRS4LC.pdf

D. REQUIREMENTS

Required

Optional. Please refer to B16

a) Director and principal officer

b) The person in control must be of fit and proper persons and shall not be subject of any adverse report from any reliable sources and such appointment shall obtain prior approval from Labuan FSA

Types of Captive Labuan Company Foreign Labuan Company
Pure/Single owner captive Group, Association & Multi-owner captives A paid-up capital unimpaired by losses of RM300,000 or its equivalent in any foreign currency. A surplus of asset over liabilities of at least RM300,000 or its equivalent in any foreign currency, to be maintained in the book of its office in Labuan.
Rent-a-captive Master-rent-a captive Cell captive Other similar vehicles A paid-up capital unimpaired by losses of RM500,000 or its equivalent in any foreign currency. A surplus of asset over liabilities of at least RM500,000 or its equivalent in any foreign currency, to be maintained in the book of its office in Labuan.
Types of Captive General insurance/General takaful business Life insurance/Family takaful business
Pure/ Single Owner Captive Group/Association & Multiowner Captives The surplus of assets over liabilities is at least the higher of: (a) the working fund’s amount of RM300,000; or (b) 10% of the net premium/contribution income for the preceding year; or (c) 10% of provision for outstanding claims for the preceding year (net basis). The surplus of assets over liabilities is at least the higher of: (a) the working fund’s amount of RM300,000; or (b) 2.5% of the actuarial valuation of the liabilities for life insurance/ family takaful business as at the last valuation date.
Master-rent-a captive The surplus of assets over liabilities is at least the higher of: (a) the working fund’s amount of RM500,000; or (b) 10% of the net premium/ contribution income for the preceding year; or (c) 10% of provision for outstanding claims for the preceding year (net basis). The surplus of assets over liabilities is at least the higher of: (a) the working fund’s amount of RM500,000; or (b) 2.5% of the actuarial valuation of the liabilities for life insurance/ family takaful business as at the last valuation date.
Protected Cell Company (PCC) Captive (Overall) The surplus of aggregate assets over aggregate liabilities 1 is at least the higher of: (a) the working fund’s amount of RM500,000; or (b) 10% of the Cells’ net premium/ contribution income for the preceding year; or (c) 10% of the Cells’ provision for outstanding claims for the preceding year (net basis). The surplus of aggregate assets over aggregate liabilities1 is at least the higher of: (a) the working fund’s amount of RM500,000; or (b) 2.5% of the Cells’ actuarial valuation of the liabilities for life insurance/ family takaful business as at the last valuation date.
PCC Captive Cell Subsidiary Rent-a Captive (SRAC) The surplus of each Cell’s or each SRAC’s assets over its liabilities is at least the higher of: (a) 10% of the Cell’s or 10% of the SRAC’s net premium/ contribution income for the preceding year; or (b) 10% of the Cell’s or 10% of the SRAC’s provision for outstanding claims for the preceding year (net basis). The surplus of each Cell’s or each SRAC’s assets over its liabilities is at least 2.5% of the Cell’s or 2.5% of the SRAC’s actuarial valuation of the liabilities for life insurance/ family takaful business as at the last valuation date.

To be audited (Audit fee subject to its volume of transactions)

Own letterhead and stationery

Kept and made available for inspection in Labuan IBFC

Single/Pure, Group, Association or Multiple Owner captive – RM10,000 Master rent-a-captive – RM13,000 Subsidiary rent-a-captive – RM3,000 Captive using PCC structure – Core – RM30,000 | Each cell – RM10,000

Obtain written consent from Labuan FSA prior to making any change in its directorship and shareholding

Complying Guidelines, Directives and Reporting Requirements issued by Labuan FSA

E. SCOPE OF SERVICES AND FEES

Please contact us to the quotation

Please contact us to the quotation

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