David Kinloch Chief executive officer Labuan International Business and Financial Centre


EMEA Captive has always taken a positive approach to new and emerging jurisdictions, and there are few more dynamic domiciles globally than Labuan in Malaysia. The tropical paradise has taken off as a captive domicile in the region, and its attractions—both geographic and regulatory—are outlined here in an extension of our usual coverage.


M


ore mature readers will, perhaps, remember the 1988 film Cocktail and its theme tune Kokomo, which was a number- one hit in the same year for the Beach Boys. As an insurance man and captive all-rounder who firmly believes that proper


music died with Elgar, I went to see the movie convinced that it had something to do with captive insurance. After all, Bermuda, Bahamas, Antigua, Barbados, etc.—aren’t they all captive locations? But no, I was left with the antics of Messrs Cruise and Brown, a thin storyline and only the adorable Elisabeth Shue for some restful thoughts.


But it is true, is it not, that many, if not most, captive insurance centres


are to be found on green and pleasant islands festooned with pristine beaches, bejewelled by lush golf courses and embellished by Michelin- starred restaurants? Yes, I will grant you that Guernsey in November may not quite live up to the image and Luxembourg in February is not much better, but the restaurants aren’t bad, are they?


Now it is my great pleasure to invite you to add Labuan, the fastest- growing captive insurance centre in the East Asia, to the list.


Situated off the North coast of Borneo, Labuan is in the same time


zone as Singapore, Hong Kong, Indonesia, and much of India and China, and is readily available during ‘normal’ office hours to most of the rest of the world. The island is only half an hour by air from Kota Kinabalu or just under three hours flying from Kuala Lumpur. Labuan is a Federal Territory of Malaysia and that country’s International Business and Financial Centre. In every way, Labuan lives up to its Cocktail


reputation—beaches, coral reefs, diving, fishing and golf are all readily available, and the island has a number of hotels and restaurants of international standard.


However, it is not just the superficial trappings of a captive location that


qualify Labuan to be included at the top-end of the captive scale. Rather it is the fiscal and regulatory environment, the ease of company formation, availability of expertise, competitive costing and a sophisticated communications network that has attracted insurers, reinsurers and captive managers from as far away as Russia and Australia, the US and Japan to the shores of Labuan to establish their risk-financing entities.


Although Labuan has, for some years, been progressing by stealth, in


fact, the island has been establishing, regulating and managing captives since 1996. It is, however, only in the last two-and-a-half years that the island has really taken off as a captive centre of choice for international companies. It was in May 2008 that the then regulator, the Labuan Offshore Financial Services Authority was reconstituted and the Labuan International Banking and Financial Centre (Labuan IBFC) was formed. The regulator, now renamed the Labuan Financial Services Authority (Labuan FSA), remains based in Labuan and performs a solely regulatory function. Sales and marketing activity is controlled through Labuan IBFC Inc. Sdn. Bhd., a Kuala Lumpur-based subsidiary and partner of Labuan FSA. Both entities are wholly owned by the Malaysian government.


New legislation introduced in February 2010 has greatly streamlined the administrative procedures for captive insurers and introduced


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