In general, an in-house insurance provider is termed as a captive insurance company. Such a company is often created for the purpose of insuring assets, liabilities, and risks of the parent company. As such, businesses that want to exercise control on their risk and insurance destiny can think in terms of establishing a Labuan captive insurance company. This helps them to save a huge amount of insurance costs. Further, Labuan captives are allowed to underwrite for third parties, subject to obtaining Labuan FSA’s approval.
A Labuan captive also enjoys a great deal of flexibility and can be structured for meeting specific coverage needs. Further, it is protected against the unpredictability experienced by conventional insurance companies or external insurers. In addition, the underwriting profits earned by the Labuan captive can be redistributed in the form of dividends. They do not attract any tax.
Labuan Captive Insurance – Advantages
- Lower insurance costs
- Complete control of the insurance programs of group companies
- Ability to customize insurance coverage for meeting specific needs and risks
- Total control as far as risk management is concerned
- Ability to ensure Shariah compliance
- Flexibility to underwrite third-party insurance
Tax benefits offered by a Labuan captive insurance
- 3 percent of chargeable profits
- Withholding tax not applicable for dividends, interest, and royalty payments
- No stamp duty on transfer of Labuan shares and other instruments
- Wider access (Malaysia has entered into double taxation agreements with 70 countries)
- Insurance and reinsurance premiums are 100 percent deductible
- No tax on dividends
Labuan Captive Insurance – Types of Companies That Can Be Established In Labuan
- Pure or Single captive
- Group or Association captive
- Master or Subsidiary Rent-a-captive
- Multi-owner captive
- A captive that uses Protected Cell Company format
Some Key Facts About Labuan Captive Insurance Business
Captive insurance companies can deal in general as well as life insurance and takaful business.
A captive is not allowed to do business in Malaysia’s domestic except as a reinsurer. Underwriting of certain permitted risks is allowed.
A captive insurance company is allowed to do only a limited amount of third-party business so that it does not lose its captive insurer character.
Subject matter experts are allowed to manage captive insurers.
Captive insurance businesses have the flexibility to choose their principal financial currency for conducting operations and maintaining accounts. They are also allowed to adopt a recognised accounting standard as recommended by Labuan FSA.
How Do We Help You?
At QX Trust, a Labuan Company, we are dedicated to providing a full range of services for onshore and offshore companies. We have the experience and expertise to assist you in setting up a captive insurance company in Labuan. We start the process with preliminary discussions as regards the feasibility of setting up a captive business and go all the way to guide you with the licence application. After you obtain the licence, we will provide you with all the necessary support and back-office functions that you need. We always customize our services so that they meet your special needs.