Formation of a Syariah-compliant Captive by “Kwai Lo”?

Just in case we missed this piece of recent news – Labuan International Business and Financial Centre (IBFC) is looking towards developing the world first set of guidelines on syariah-compliant captive insurance. Kudos! Another First for Malaysia…..can’t say of the implementation though. Before we move forward best if we run through some of the terms:

CAPTIVE INSURANCE – about insurance companies established under the relevant Acts such as LOFSA for specific purposes of financing risks enumerating from their parent company or group. Good example would be ENERGAS for the Petronas Group. Labuan IBFC expects to have at least 40 captive insurance companies by year end. Currently there are 32 captives and 4 rent-a-captives, so it is not difficult to bring in 4 more to make up the numbers…..! Singapore happens to also house  some captive insurance markets – the country has some 50 captives.

LOFSA – is Labuan Offshore Financial Services Act

Labuan IBFCCEO for IBFC is Martin Crawford and Corporate Insurance Adviser is David Kinloch. According to the website of IBFC, their  basic objective is attracting investors to Labuan where they would be able to access  and enjoy Malaysia’s extensive Double Tax Treaty network (the largest in the region). I supposed this is why we are having some “kwai Lo” in the company…..we need the global network to interest foreign investors. But can’t understand why they are into Islamic matters…..are they well-versed with syariah matters?

Because of Singapore’s proximity, most Malaysian cannot really see how Labuan IBFC can effectively comes up. The usual stuff is about our comparative low cost operation and relying on Islamic branding to counter the various strategies adopted by Singapore. However, it is common knowledge that Labuan, the island has no quality and capable professional to handle those jobs, not to mention taking Labuan as the next offshore financial destination. The next best thing in as far as the whole Offshore financial concepts are concerned, Kuala Lumpur is still the main business hub that runs Labuan’s  offshore operations leaving IBFC as a mere registration centre…..are we doing justice to Labuan after the people of Sabah handed over the island to the Federal government back in the 1980s? If investors registered as a piece of the LOFSA formation but taking the actual work out from Labuan; where else is the people of Labuan going to secure those learning curves? IBFC already have more than 7,000 registered companies but who is operating on the island? Almost none…..

Currently the guidelines on Islamic captive insurance are non-existent. You can’t implement even if you have them as very few jurisdictions have Islamic finance enshrined in its financial system together with the much needed infrastructure. IBFC is still working hard in establishing some of the infrastructure and technicalities so that the guidelines can be implemented both efficiently and effectively.

Coming back to “Kwai Lo” again, I supposed they do have the credentials to be appointed to run IBFC – not just their international networks but also their familiarities with some of the offshore financial and operating concepts which they can introduce to Labuan.

Martin did mention about the concept of Protected Cell Companies (PCC), which are basically corporations but their assets and businesses can be legally separated by “cells”, making them independant of each other. Thus whenever one of the cells are being brought into litigation the other cells are not affected. Accordingly this has already been tabled in Parliament (first reading) and should becomes law in 2010.

At the end of it, we hoped the people of Sabah, Labuan in particular would benefit from the creativity and innovativeness of the IBFC run by capable “Kwai Lo”…..

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7 comments for “Formation of a Syariah-compliant Captive by “Kwai Lo”?

  1. mike
    December 30, 2010 at 22:55

    May i know the lists of 32 companies doing captives and 4 rent-a-captives?

  2. teoh
    December 26, 2010 at 21:10

    as mentioned in your articles, [QUOTE]Currently there are 32 captives and 4 rent-a-captives [UNQUOTE]
    may i know i who is the players especially among the rent-a-captive?

  3. July 29, 2009 at 09:59

    Message to Elysee:

    Thank you for your interest in Captive Insurance, and the rent-a-captive structure. We have brochures, articles, presentation materials and so on which we can share with you; if you are interested in learning more we can even set up a meeting to take you through it – at no charge to you. If this is of interest, write to me at the following email address – martin@labuanibfc.my – and we will go from there.
    Kind regards,
    Martin Crawford
    CEO
    Labuan IBFC Inc.

  4. July 24, 2009 at 17:50

    As the “kwai lo” in question, I couldn’t resist the opportunity of responding to your article.
    Firstly, thanks for the free plug. Labuan has been open for business for 18 years, yet still our biggest challenge is one of awareness – so the more we get people talking about it, the better.
    Second, you can call me a kwai lo, an orang puteh, a mat salleh, or any other term you like – so long as it creates greater business for Labuan IBFC, then it will be worth it.
    Third, Labuan is growing as a centre for captive insurance, even faster than Singapore. Our numbers of captive insurance companies continues to grow, and in 2008 captive insurance premiums (technically I should use the word premia) grew by 47%, so we must be doing something right.
    As regards Islamic Finance, any jurisdiction wishing to get a slice of the action must first have the right tax and stamp duty laws to prevent these transactions being penalised versus their conventional finance counterparts. Labuan have had these laws in place for years, and continues to enhance its legislative framework for Sharia’h compliant structures. Investors can choose to use LOFSA’s Sharia’h Advisory Council for approval (fatwa) or rely on their own.
    And, finally, the financial services sector in Labuan directly employs over 1,500 professionals and indirectly many more. The multiplier effect on Labuan’s economy is not to be underestimated, and the huge amount of infrastructure spending in Labuan (eg airports, telecoms, roads, schools) has in large part been stimulated by the existence of the IBFC. Of course we can do more, and one of our KPIs is to grow employment even more.

    So I don’t want to come across as defensive – like in every job, the list of “unfinished business” is always larger than the “finished” list. But I’d prefer to see the glass as half full, not half empty.

    I’d be happy to hear any further comments or feedback from people reading this.

    Regards,

    Martin Crawford
    CEO – Labuan IBFC Inc.

  5. July 18, 2009 at 01:09

    This is something new. Never heard of captive insurance before.Do write something more detail about captive and how we can set up one especially the rent a captive.

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