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
CEO 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”…..