YBhg. Datuk Iskandar Mohd Nuli, Executive Chairman of Labuan IBFC Inc. Sdn Bhd,

Mr. Gerard Roy Suresh Sharma, Chairman of Labuan International Insurance Association,

Dato’-Dato’, friends from overseas, distinguished Guests,

Ladies and Gentlemen,

1. Assalamualaikum and a very good morning and welcome once again to the sixth edition of The Asian Captive Conference 2023. It is a privilege to join you in this momentous occasion with the theme "The Connected Risk Journey in Self-Insurance" which aims to assist risk professionals in navigating their risk journey at critical touchpoints in a changing risk landscape. Your presence here is a testament to the prominence of this event, and we are pleased to have all of you with us today.

2. As we recap the events of past two years, it is impossible to discuss the current state and prospective growth of the global insurance industry without addressing the highly uncertain macroeconomic and geopolitical landscape. From the lingering effects of the pandemic on global workforces and supply chains to the war in Ukraine and rising tensions between major global players to soaring interest rates, rising inflation, and fluctuating currency valuations, the entire insurance industry has been forced to re-evaluate its fundamental assumptions.

3. This year, the world faces new and familiar risks. The return of “conventional” risks such as inflation, cost-of-living crises, trade wars, capital outflows, social unrest, geopolitical conflict, and nuclear warfare has been experienced by many business leaders and policymakers in this generation. New global risks, such as unsustainable debt, low growth, low investment, de-globalization, declining human development, rapid development of dual-use technologies, and climate change pressures, just to name a few, are amplifying these challenges. Together, these are converging to shape a unique, uncertain and challenging decade to come.

4. In the past two years, as the world has adjusted to living with COVID-19, many changes have occurred, and Malaysia has not been spared. The pandemic has had a significant impact on global economic prospects, and Malaysia has proven its resilience in the face of numerous obstacles stemming from the health crisis. As a result of the easing of mobility restrictions, the recovery of economic activity, the improvement of employment conditions, and the increase in commodity prices, the nation is reaping the benefits of the economic rebound and is on a solid path to recovery. Based on the Central Bank’s recent report, Malaysia’s economy expanded moderately by 2.9 percent in the 2nd quarter and this growth was weighed mainly by slower external demand. In fact, yesterday’s news were all pro-growth.

5. Domestic demand remained as the key driver of growth, supported by private consumption and investment. This is anticipated to continue throughout the remainder of 2023, and there should be a silver lining from the increase in tourism activities and positive sentiments from the initiatives under the ‘MADANI’ economy. These initiatives have the potential to bring a positive change in Malaysia by adopting a strategic and value-centred approach, especially during a period of domestic and global uncertainty. The emphasis on innovation and inclusiveness in the Madani Economy framework reflects a strategic vision aligned with advanced and resilient economies, positioning Malaysia at the forefront of technological advancement and providing opportunities for all sectors of society.

Ladies and Gentlemen,

6. Let me now turn to the latest developments in Labuan IBFC. Despite the challenging global financial landscape, Labuan IBFC continues to forge ahead in its business expansion in 2023. Labuan IBFC is now home to 237 insurers and insurance intermediaries, including 71 captives. As of the second quarter of 2023, the total gross premium of Labuan insurance industry was recorded at USD1.1 billion (2022: USD937 million). A total USD408 million worth of premiums were underwritten by Labuan captives in the first half 2023 and about 63 percent of these premiums were from the international market and 37 percent from the domestic market. In fact, Labuan captive market share accounted for 39 percent of the entire insurance industry in the Centre.

7. This development is well supported by the global demands, resulting in a growing interest in multinational insurance, a fully end-to-end customised service for organisations' cross-border exposures, including risk transfer and captive services. Which means, there will be increasing exposures in an ever-more connected world and more organizations than before are using captives as a valuable risk management tool, besides its cost effectiveness. In addition, we saw the increased interest in captive formations and greater use of existing captive insurers in 2022 will likely continue through 2023, based on the Business Insurance Report. Captive growth has continued to be robust, and the growth has been across industries, risks covered and domiciles.

8. On this note, I am pleased to announce that Labuan IBFC made its first appearance in the recent report under the World Domicile Update published by the Captive Review, that Labuan is ranked among the top ten captive centres in the world in terms of number of growths, alongside captive centres in the United States such as Connecticut, Oklahoma and Texas.

9. Key to Labuan IBFC's sustained growth is its well-regulated business environment, which gives investors’ confidence to continue utilising Labuan IBFC. Labuan FSA will continue to bolster the competitiveness of Labuan captive businesses in accordance with the Labuan IBFC 5-year Strategic Roadmap 2022 – 2026, which charts continued development and builds on existing strengths to be one of the leading captive centres including Takaful Captive. Together with the Labuan IBFC industry and other stakeholders, we have identified priorities and key approaches that will guide our efforts to promote the development of Labuan captive insurance. This will include:

a) Formulating omnibus captive policies to ensure comprehensive business offerings;
b) Intensifying market growth of Labuan insurance through targeted marketing promotion; and
c) Fostering greater collaboration with other target international insurance markets through forging new partnership.

10. In response to this, Labuan FSA has recently issued the revised Guidelines on Captive Insurance with these objectives:

a) To provide a better clarity on captive structure and operational requirements for rental captives by:

• One, establishing a new captive structure, namely External rent-A-Captive (X-RAC). Existing Subsidiary rent-A-Captive (S-RAC) features are similar to X-RAC. The only distinction is that Master Rent-A-captive (M-RAC) owns less than half of X-RAC's shares.

• Two, introducing requirements on the roles and responsibilities of the board and senior management of M-RAC and Protected Cell Companies (PCC) in managing captives under their care. In line with the temporary relief granted for the establishment of a cell under a PCC, that requires notification instead of approval by Labuan FSA, the notification will continue to be permitted under the Guidelines.

b) Second objective, to expand the insurable risks of Labuan captives to include indirect insurable interest risks. It is anticipated that with the expansion of insurable risks under Labuan captives, this will further support the industry’s innovation and cater for the needs to deal with current global issues.

11. Labuan captive insurance has demonstrated an outstanding track record. This demonstrates the increasing maturity of the Labuan captives’ sector, as the aggregate premium underwritten by the Labuan captives segment has been steadily increasing, primarily from Asia. With strong financial fundamentals, Labuan captives will not only sufficiently be resilient to withstand external disruptions, but also have the capacity for greater retention.

Ladies and Gentlemen,

12. Labuan FSA will continue to emphasise on the players to be innovative, responsive, and supportive at the forefront of technology. These include the underwriting of new or emergent risks, particularly in the digital era, such as cyber risk, digital asset risk, data protection risk, and technology risk, as well as the development of guidelines to protect the conduct of digital business, digital governance, cyber risk management, and AML/CFT compliance.

13. Labuan FSA will continue to promote captive insurance through the implementation of a number of business development initiatives. In light of the dynamic changes in the environment over the past decade, we will continue to strengthen regulatory and supervisory measures to promote the Centre's orderly business expansion and market stability. In this regard, we are fostering greater collaboration at the international front through an MoU arrangement between Labuan FSA and the Bermuda Monetary Authority cemented in September. Bermuda is the largest captive domicile in the world with more than 800 operating captives. We envisage Labuan-Bermuda partnership will create strong synergies between both jurisdictions and intensify the momentum for Labuan’s agenda in becoming Asia’s captive market of choice. Labuan IBFC will continue to provide a truly robust, diverse, and well-regulated ecosystem---that’s my commitment to you and the wider market at large.

14. With that, I would like to conclude by thanking the organisers for inviting me and wishing everyone a productive conference.

Thank you.