Assalamualaikum w.r.t. and good morning.

17. For Labuan companies, the incorporation of companies has grown significantly, with a 17% increase from the previous year rising from 455 to 532. This double-digit growth indicates a turnaround market trend and an increase in business activity in Labuan IBFC.

18. For insurance, gross premiums continued to reflect growth momentum – the highest recorded in the past five years. This reflects strong demands for Labuan reinsurance business from the region.

19. The Labuan international commodity trading companies or LITC sector recorded the largest trading amount of USD51.1 billion in 2022 – reflecting a significant growth of 30.7%.

20. For leasing, we saw 18 new leasing companies and 144 new subsequent leasing transactions approved – majority of them were in relation to aviation leases. Consequently, new aviation assets leased grew tenfold to USD5.8 billion.

21. In term of Islamic banking, the Labuan Islamic banking industry has demonstrated resilience towards external challenges and managed to show healthy growth in term of assets and financings. The Islamic assets increased by 21.1% where 94.9% were contributed by Islamic window operators.

22. And for digital financial services (DFS), the digital industry continued to show rapid expansion with a 22% growth.

23. In terms of company incorporation, looking at the global business landscape, most of the economy is gradually opening and adapting to new norms. Majority of the benchmarked jurisdictions are showing decreasing trend in recent total number of incorporations, including Labuan IBFC. Total operating Labuan companies declined by 5.9% to 4,847 at end-2022 compared with 5,151 for 2021. However, due to the relaxation of pandemic control measures, together with the reopening of economies, business activities had restored to normalcy. In 2022, we can see that the new business establishments in Labuan IBFC increased by 17%.

24. In response to increased regulatory requirements, technological advances, and post-pandemic recovery, the global banking landscape has continued to evolve over the years. The Labuan banking industry continued to attract new participants, as evidenced by the approval of three new banking licences in 2022, of which two were for digital banking operations. This increases the total number of banks to 68. The banking industry continued to grow with two new investment banks and one commercial ban

25. Total loans recorded an 11.5 % reduction to USD20.7 billion driven by a reduction of 17.1% or USD2.6 billion of non-resident loans to USD12.7 billion mainly due to loans settlement. Total deposits decreased by 48.4% to USD6.7 billion with a resident’s market share of 50.7% to USD3.4 billion, primarily from the Oil & Gas sector. Total assets recorded a reduction of 13% to USD48.5 billion mainly driven by reduction of interbank placement to financial institution.

26. Meanwhile, net interest income decreased by 3.7% to USD451.3 million particularly driven by higher interest expenses on placement by financial institutions. These may be due to additional interest income earned from financing extended beyond their original tenure following the increasing interest rate lending trend in Malaysia and US markets.

27. The banking industry’s profitability declined sharply by 41.6% mainly attributable to higher expenses incurred on interbank placement and financial investment losses.

28. The Labuan Islamic banking industry has shown resilience in the face of external challenges and has maintained a robust asset and financing growth. The murabahah financing was favoured by loan borrowers and capable of attracting borrowers from all over the world. Islamic banking in Labuan remains promising. Labuan Islamic institutions are also modernising their banking operations by integrating technology to serve the digital market.

29. The Islamic assets increased noticeably by 21.1% where 94.9% were contributed by Islamic window operators. Islamic assets constituted 4.7% of the industry’s total assets. The Islamic banks financing grew by 25.4% which was contributed by 27.3% growth in non-resident borrowings in relation mainly to the financial services sector. Islamic financing constituted 10.2% of the industry’s total loans/ financing and advances. Non-resident depositors declined by 19% to USD114.7 million and Islamic deposits accounted for 1.8% market share of the Labuan bank deposits.

30. Despite the challenging global economic decline, the pandemic, and the impact of the global conflicts, the Asian insurance industry's recovery phase appeared somewhat favourable. The overall performance of the Labuan insurance industry improved as a result of a higher underwriting margin, moderate premium growth, and positive claims experience. Despite this, Labuan insurers remained vigilant by employing conservative underwriting appetites, prudent investment strategies, and risk management in the face of market volatility.

31. The insurance industry continued to expand with eleven new approvals comprising four general (re)insurers, a life insurer, five captives and an insurance broker.

32. Total premiums increased by 1.9% or USD31.5 million to USD1.7 billiion, particularly contributed by premium from Malaysian business. Nevertheless, foreign business continued to contribute a higher share of 56.4% while Malaysian business stood at 43.6% of the underwritten premiums. Reinsurance sector continued to dominate with a market share of 57%, an increased by 3.5% mainly consisting of fire risks. The underwriting margin recorded an increase of 19.5% or USD30.7 million mainly due to decreases in net claims incurred by 4.5% or USD29.3 million, lower net commission by 7.9% or USD14.5 million and lower management expenses by 10.4% or USD7.1 million.

33. For Labuan captives segment, the year continued with the encouraging market expansion and positive trend. In 2022, insurance captives grew with five entrants which were approved to underwrite agricultural risks and fire-related perils. Total gross premiums for captive business recorded a marginal increase to USD570.9 million driven by engineering class.

34. As the market reopened following the pandemic, there was an increase in demand for Labuan structures and corporate vehicles. This augured well for the sector of Labuan trust companies' growth impetus. Labuan Trust Companies or LTCs continued to be instrumental in promoting the Centre and facilitating new incorporations. LTCs have initiated an evaluation of their business models in response to the multitude of market dynamics that have swept the regional landscape. This necessitates re-strategising and digitalization in order to keep their operations sustainable, cost-effective, and competitive.

35. Four new trust companies were approved and three surrendered resulting in an increase of 2% in the total number of LTCs to 68 as of end-2022. LTCs’ revenue moderated to USD23.6 million mainly due to lower advisory and administrative fees earned. The industry’s profitability declined to USD2.6 million mainly due to investment impairment.

36. In 2022, the Labuan international commodity trading companies or LITCs sector recorded the highest trading volume at USD51.1 billion, a significant increase of 30.7%. The major market movement can be attributed to price hikes in global oil and liquefied natural gas. Consequently, LITCs’ profitability surged by 55.1% to USD5.5 billion surpassing the pre-pandemic level. The encouraging performance of this sector was also supported by intra-Labuan business developments with the availability of trade financing offered by Labuan banks.

37. Six LITCs were approved and three surrendered in the year 2022 bringing the total LITCs to 43. Total commodities traded were mainly crude oil and LNG which grew 40.1% to USD48.3 billion.

38. The reopening of international borders following the pandemic sparked the aviation industry's recovery. This is evidenced by the rising number of flights, the rise in air passenger traffic, and the reinstatement of pre-COVID routes. New leasing companies increased by 125% from 8 to 18. Subsequent leasing transactions also grew significantly by 243% from 42 to 144. Subsequently, new aviation leased assets grew tenfold to USD5.8 billion. Despite this, total approved leased assets remained unchanged at USD39.1 billion. The aviation and oil and gas industries continued to be the primary consumers of Labuan leasing structures comprising more than 90 percent of the total. 87.9% of leasing companies originated from Asia-Pacific mainly from Malaysia and Singapore.

39. Despite this, total approved leased assets remained unchanged at USD39.1 billion. The aviation and oil and gas industries continued to be the primary consumers of Labuan leasing structures comprising more than 90 percent of the total. 87.9% of leasing companies originated from Asia-Pacific mainly from Malaysia and Singapore. The industry was able to sustain healthy gross profits despite visible realignment of lease revenue and expenses with slight decline by 3.7% to USD466.7 million.

40. The rapid increase in the number of High-Net-Worth Individuals in Asia and the rising appetite for investment have fuelled the rising demand for Labuan wealth management structures. Labuan IBFC provides a variety of investment vehicles based on either Common Law or Civil Law trusts or foundations. These vehicles were utilised for wealth management, estate planning, investment holding, and charitable purposes. For foundations, total assets endowed declined by 24.6% to USD492.4 million, with the majority in the form of non-cash endowments.

41. As at end-2022, there were 14 Labuan trusts registered, comprising seven purpose trusts, three charitable trusts, two private beneficiary trusts, one Labuan discretionary trust and a protective trust. Total assets under ma

42. With parallel conventional and Islamic offerings, Labuan IBFC's capital market has potential growth. Over the past two years, there has been a growing interest in using Labuan IBFC as a platform to facilitate investments and fundraising throughout Asia and beyond. Seven new entities were approved for both fund managers and securities licenses bringing the total number to 45 and 23 respectively. Both sectors were mainly from Asia-Pacific origins contributing 64% of the fund managers and 59% for securities licensees. Fund issuances were mainly of Asia-Pacific origins.

43. Total assets under management by Labuan fund managers showed almost a doubling growth to USD1.1 billion. Most of the assets were investments in equities and debt instruments subscribed by Indonesian and British Virgin Island investors.

44. The Digital Financial Sector or DFS in Labuan IBFC includes a vast array of financial offerings, spanning from simple e-platforms for trading fiat and digital currencies to the more complex digital asset exchanges and fundraising blockchain-based tokenisation. In 2022, Labuan DFS continued to show rapid expansion with a 22% growth.

45. During the year, 29 approvals were granted to conduct DFS business. Majority were approved to operate digital banking business (4), exchange (3), digital currency trading platform (11), credit token business (5) and e-payment systems (6). We expect to see more digital players coming to Labuan to be part of the DFS industry as the landscape becomes more and more developed.

46. Undeterred by the global challenges, financial exchange is increasingly becoming a competitive market environment for fundraising in the digital space. And this can be undertaken via conventional or Islamic finance.

47. In the year 2022, four exchanges were approved, bringing the total of exchanges to six. In 2022, two loan notes worth USD1 billion were raised through the Labuan International Financial Exchange, with a 5-year maturity tenure. The total market capitalization declined 10.6% to USD23.5 billion. Of this total, USD5.2 billion were for sukuk issuances. The strong revenue generated from initial and annual listing fees has resulted into lower losses for 2022 to USD12.3 billion. Profitability performance rebounded by 56% to record the lower losses mainly due to stronger listing revenue performance and cost control measures.

48. On this note, I would like to highlight on the employment sector in Labuan IBFC, which is the heartbeat of the industry. In the year 2022, total employment for nine sectors increased by 7.9%, bringing the figure to 4,224. This trend is in consistent with the economic substance requirements and is a positive indication. Hopefully, it will be translated into more employment opportunities and aid the locals in terms of employment opportunities. Based on the data, majority of the employees were from the Insurance and LITCs industry followed by banks. 89.9% of the employees are Malaysian.

49. As we enter the next phase of the economic recovery, the financial landscape is expected to remain challenging due to the convergence of geopolitical unrest, surging inflation, rising interest rates, and high energy prices.

50. The growing prominence of the emerging factors of ESG and digitalisation will potentially have a far-reaching influence on Labuan’s appeal as an IBFC moving forward. Labuan FSA will continue to work together with the Labuan IBFC industry players and other stakeholders to shape the industry’s future for the better.

51. Lastly, I'd like to draw your attention to the four box articles included in the current report. Hopefully, it will be of use to everyone -
One, Islamic Digital Asset Centre - Pioneering New Asset Class, players & infrastructure.
Two, Labuan Insurance Capital Adequacy Framework -Transforming into a risk-discerning market
Three, Ten Decades of Existence - Captive is still relevant
Four, ESG-Catalysing Asia’s Sustainability via Labuan IBFC.

Thank you.