A significant challenge for Malaysia is to continue to promote Labuan as a strategic domicile for reinsurance and to attract more foreign captives as a viable alternative to more established captive domiciles, according to Peter Phillips, the principal officer of Markel International Singapore.
He was speaking at an insurance industry gathering in Kuala Lumpur today.
Phillips (pictured) told delegates at the second Malaysia Insurance Summit that significant progress had been made by Malaysia in the promotion of Labuan as an offshore insurance and reinsurance domicile and it had been successful in attracting many companies and captives.
In his presentation entitled “Malaysia – The Challenge of Globalisation”, he highlighted the effects of globalisation on Malaysia’s economy and also noted what he saw as the challenges facing the Malaysia insurance market in supporting home grown multinationals.
He said Malaysia is now a key partner in the global trading network and home to several powerhouses such as Petronas, Sime Darby and Malayan Banking. These growing companies were not immune from risks, he said.
“My general sense is that the Malaysian insurance market has not necessarily yet developed all the tools required by a global or regional multinational to manage its risks effectively outside Malaysia.
“This may change in light of the liberalisation of the market but historically it has been difficult to establish master policies here that provide broad, cross jurisdictional coverage beyond the relative orthodoxy of the domestic Malaysian market.
“Also for specialist risks, notably energy for example, there is limited domestic capacity available, although admittedly the size and concentration of asset values including one of the world’s largest LNG production facilities , are challenging for global insurance and reinsurance capacity, let alone the Malaysian market.”
Phillips said Labuan had grown as an offshore insurance and reinsurance domicile with nine direct insurers (of which two were composites), 34 reinsurers and 34 captive licences by the end of 2010.
By the end of 2011 written premium had increased to USD1.6bn (from USD1.2bn in 2010) providing clear evidence of the appeal of Labuan in terms of providing market access in Malaysia, he added. This included a 32 per cent increase in premiums written through captives.
He concluded: “In reality, the challenge for Malaysia and other newly industrialised countries which have embarked on the path of globalisation is to balance the need to protect the local economy against the fluid nature of global capital (including insurance capital) in a manner that brings global best practices, products and services to consumers in Malaysia.”
Markel International Singapore, which is part of the Lloyd’s Asia Platform in Singapore, recently set up an office in Kuala Lumpur and is a registered insurer in Labuan.