1. A very good morning and welcome once again to the fifth edition of The Asian Captive Conference 2022. It is a pleasure to be able to speak at this conference and to be here in person with all of you rather than virtually, it compelled me to dress properly as everyone now can practically see me from head to toe. I’m delighted to see many familiar faces, including Labuan industry players, regional captive professionals and risk owners, continuing to support this event.

2. The global risk landscape is getting more complicated and demanding, causing constant change and disruption in insurance business. Insurers are concerned about rising inflation, low interest rates, tougher regulation, emerging and new risk such as post pandemic, and cyber as well as climate risks. These issues, together with the strong forces from customers, technology, and shifting market boundaries, are transforming the insurance industry. This game-changing scenario will create opportunities for those who can satisfy the expectations of dominant clients, emerging risks, and quick customer adoption of technology. In other words, demographic, technological, economic, and environmental trends are reshaping the overall insurance sector.

3. A lot of changes have happened in the past two years as the world adjusts to living with COVID-19 and Malaysia has not been spared from its impact. The pandemic had profound impact on global economic prospects and Malaysia has demonstrated its resilience to many challenges arising from the health crisis. However, with the easing of mobility restrictions, recovery of economic activities, favourable employment condition and higher commodity prices, the nation is benefitting from the economic rebound and is on a strong recovery path. Based on Bank Negara Malaysia’s recent report, Malaysia’s economy expanded by 8.9% in the 2nd quarter, the fastest pace in a year. The positive momentum is expected to remain strong in the 3rd quarter. Nevertheless, the government is cautious of a less favourable global outlook owing to weaker-than-expected global growth, further escalation of geopolitical conflicts, prolong supply chain disruptions, heightened financial market volatility and adverse developments post COVID-19.

4. The pandemic has significantly influenced the global risk profile in terms of risk management, crisis management and business continuity planning. According to a survey conducted by the Association of Insurance and Risk Managers in Industry and Commerce (Airmic), the outbreak of COVID-19 in March 2020 has sparked a chain reaction in the captive insurance industry, as risk managers are looking for better alternatives and captive insurance to enable corporations with extensive risk portfolios to better bundle and diversify them, as well as have direct access to global insurance and reinsurance markets. By self-insuring high-frequency, low-severity risks through a captive, a corporate can reduce transaction costs and focus risk transfer on lower-frequency, higher-severity risks for more efficient risk management.

5. As the world places greater emphasis and focus on sustainable finance, Environmental, Social and Governance or ESG is identified as one of the key drivers that could impact the insurance industry. The World Economic Forum Global Risks Report 2021 has ranked climate change as the most likely and impactful threat to stability. In addition, cyber risk is considered as a top global risk for the insurance sector. Digital vulnerability has heightened the increase in cyberattack and according to an estimate, global cyber premiums totalled USD9.2 billion (beginning of 2022) and expects that it will reach approximately USD22 billion by 2025. The offering of protection in digital business models in areas of resilience enhancement measures such as robust network security, access management, would certainly contribute to market sustainability.

Ladies and Gentlemen,

6. Let me now turn to the developments in Labuan IBFC. Despite the challenging global financial landscape, Labuan IBFC continues to forge ahead in its business expansion in 2022. Labuan IBFC is now home to 226 insurance and insurance-related entities, including 64 captives. As of the second quarter of 2022, the total gross premium of Labuan insurance industry recorded at USD933.3 million. A total USD350.7 million worth of premiums was underwritten by Labuan captive insurance in the first half 2022 and about 65% of these premiums are from the international market. In fact, Asia markets have contributed more than 55% of the premiums underwritten by Labuan captives.

7. A key success factor to the sustained growth of Labuan IBFC is the well-regulated business environment which provides confidence to investors to continue using Labuan IBFC. In charting the continued growth and building on the position of strength, Labuan FSA will continue to strengthen the competitiveness of Labuan captive business under the 5-year Labuan IBFC's Strategic Roadmap launched in June 2022. We have identified priorities and key approaches that will anchor our efforts – working together with the Labuan IBFC industry and other stakeholders to further promote the growth of Labuan captive insurance.

8. Approach 1 is on Business Development. Labuan FSA will review the captive framework to provide more regulatory clarity to investors on captive requirements and to optimise the sector’s capacity to better serve the (re)insurance needs of Labuan entities and peer sectors within Labuan IBFC as well as Labuan Island. This includes strengthening the existing Guidelines on Captive Insurance Business by providing greater clarity in term of business parameters and clearer structures allowed in in Labuan IBFC. At the same time, accelerate the awareness level on use of captive to underwrite more contemporary risks which are uninsured or under-insured. This includes captive used to cater for risk relating to cyber disruptions as well as emerging risks such as ESG related, and crypto-currency business. Labuan FSA is also keen to introduce new innovative solutions for captive insurance business in Labuan IBFC and to enhance the complementary roles of Labuan IBFC to Malaysia insurance needs in serving the unserved and underserved segment.

9. Labuan FSA will continue to be supportive, innovative, and responsive at this cutting edge of technology in developing captive insurance industry in Labuan. These include underwriting of new or emerging risks especially in digital era e.g. cyber risk, digital asset risk, data protection risk, technology risk etc.; and developing guidelines to safeguard the conduct of digital business, digital governance, cyber risk management, and AML/CFT compliance.