• Profitability hike in Labuan Banking and Insurance markets of 322% and 111%, respectively
• More than threefold increase in trust companies sector’s profitability
• World’s first Islamic digital assets (RAMZ) worth USD50 million funds
• Captive insurance recorded 67% growth in underwriting margin
• Labuan captive capturing more prominent global recognition winning “Highly Commended Captive Centre Award” and ranked top 10 in World Domicile Update
• Generated RM1.2 billion for the nation’s fiscal contribution, breaching the RM1 billion mark

Kuala Lumpur, 26 April 2024: Labuan FSA released the Labuan IBFC Market Report 2023 today, highlighting business optimism in the Labuan IBFC guided by the 5-years Strategic Roadmap 2022-2026. Growing market vibrancy was seen across key sectors evidencing Labuan IBFC’s recovery momentum as it emerged from the COVID-19’s economic debilitating phase in the prior years. Business growth, both in terms of volume and new entrants in the core sectors was apparent, particularly for banking, insurance, captive, trust companies, capital market, digital financial services and wealth management. Moreover, increasing new company incorporations during the year further solidified this positive market trend. The profitability surge, which recorded about USD4 billion in major sectors such as banking, insurance and trust companies, further attested Labuan IBFC’s market rebound and is back on track with its targeted growth trajectory.

The overall financial sector recorded a total of 880 approved and licensed financial institutions, representing a substantial asset volume of USD83.3 billion. Furthermore, Labuan Islamic finance’s offering had undergone a revolution by adopting digital innovation as a unique business proposition. This is highlighted by the landmark issuance of the world’s first Islamic digital assets (coined as RAMZ) worth USD50 million funds which were listed on a few Labuan digital exchanges.

In terms of economic development, Labuan IBFC continued to play a pivotal role by providing spillover to the Labuan island’s economy with new jobs created and local spendings made by Labuan entities estimated at RM219 million. Further economic contribution is evident as Labuan IBFC generated a record-breaking RM1.2 billion to the nation’s fiscal revenue, exceeding the RM1 billion mark for the first time.

LABUAN IBFC SECTORAL BUSINESS PERFORMANCE

For 2023, there have been notable milestones for Labuan IBFC throughout the year which included:
i. New Company Incorporations registered an 8% growth. Fueled by new incorporations from Asia-Pacific region which surged by 14.9% and mainly from Singapore, Indonesia, India and Pakistan.

ii. Banking sector demonstrated a commendable profitability performance with more than threefold increase of 322.5% to USD589.7 million, and Return on Assets was four times higher at 1.2%. Underpinned by the favourable environment of higher rate of interest, prudent asset management practices as well as maintaining a strong capital adequacy ratio. The sector’s net Interest income recorded the highest in 10 years (USD2.7 billion).

In 2023, Labuan banking sector had further expanded its international mix to include new banks from the Middle East as well as the Pacific region. Specifically, this entailed two investment banks which originated from Dubai and Vanuatu.

iii. Insurance industry recorded a historic high premium and impressive bottom-line performance. Total premiums grew to USD2.7 billion and underwriting profitability recorded the highest growth of USD456 million post-COVID. Non-Malaysia business portfolio contributed a larger market share with insurance risks underwritten primarily from the Asia-Pacific markets and Far East region.

iv. Labuan is a leading captive centre for Asia. Its gross premiums increased to USD624.6 million - an all-time high premiums volume over the past five years. The Centre’s modern regulations and innovative structures continued to attract eight new captive establishments in 2023. Labuan IBFC’s global prominence as a well-recognised captive market with the conferment of Highly Commended Captive Domicile by European Captive Review Awards 2023 in Luxembourg, and ranked as top ten in the World Domicile Update by Captive Review 2023. This reaffirmed its international recognition and appeal.

v. Trust Companies’ profitability made a turnaround with a tripling growth to USD11.2 million. In tandem with the increased new company incorporations, the total income of trust companies grew by 31% to reach USD30.9 million, mainly contributed by the higher fees income from secretarial and administrative services.

vi. Labuan Financial Exchange sector spurred by digital innovations. This is exemplified by the issuances of four Shariah-compliant securities tokens (RAMZ), amounting to USD50 million funds listed on Labuan digital exchanges.

WAY FORWARD

In light of the global outlook for 2024 projecting a sustained recovery growth pace, albeit with some uncertainties, Labuan FSA remains optimistic that the Centre would continue to grow in strength. This would be possible through the industry’s resilience, adaptability and innovation despite the emerging challenging externalities in the international landscape. Labuan FSA will also continue to collaborate with the Government and domestic authorities to nurture new business opportunities via Labuan IBFC, leveraging on its wide range of unique financial solutions and structures. 

For more details of the report, please click here.