Captive insurance market still underexplored

The captive insurance industry is significantly under-penetrated despite lower risk burden, said Labuan IBFC Inc chief executive officer Danial Mah Abdullah.

“The Asian market for captive is relatively unexplored and the potential for growth is immense. The penetration level is low at the moment with only 2.3 per cent out of the total number of 6,939 captives established worldwide (according to Business Insurance 2016) and we believe the Asian captive market will continue to grow at a steady pace,’ Danial said.

Asian corporations, he added, are viewing captives as a viable alternative of risk management tool and the number who appreciates this concept is growing.

“While many companies will continue to depend on traditional insurance, those with the know-how will explore greater business opportunities and risk management options through captives, especially when commercial premium rates make standard insurance untenable,” he said during a media briefing held yesterday.

Captive insurance companies insure the aasets, liabilities and other risks of its parent company and is usually located in a jurisdiction where taxation, solvency and reporting requirements are less complicated.

Often managed by specialist companies that act as accountants and administrators, much of the decision-making on the risk to be retained by the subsidiary company and how much is transferred to the conventional insurance market is undertaken by the parent company.

Currently, 75 per cent of the world’s Fortune 500 companies are parent owners of captive insurance companies and total captive premium income is exceeding US$14 billion with more than 5,000 captives established worldwide.

This move, said Energas Insurance (Labuan) Ltd chief executive officer Raziyah Yahya, is able to reduce the premium payments as well as management costs to very much lower as well as give the parent company some form of control over its insurance undertaking decisions to be made over risks involved.

Energas Insurance is the captive insurance company for its parent Petroliam Nasional Bhd.

It was granted an “A” financial strength rating.

The ratings reflect Energas’ adequate capitalisation, strong reinsurance protection and its unique role as the primary insurance carrier for its parent.

Meanwhile, Labuan International Business and Financial Centre (Labuan IBFC) and Labuan International Insurance Association will be jointly organising The Asian Captive Conference (ACC 2017) in Sasana Kijang here on August 16-17.

ACC 2017 is aimed at enhancing the awareness of the role of self-insurance, specifically captives, in Asia.

Bank Negara Malaysia governor Datuk Seri Muhammad Ibrahim is expected to deliver a keynote address during the event.

Source : NST (17 May 2017)