Malaysia: Self-Insurance For Unique Risks

Last Updated: 1 October 2018
Article by Labuan IBFC Inc.
Most Popular Article in Malaysia, October 2018

From their inception half a decade ago, captives have played a key role in helping companies mitigate and contain business risks. But with the rapid and disruptive change in the digital age, captives can play a strategic role in driving Asia's business growth.

All businesses have risks – but not all risks can be prepared for. 

In May 2017, a massive cyberattack known as WannaCry infected over 200,000 computers in 150 countries, affecting major telecommunications and energy providers, banks and government services. In the first four days of its release alone, the virus became responsible for over USD1 billion worth of data and productivity losses. While large-scale cyberattacks may dominate headlines, new risks are emerging with increased technology adoption and digital disruption. 

"Our increasingly digital landscape brings about new risks. The widespread use of smart devices increases the need for cybersecurity and data privacy; the global availability of business data has increased calls for digital governance and accountability. 

"Businesses are also exposed to reputational risks – one rogue comment on social media can cause significant loss of trust in companies," said Stacey Huang, executive director of PARIMA or Pan-Asian Risk and Insurance Management Association at the recent Asian Captive Conference organised by Labuan International Business and Financial Centre and Labuan International Insurance Association in Kuala Lumpur. 

Risk management providers have to be more proactive, instead of reactive, to mitigate potential hazards. Captives offer the right structure to not only mitigate risks but also create value for parent companies.

Mo' growth, mo' risk

Captives – in-house insurance providers that contain the risks borne by their parent companies – are most needed at the early stages of a business' formation, where businesses need to cover all their bases. 

"When businesses are just starting their risk management efforts, they are looking to cover basic known risks – property, marine, liabilities. There is already a high concentration of solution providers catering to those needs," said Oliver Schofield, Head of Captive and Alternative Risk Transfer Consulting at Principal Re Limited

"But as the business grows, many day-to-day risks fall by the wayside without coverage, which reduces the company's margins and prevents them from reaching full profit potential," he said. 

Schofield explained that captives should proactively reach out to various departments in their parent companies – finance, treasuries, customer service – to find out the 'day-to-day' risks that these companies face and come up with a risk management profile to manage these risks. 

"By coming up with more coverage options for their parent companies, captives are not only able to increase the protection that the parent companies enjoy, but also become revenue-generating centres for the parent company. It's a win-win solution," he added.

Captive Innovations

One example to illustrate innovative captive coverage is trader protection. By devising a premium for a percentage of trade income, captives can pay out profit gaps that are caused by fluctuation in market prices, enabling enable traders to enjoy the same rate of compensation regardless of market performance. This encourages trader retention and prevents them from being lured away by competitors offering higher compensation.

Another area where captives can generate income is goods delivery costs. When a premium is charged on a percentage of the delivery costs, businesses can pay out refunds for late or faulty deliveries without cutting into their profit margins.

Grow in Asia's captive market

Traditionally, the captive industry is more active in places such as Bermuda, Vermont and Delaware. However, Asia, with its dizzying pace of business growth, is the captive place to be. 

"Less than 2% of the world's captives are based in Asia, which accounts for at least 30% of global gross domestic product (GDP). Many might see this as a disconnect, but I see it as a huge opportunity – the market is open wide for companies to establish captives in Asia," Schofield said. 

Although captive growth in Asia is still modest, captive jurisdictions in the region have recorded promising growth. "The captive industry in Asia has lots of potential. Labuan in Malaysia for instance has the highest new captive additions recorded in 2017 for the region, and it has the second highest total captive domiciles in the region after Singapore," said Richard Cutcher, editor of Captive Review.

Labuan – an ideal base for captive growth

Businesses in Asia looking to take advantage of the strategic growth opportunities that captives provide can look no further than Labuan IBFC, a comprehensive midshore jurisdiction that has actively facilitated captive formations since 1998. 

"Labuan IBFC is one of the fastest-growing risk management centres in Asia, with more than 60% of foreign-origin premiums. To date, Labuan IBFC has approved more than USD360 million worth of premiums and 47 captives, with four new approvals in 2018 alone," said Dato' Mohammed Azlan Hashim, Chairman of Labuan IBFC Inc. 

Labuan IBFC offers facilities to set up a range of captives - from pure and rental-based captives to protected cell companies, which offer a cost-effective self-insurance option to small and medium enterprises who find traditional captives out of reach.

The Asian Captive Conference 2018

The Asian Captive Conference 2018 was held on 1-2 August, 2018 at Sasana Kijang, Kuala Lumpur, Malaysia. The conference highlighted the challenges and disruptions faced in the self-insurance, captive and re-insurance industries and how risk managers could address them effectively. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions