21/09/2023 10:26 PM

LABUAN, Sept 21 (Bernama) -- Labuan Financial Services Authority (Labuan FSA) and Labuan IBFC Incorporated Sdn Bhd today hosted a half-day conference on the Insurance Capital Adequacy Framework (ICAF) in Kuala Lumpur.

With speakers from Labuan FSA, Bank Negara Malaysia and industry professionals, the conference aimed to showcase the intricacies of the new risk-based capital solvency framework for Labuan IBFC and provide practical guidance for the industry as the framework will come into effect in January 2024.

In a statement today, Labuan FSA said the issuance of the ICAF guidelines by the regulator in August last year was a pivotal milestone for Labuan IBFC, signifying the market’s shift from the traditional “one-size-fits-all” capital approach to a “fit-for-purpose” solvency measure tailored to suit an insurer’s business risk profile.  

“With the adoption of the ICAF, Labuan insurers are expected to have sufficient risk-sensitive capital buffer for their businesses to weather against financial uncertainties. 

“It reflects Labuan IBFC’s ongoing commitment to achieve conformity with international regulatory standards and best practices,” it said.

The authority said while bearing a broad resemblance to Malaysia's Risk-Based Capital Framework, the ICAF was developed to accommodate the distinctive international landscape of the Labuan IBFC, serving as an international insurance hub for Malaysia, Asia and other regions. 

“Therefore, its architecture blends the finest aspects of both domestic and internationally recognised capital regulations. 

“This is to ensure the ICAF remains practical and relevant to Labuan IBFC’s mid-shore business make-up and circumstances,” it said.

Labuan FSA said the ICAF offers three primary advantages to the Labuan insurance landscape, whereby the framework addresses the limitations of the current margin of solvency framework via promoting transparency and providing a more granular understanding of insurers’ financial position.

It said the ICAF also allows for a holistic risk assessment that provides Labuan insurers with a well-rounded perspective in managing capital resources vis-a-vis the risks inherent within their respective businesses.

“The ICAF is calibrated to the manner in which Labuan FSA supervises the insurers by linking an insurer’s capital adequacy ratio (CAR) to the supervisory risk profile. 

“Declining CAR would be a red flag trigger to prompt appropriate supervisory measures,” it said, adding that this enables the regulator to undertake pre-emptive and timely interventions to address any emerging financial distress. 

Labuan FSA director-general Nik Mohamed Din Nik Musa said that in developing the framework, the regulator had gone through extensive rounds of industry and public consultations as well as quantitative impact studies.  

He urged the industry to embrace the ICAF beyond a mere compliance exercise and to see it as an opportunity for businesses to adapt, grow stronger and innovate further.  

“Labuan FSA is committed to working closely with the industry to provide constructive feedback and facilitate Labuan insurers’ compliance with the ICAF requirements,” he added.

More than 140 participants, ranging from subject matter experts to industry professionals, attended the conference.





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