Labuan FSA Annual Report 2016 - Resilience And Growth In A Challenging Global Environment

Author:Labuan IBFC Inc.
Profession:Labuan IBFC Inc

Labuan, 28 April 2017 - In 2016, the global economy grew at a moderate pace, with slower growth in most advanced and emerging economies. The uncertainties surrounding geopolitical events, the economic and monetary policies of the US and continued volatility of crude oil and commodity prices set the backdrop for a challenging operating environment. Despite the challenging environment, Labuan International Business and Financial Centre (IBFC) continued to register positive growth in its key business areas of banking, reinsurance and wealth management.

The IBFC remained resilient, with sustained financial stability and integrity. Importantly, investor confidence and business prospects remained strong.

Performance of Key Business Areas

Labuan is now home to more than 13,260 companies with diverse geographic origins. Its position as Asia's business and financial gateway is underlined by the composition of companies, with 70% of the establishments originating from within the region. Consistent with global trends, the growth of Labuan companies incorporated in the IBFC moderated to 6.3% in 2016 compared to 7.2% in 2015.

The Labuan banking sector continued to support financial intermediation in the region. This sector registered a steady growth of assets of 7.6% to USD51.0 billion in 2016. Total loans outstanding stood at USD31.8 billion with non-residents accounting for 62.4% of total loans. Borrowers from ASEAN countries made up the largest share, with total outstanding loans of USD22.8 billion. Transportation, storage and communications were the major business lines funded by Labuan banks, contributing about 18% of total loans. While the sector's profit before tax moderated to USD551.5 million, balance sheets remained healthy with further improvements in asset quality and adequate capital buffers.

The Labuan insurance industry recorded positive growth in 2016. Total insurance and reinsurance business registered an increase in gross premiums written of 3.3% to USD1.4 billion. In an environment of volatile oil prices, the insurers and reinsurers successfully shifted focus from engineering and marine classes that correlate to oil price developments towards other specialised lines. The IBFC recorded an increase in premium retention, reflecting the internal capacity of Labuan's insurance industry to underwrite more business, particularly business from non-residents which contributed 57.9% of total premiums. The year 2016 also recorded the highest...

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