The Labuan International Business and Financial Centre (IBFC) is in the midst of developing what could be the world's first set of guidelines on syariah-compliant captive insurance.
Captive insurance refers to companies, which are insurance companies, established with the specific objective of financing risks coming from their parent group or groups.
Labuan IBFC corporate insurance adviser David Kinloch said the guidelines could be ready in the next six to nine months.
"There is nothing conceptually to stop us from coming up with a syariah-compliant captive insurance. Some technicalities have to be sorted out but otherwise it is very simple," Kinloch said.
Labuan IBFC chief executive officer Martin Crawford said guidelines on Islamic captive insurance are non-existent now, as very few jurisdictions have Islamic finance enshrined in its financial system, and do not have the infrastructure needed for it.
Renowned jurisdictions for captive insurance include the islands of Bermuda and Guernsey among others.
Labuan IBFC expects to be the home of 40 captive insurance companies by year-end, as more local and regional companies realise the benefits of setting up in Labuan.
The nearest captive insurance market is in Singapore, which has 50 captives. The market, however, has been growing at a slower pace in recent years, according to Crawford.
"The captive structure necessitates the need for physical infrastructure, so with the comparatively low-cost nature of doing business in Malaysia, we really stand a good chance of attracting the crowd here," Crawford said.
Labuan IBFC has now 32 captive companies and four rent-a-captive operating there.
Crawford said Labuan IBFC is also hopeful to see a legislation for protected cell companies (PCC) to come into law by the first quarter of 2010.
The legislation has already had its first reading in Parliament.
A PCC is a corporation in which its assets and or businesses are separated by "cells", making them independent of each other. This limits liabilities from things like legal action to the cells, rather than have the whole group affected by it.
Crawford said such a ruling would increase Labuan's competitiveness as a business and financial centre.