On behalf of the Board of Directors of Labuan Reinsurance (L) Ltd (Labuan Re), it is my pleasure to present the Group’s Annual Report for the financial year ended December 31st 2022. 

Performance and Outlook

Year Under Review

        The worst of the pandemic was behind us when the year began. But despite hopes for a recovery in the world economy, all of us were abruptly forewarned of the risks that laid ahead. Inflation re-emerged as a top concern for central banks and policymakers around the globe. This translated to developed economies implementing aggressive and unprecedented monetary policy tightening in their efforts to control inflation.

2022 was also a year marked by costly, consequential and historic natural catastrophe events around the world. The estimated economic cost of natural hazards was listed at USD360 billion (2021: USD 343 billion) according to Gallagher Re’s Natural Catastrophe Report of 2022. However, only USD140 billion were paid out by the private and state insurance institutions, which highlights the big protection gap since 61% of the global disaster costs were not covered by insurance.

2022’s Results Overview

In FYE2022, we were actively managing our underwriting business portfolio and pursuing growth in other business segments [e.g. Managing General Agents (MGAs)] to ensure our overall business portfolio would be more sustainable and provide value to the Company.

Unexpectedly, 2022 was an unprecedented year for the financial markets where both equities and bonds posted negative investment results, not only affecting us but everyone else. With the challenging operating environment, we posted a Group Loss After Tax of USD18.5 million (2021 PAT: USD6.1 million), mainly due to a total of USD11.2 million marked-to-market losses in the Equity and Fixed Income portfolios (2021: USD18.7k profit).

Underwriting results for the Group turned to losses of USD0.8 million (2021: USD3.2 million profit). While the Lloyd’s underwriting improved significantly to a profit of USD6.4 million (2021: USD1.5 million loss), the Non-Lloyd’s underwriting worsened to a loss of USD7.1 million (2021: USD4.8 million profit).

The Group has been reducing its participation in the unprofitable Lloyd’s syndicates and stayed invested with the profitable ones.

The Non-Lloyd’s portfolio suffered multiple medium-sized losses which were all retained on net because the losses, individually, were not high enough to trigger the retrocession protection. Collectively, it caused a drag on the results.

In pursuit of growth in new segments, namely, speciality reinsurances and MGAs, it would take a few years to develop the underwriting results in order to determine the viability of these portfolios.

Due to these underlying factors, a revision in the actuarial ultimate loss assumptions were made in 2022. Hence, the Management ensured that its reserves provisions were adequate and reasonable, and this short-term impact was necessary to ensure the sustainability of the portfolio in the long-term.

Retrocession costs also continued to increase from the global rate hardening and the Company had to incur more reinstatement premiums in 2022 for the Peninsula Flood that occurred in 2021. This cost was necessary to enable the Company to recoup its losses from the event and maintain it at a net loss of USD5.0 million. Otherwise, the full gross loss of USD17.4 million (RM73 million) would be retained by the Company.

The reduction of Management expenses and improvement in the trade and insurance impairment by USD3.0 million (2021: USD0.2 million) helped offset the losses marginally.

Despite all these, we still possessed a healthy cash flow and the capital adequacy ratio, measured by the Best’s Capital Adequacy Ratio, is at the “Strongest” level at the 99.6th percentile.


Despite a challenging year, the Group managed to attain Gross Written Premium (GWP) of USD168.4 million as of 31st December 2022 (2021: USD176.3 million). The Group had been selective and careful in its participation in the syndicates at Lloyd’s as guided by the principle of sustainable profitability. This resulted in a reduced number of participated syndicates from 5 to 4, with GWP of USD32.1 million (2021: USD51.2 million). As a result, for the Lloyd’s business, its overall profit went up to USD5.1 million (2021: USD1.5 million).

Additionally, our Overseas portfolio showed positive signs as our Non-Lloyd’s GWP reached USD109.9 million compared to USD95.8 million in the preceding year. Furthermore, our Retakaful contribution was at USD18.2 million, an increase of 8.3% compared to 2021 at USD16.8 million, contributed mostly from the domestic market.


The Group’s investment income recorded a loss of USD7.9 million compared to a profit of USD8.8 million in 2021. The loss was due to the marked-to-market valuations, and the massive sell-off in both local and overseas Equity and Fixed Income markets.

Moving forward in 2023, we are hopeful for a better year for the capital market as inflation and growth are expected to trend lower, with central banks across the world expecting to conclude their policy normalisation. Thus, marking the end of the tightening cycle.


On October 22nd 2022, AM Best had reaffirmed the Company’s Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-“. This was a reflection of the Company’s balance sheet strength, which AM Best assessed as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Global Market and Reinsurance Outlook for 2023

The prediction for global economic growth in 2023 ranges from 2.4% to 2.9% (2022e:3.4%) which presents a difficult and uncertain environment. With the notable exception of the global financial crisis and the severe phase of the COVID-19 epidemic, this is the worst growth profile since 2001.

The nation’s economy is anticipated to grow between 4% and 5% this year as domestic demand continues to be the main driver of growth, supported by the labour market’s ongoing recovery and continued implementation of multi-year investment projects such as the East Coast Rail Link (ECRL), Light Rail Transit Line (LRT3), and Malaysia Digital Economy Blueprint

Furthermore, increasing tourism activity from the growing visitor numbers is anticipated to boost consumer spending growth which were more adversely affected by the COVID-19 pandemic.

For the global reinsurance market, despite the highly unpredictable market conditions brought by inflationary pressures, the possibility of a recession, the persistence of increased natural catastrophes, and the continuous interest rate hikes, AM Best (in its latest report in November 2022) had kept its Stable Outlook for this industry in 2023.

Encouraging signs are anticipated as demand for reinsurance capacity continues to rise, positive pricing momentum, improved market discipline, and key players are beginning to stabilise their results by reducing property catastrophe exposures.

Prospects Ahead

The Group remains cautiously optimistic of the coming FY2023. We are wary of the uncertainties stemming from high inflation, continued geo-political uncertainty from the Ukraine-Russia war and renewed trade tensions between China and USA.

Environmental Social Governance (ESG) awareness has become keenly discussed at Board and Management levels everywhere, and more answers are demanded in terms of demonstrating the role a Company plays in addressing the ESG challenges. Performance is no longer measured just by the financial bottom line, but also through understanding the organisation’s ESG impacts and how the related risks and opportunities are managed.

In addressing this sustainability challenges, I am pleased that we have taken our first step to include the Sustainability Statement which will stand as a record of the ESG efforts being undertaken.

For the Malaysian Financial Reporting Standard 17, Insurance Contracts (“MFRS 17”) that came into force in January 2023, I am happy to inform that the dedicated project team has successfully implemented MFRS17 and has assessed that the Group’s transition impact to be minimal. Once the results are validated by the external auditors, we are on track to adopt and begin reporting our financials in the MFRS 17 format.

Acknowledgement and Appreciation

On behalf of the Board of Directors, I wish to express our sincere gratitude to the Management and staff of Labuan Re for their continued dedication and hard work. We know that the past year has been a challenging one, but you have all risen to the occasion and shown your commitment to excellence.
I’m particularly proud of the way you have all come together to support each other and to find new ways to do business. Your creativity and determination are an inspiration to us all.

I would also like to take this opportunity to thank Encik Mohamad Mohamad Zain for his many years of service as a Board member of Labuan Re. Encik Mohamad had been a valuable Board member, and his expertise in risk management had been instrumental in strengthening the Company’s corporate governance. We wish him all the best in his retirement.

Finally, to our shareholders, clients and brokers, and the office of the Director-General of LFSA, we are grateful for your continued support to the Company and we will continue to work hard to earn your trust.

I am still confident that Labuan Re has a bright future and will remain resilient in facing the challenges that are thrown at us, whilst seizing the opportunities that present themselves. With the Management’s finely tuned business acumen, I am sure the results will quickly turnaround and we will recover from the 2022 performance.


Thank you. 

George Oommen