Labuan IBFC Marks 35 Years of Resilience, Sustained Growth, and Strengthened Global Recognition

KUALA LUMPUR — The Labuan Financial Services Authority (Labuan FSA) today released the Labuan IBFC Market Report 2025, highlighting the Centre’s continued resilience and growth momentum. In its 35th anniversary year, Labuan IBFC recorded notable progress in market expansion, business innovation and regulatory standing, in line with global standards. This was reflected in Malaysia’s positive outcome in the Financial Action Task Force (FATF) Mutual Evaluation, of which Labuan IBFC market was assessed favourably, and the Centre’s debut in the Global Financial Centres Index (GFCI), marking its growing international prominence.

Labuan IBFC’s strong momentum in 2025 was underpinned by sustained business activities, new market participation and resilient performance across key sectors, including banking, insurance, capital markets as well as strategic growth segments such as Labuan captive insurance, Islamic finance and wealth management had also gained much traction in the past year. These niche lines had reinforced Labuan IBFC’s role as financial boutique market that offers not just specialised, future-oriented financial services – but also option of conventional or shariah-compliant business structures for investors.

New company incorporations and registrations grew by 5.1 per cent, while 41 new licences were issued bringing the total to 808 licensed entities and 4,971 operating companies. Total industry assets increased by 13 per cent to USD94 billion, while capitalisation rose by 32.3 per cent to USD22.5 billion reflecting stronger markets fundamentals across the Centre.

HIGHLIGHTS OF THE REPORT:

Labuan banking sector posted a marked 55.3 per cent in profitability hike, while Islamic banking recorded solid growth across assets, financing, and deposits.

Labuan banks’ lending to financial services increased substantially by 36.9 per cent, reflecting the banks’ continued support in Asia’s financial intermediation activities.
In line with 35.2 per cent expansion in Islamic banking assets to USD2.2 billion, Islamic financing rose by 23.4 per cent to USD1.65 billion mainly comprising non-resident borrowing.
Islamic deposits also grew by 17.7 per cent to USD231.8 million, attributable to increased non-resident deposits during the year.
The overall banking sector profitability recovered strongly, increasing 55.3 per cent to USD665.7 million, after the decline recorded in 2024.

The Labuan insurance market delivered stronger performance in 2025, supported by sustained demand for reinsurance and captive solutions, with expanded top line and profitability strengthening despite shifting risk landscape.

Gross premiums for the insurance sector rose 5.8 per cent to USD2.5 billion.
The sector’s net retention increased to 62.7 per cent, reflecting Labuan IBFC’s growing risk capacity and strengthened reinsurance role.
Captive insurance premiums grew 7.2 per cent to USD726 million, which contributed to more than one third of the total premiums underwritten by the industry.
Overall, insurance sector profitability rose 7.1 per cent to USD434.7 million, the highest level over the past five years.

Labuan Capital market innovation continued to advance in 2025, driven by innovations in digital structuring alongside conventional offerings.

The world’s first RMB200 million Climate Sukuk reinforced the Centre’s innovation across Shariah-compliant finance with sustainable and digital tokenisation solutions.
Labuan fund managers’ asset under management grew 9.4 per cent to USD1.2 billion.
Profitability in the fund management segment surged 143 per cent to USD10.5 million, supported by higher management fees and improved cost efficiency.

Labuan Wealth Management gained momentum with double-digit growth in both Labuan foundations and assets under management (AUM).

New Labuan foundations rose 29 per cent to 263, the highest since 2021, while total foundations grew 11 per cent, reflecting Labuan IBFC’s rising appeal amongst high-net-worth individuals (HNWIs).
Labuan foundations’ AUM increased 12 per cent to USD802 million, comprising mainly cash holding endowments.
Labuan IBFC complements Malaysia’s multi-layer wealth ecosystem through its distinctive conventional, digital and Shariah-compliant structures for wealth preservation, investment and legacy planning.

Labuan Leasing and international commodity trading remained resilient amidst global trade uncertainty and commodity price volatility.

The sector recorded USD1.8 billion new asset leased in 2025, from aviation sector, which accounted for 64.2 per cent of the total.
With the softer operating environment, Labuan leasing revenue moderated to USD1.2 billion, with profitability eased to USD597 million. In addition, lower lease expenses recorded indicated improved cost management and operational efficiency.
For Labuan international commodity trading companies, higher export volumes of crude oil and LNG were offset by weaker global prices, leading to lower export value and narrower profit margins at USD0.6 billion.

PRIORITIES FOR 2026

In 2026, a more challenging external environment is expected to persist, shaped by heightened geopolitical tensions, and continued uncertainty over global trade and capital flows. Against this backdrop, the imperative of Labuan IBFC is clear – to deepen financial inclusivity, strengthen ecosystem synergies, and hone its competitive edge. In response, three priorities are key for 2026:

To intensify market development and innovation, particularly in digital finance, Islamic finance and insurance;
To further strengthen regulatory frameworks for the takaful, banking and trust company sectors, and enhance the AML/CFT regulations consistent with Mutual Evaluation recommendations; and
To improve operational efficiency through enhanced digital platforms as well as stronger supervisory and compliance oversight systems.

PROGRESS THROUGH ASEAN OPPORTUNITIES

The Director General of Labuan FSA, Affendi Rashdi highlighted, ‘With the current more fragile global backdrop, Labuan FSA remains vigilant to the implications of the evolving conflict in the Middle East, particularly its effects on energy markets, trade flows and investor sentiment. Yet periods of disruption also tend to accelerate strategic realignment, and within our immediate region, ASEAN remains a natural source of opportunity for Labuan IBFC.”

The Director General added that Labuan IBFC is well-positioned to facilitate regional initiatives such as ASEAN’s, particularly in intermediating cross-border financing, regional trade and investment amongst member countries. These include emerging intra-ASEAN opportunities for infrastructure financing and energy connectivity-related projects, such as the ASEAN Power Grid, where Labuan IBFC can be the bridging market.

With combined support from stakeholders and industry players, Labuan FSA is confident that Labuan IBFC will remain resilient, deepen its anchor within Asia’s broader financial ecosystem, and continue to capitalise on emerging opportunities ahead.