KUALA LUMPUR: The Labuan International Business and Financial Centre (Labuan IBFC) sees no immediate impact yet on industries incorporated in the economic zone and offshore financial hub as a result of the ongoing conflict in the Middle East.
Labuan Financial Services Authority director general Affendi Rashdi said across the main sectors such as leasing, banking and insurance, the impact has been somewhat muted.
“But we remain cautious and vigilant,” he said after the release of the Labuan IBFC Market Report 2025 here yesterday.
“In leasing, for example, most of the activities are energy-related, these have not really felt any impact as most of their contracts have been locked in but there is normally a lag, so we are monitoring.”
He said in banking, although the direct exposure to the Middle East remained small, there were banks which had their assets tied up in investments.
“So if there is a lot of volatility and uncertainty, there will be an impact. For now there is no immediate issue,” he said, adding that earlier capital buffers that had been introduced for the lenders, will help to cushion any impact.
He said moving forward, a major spike in the price of oil and a global investment market that goes south, could likely change this positive narrative.
Affendi said the upcoming second-quarter figures will give a better idea of how things are really shaping up.
He said in 2025, new company incorporations and registrations in Labuan grew by 5.1%, while 41 new licences were issued bringing the total to 808 licensed entities and 4,971 operating companies.
This is expected to grow at a slower rate of 3% to 5% in 2026, mainly due to heightened geopolitical tensions, and continued uncertainty over global trade and capital flows.
Affendi said the 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.
The Market Report 2025 highlighted that the Labuan banking sector posted a marked 55.3% 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%, reflecting the banks’ continued support in Asia’s financial intermediation activities.
The Labuan insurance market also 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, it said.
The report noted that gross premiums for the insurance sector rose 5.8% to US$2.5bil while the sector’s net retention increased to 62.7%, reflecting Labuan IBFC’s growing risk capacity and strengthened reinsurance role.
It said Labuan’s leasing and international commodity trading sector saw US$1.8bil new assets leased in 2025, from the aviation sector, which accounted for 64.2% of the total.
“With the softer operating environment, Labuan’s leasing revenue moderated to US$1.2bil, with profitability easing to US$597mil. In addition, lower lease expenses recorded indicated improved cost management and operational efficiency.”
