Lack of awareness on Takaful, conventional insurance differences

Many Malaysians do not understand the importance and difference between takaful and the conventional insurance, says Zuraidah Hanim Ibrahim, the first lady agent from Takaful Ikhlas Sdn Bhd to break into the Million Dollar Round Table (MDRT) ranks.

She said Malaysians were not aware of takaful coverage, as they often had the misconceptions on the differences between the Islamic and the conventional insurance.

"Only 10 per cent of Malaysians have takaful coverage compared to 42 per cent who have insurance coverage.

"The untapped market is actually is in the high-income market.

This is because they have no time to explore what is takaful and usually, they are insurance policy holders, yet looking for more and better coverage," she told Bernama in an interview.

Zuraidah said takaful, an Islamic insurance concept grounded in Islamic muamalat (Islamic banking), observed the rules and regulations of Islamic law.

"In reality, it is better to have both kinds of coverage for a person, as both insurance structures give benefits in different ways," said Zuraidah, who manages over 1,500 Takaful Ikhlas policyholders.

On MDRT, Zuraidah said, with a personal production of family takaful for the first year contribution of RM461,000, she was able to make it to MDRT 2011, along with 7,000 other insurance and takaful agents from around the world.

The minimum premium qualifying mark will increase every year, and for the MDRT 2011, the mark was RM420,000.

With the induction, Zuraidah, who runs her own financial consultancy via Subang Jaya-based Darul Asiah Consultant Sdn Bhd, joined the ranks of some 36,000 life insurers and financial services professionals from over 430 companies in 78 countries.

The MDRT annual meeting is also designed to expose participants to innovative sales ideas in the life insurance-based and financial services business.

It will have about 100 speakers during its sales ideas breakfast sessions, motivational main platform presentations, educational afternoon sessions, and what it badges as insightful evening sessions.

MDRT members demonstrate exceptional professional knowledge, strict ethical conduct and outstanding client service. - Bernama

http://www.dailyexpress.com.my/news.cfm?NewsID=82297

Saudi Arabia remains largest takaful market

The global takaful industry has witnessed tremendous growth in the last decade, rapidly becoming an integral part of the mainstream financial system, with Saudi Arabia at the forefront, Ernst & Young executive said Wednesday at the opening of "The World takaful Conference: Asia Leaders Summit (WTC: ALS 2012)" at Hotel Istana, Kuala Lumpur.

South East Asia, particularly Malaysia, has been the nerve center of this dynamic and vibrant industry, added David McLean, Chief Executive of the World takaful Conference. Citing a recent report by Bank Negara Malaysia, he said the takaful industry "experienced a compounded average growth rate of 27 percent in terms of net contributions between 2005 and 2010."

Given the large untapped market that still exists, the takaful industry in Malaysia is poised to benefit in the years ahead on the back of steady demand. 

Similarly other key markets in South East Asia such as Indonesia and Brunei are also rapidly emerging as important takaful markets, he added.

Brandon Bruce Sta Maria, Partner, Assurance – Insurance Leader, Ernst & Young Malaysia, noted that "global takaful contributions grew by 19 percent to $8.3 billion in 2010. Of these, the GCC contributed $5.68 billion and South East Asia contributions were $2 billion. In 2010, growth in the GCC slowed to 16 percent, from a compounded annual growth rate (CAGR) of 41 percent in 2005-2009, as the implementation of compulsory medical takaful in Abu Dhabi and Saudi Arabia was completed earlier. Saudi Arabia remains by far the largest takaful market, contributing $4.3 billion or 51.8 percent of the industry at an average contribution per operator of $141 million."

He also said "Malaysia grew 24 percent to reach contributions of $1.4 billion at an average contribution per operator of $141 million. With current growth trends, and the addition of new frontier markets such as Indonesia and Bangladesh, it is expected that gross contributions will reach $12 billion by 2012. 

By contrast, the GCC takaful market predominantly comprises of general takaful business with family takaful accounting for as little as 5 percent in certain markets."

"Strong competition, evolving regulations and shortage of takaful expertise are identified as key risks in both the GCC and South East Asia. Young takaful operators are relying upon aggressive pricing strategies to compete against the established, older, conventional players. Such pricing is not sustainable and causing significant pressure on the industry’s profitability. There are increasingly stringent regulatory requirements on capital and solvency, indicating the regulators’ desired future direction", he added.

Zainurin Julaihi, Senior Vice President and Chief Financial Officer of takaful Ikhlas Sdn Bhd, said "with a track record of sustained double-digit growth rates, the potential for the takaful industry in Asia is unquestionable. The low insurance penetration, demographic factors and the rise in Shariah compliance awareness have made the region an attractive destination for both domestic providers as well as global conventional insurers entering the takaful market space."

He added that "though the focus has shifted toward identifying strategies to translate the market potential to real growth, industry leaders must also keep a constant check on the increasing competitive pressures and the challenges that come along with it." – SG/QJM

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20120614126894

Takaful growth potential 'tremendous'

Takaful, the Shariah-compliant form of insurance, holds tremendous potential but continues to be challenged by multiple factors such as a limited product range and non-competitive pricing, a report said.

The report, Opportunities and Challenges in the Middle East Takaful Industry, is released by Zawya and it summarizes and examines panelist commentaries made during the 2012 Takaful Roundtable discussion.

Organized by Zawya in partnership with Emirates NBD and FWU Group, the roundtable provided an opportunity for industry leaders and decision makers to convene and participate in an open dialogue on the Takaful industry.

"The Takaful industry has come a long way, paving the way for a distinctive bancassurance offering within the GCC,” said Shekhar Krishnamurthy, head of retail assets and liabilities, consumer banking and wealth management at Emirates NBD.

“Having said that, the success of the Takaful industry is dependent on the active participation of the providers in creating general awareness of the product value. It also requires engagement with distributors to deliver on innovative products matching client demand and market requirements,” he said.

In spite of a high growth rate in demand for such products in the UAE, for instance, takaful remains a small segment of the insurance pie. In 2011, the overall UAE insurance market grew by 10 per cent, whereas the takaful segment is expected to have grown by 30 per cent. Takaful remains a very small segment of the market, at about 7.5 per cent, the report said.

Sohail Jaffer, deputy CEO, FWU Global Takaful Solutions, said: "Key drivers for takaful include full transparency of product terms and conditions, surplus sharing and a sustainable customer value proposition. Increasingly major banks in the region have widened individual customer choice by offering suitable long term takaful savings plans and financial protection." –TradeArabia News Service

Amana Takafull makes losses, says lack of investment options is hindering growth

Sri Lanka’s Amana Takafull PLC has recorded a Rs. 109.3 million loss during the financial year 2011, owing to the impact caused by increased claims and volatility in investments.

“Increased claims, volatility in investments, especially equities and gold in the latter half of the year, took its toll on profitability, resulting in negative bottom-line”, Chairman of the Amana Takafull PLC Tyeab Akbarally stated in the company’s annual report.

However, the revenues from the company’s local business operations have grown from Rs. 917 million in 2010 to Rs. 1,269 million in 2011, recording a growth of 38.4%.

The firm’s local general business has grown up to Rs. 965.3 million during the reference year, from Rs. 676.9 million recorded in 2010, which is a growth of 42.6%.

“Similarly Life business grew by 26.5 percent which amounts to Rs. 64.0 million, by recording a gross written premium of Rs. 304.0 million compared Rs. 240.0 million in 2010”, added the Chairman in his review.

Amana Takafull says its subsidiaries, Amana Global, Amana Takaful Maldives and IGL have contributed positively to the Group.

According to Akbarally, lack of investment options for the firm still persists.

“Equity and bullion being volatile investments where fortunes can swing ways, the Islamic finance system and especially Takaful requires more avenues of investments in the form of Islamic Bonds and relaxation of rules to invest in Islamic finance windows in banks, where there is low volatility” says Akbarally.

http://www.news360.lk/business-finance/14052012-amana-takafull-makes-losses-says-lack-of-investment-options-is-hindering-growth-9912

AAOIFI plans reform of takaful standards

Khaled Al Fakih, the new secretary-general of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions, outlined plans for a sweeping review of its guidelines in an interview with Reuters.

"We would like to see insightful debate ... that can help us develop standards that can benefit the industry," Fakih told Reuters, ahead of AAOIFI's annual meeting on 7 and 8 May.

His organisation plans to start consultations on reforming the operations of sharia boards, the groups of Islamic scholars which rule on whether financial institutions' activities and products are religiously acceptable, by the middle of this year.

A final draft of the reforms is not expected to be ready before the end of next year at the earliest.

AAOIFI will also work on a new framework for disclosing financial data, and will look at revising standards for takaful (sharia compliant insurance), investment accounts and other products, Insurance Insightunderstands.

Fakih, who took the helm in February, said basic elements of Islamic finance such as murabaha, mudaraba and ijara - structures designed to permit investment while obeying religious bans on paying interest and pure monetary speculation - would be reviewed next year.

But the growth has exposed weaknesses in Islamic finance. One is the lack of a clear consensus on what products and procedures are permissible. The sharia boards of individual banks and investment firms can issue conflicting rulings.

The board may also attempt to address the accusations of conflict of interest that are often levelled at the sharia board system because scholars are paid handsomely by the firms whose behaviour they are supervising.

AAOIFI plans to improve the operations of shariah boards by strengthening the certification process for scholars, Fakih said. The organisation currently offers scholars two professional credentials, but they have been criticised as not sufficiently rigorous and too easy to obtain.

In addition, AAOIFI is developing new guidance on the relationship between Islamic financial firms and their shariah boards, "similar to international best practices in terms of reference for financial institutions' board of directors".

http://www.insuranceinsight.eu/

Saudi leads the way in takaful sales

Global Islamic insurance sales rose nearly 20 per cent to US$8.3 billion (Dh30.48bn) in 2010, but opportunities still abound for further expansion, a new report has found.

Takaful contributions in the UAE grew by 28 per cent to reach $818 million during the year, said Ernst & Young's World Takaful Report 2012.

Saudi Arabia was the biggest market, with $4.3bn of sales, or more than half of the industry. Malaysia was the second-largest market, ahead of the UAE, with contributions of $1.4bn.

"The takaful industry continued to show double-digit growth in 2010, albeit at a relatively slower rate of 19 per cent compared to previous years," said Ashar Nazim, the head of Islamic financial services in the Middle East and North Africa (Mena) region for Ernst & Young.

"With current growth trends, and the addition of new fringe markets such as Indonesia and Bangladesh, we expect gross contributions of $12bn by 2012."

Takaful has grown from a low base in recent years as popularity rises for Islamic alternatives to conventional insurance products. Unlike conventional products, investments are held in Sharia-compliant assets.

The six-nation GCC made $5.68bn of Islamic insurance contributions in 2010, and South East Asia $2bn, according to the report.

Expansion in the GCC slowed to 16 per cent in the year from an annual average of 41 per cent between 2005 and 2009.

Opportunities existed for further growth in Islamic insurance catering for families, which accounted for as little as 5 per cent of the total takaful market in certain countries, Ernst & Young said.

"With high disposable income average and low market penetration, the GCC presents great potential for family takaful," said Gordon Bennie, a financial services industry leader in the Mena region for Ernst & Young

"Large Muslim markets such as Libya, Egypt, Bangladesh, Indonesia and Brunei are opening up to takaful."

Strong competition, evolving regulations and a lack of takaful expertise are key risks in both the GCC and South East Asia, said the report.

Young takaful operators were using aggressive pricing strategies to compete against more established players, it said. Such pricing was "not sustainable" and causing significant pressure on the industry's profitability.

At the same time, the industry was being squeezed by increasingly strict regulatory requirements on capital and solvency, it said. One in five insurance brokers in the UAE shut down in 2009 after new rules came in requiring Islamic and conventional insurers to have stronger financial backing.

But Ernst & Young forecasts further shake-ups.

"Industry consolidation would allow takaful operators to compete effectively with larger, more established conventional insurers and also reduce unhealthy price wars," said Mr Nazim.

"However, the industry is still growing rapidly, which is keeping shareholders interested in their takaful operations."

The industry would take more time to establish itself before it could be decided which players could sustain themselves and which could not, he said.

The Islamic Financial Services Board estimates assets of the Islamic finance industry will grow to $2.8 trillion by 2015, up from $1tn at the moment.

http://www.thenational.ae

UAE issues takaful law to regulate industry

A new UAE law regulating the growing Islamic insurance industry will provide more transparency and oversight but the extra costs of compliance may drive consolidation in a fragmented market, lawyers said.

The Islamic insurance, or takaful, law was issued Sunday, placing companies under the jurisdiction of the Insurance Authority of the United Arab Emirates and giving them a year to reorganize their processes.

Under the law, every takaful firm must have a Sharia board consisting of three qualified scholars with experience in Islamic finance.

The boards will be responsible for issuing an annual report and will fall under the oversight of a supreme committee within the authority charged with all Islamic legal opinions.

The law also sets standards for financial and accounting issues as well as rules for paying out surpluses resulting from premiums and investments.

“Up until now, companies were just trying to put insurance law in an Islamic context without any specificity,” said Peter Hodgins, partner at Clyde & Co. “The new law aims to standardize the operating structure of all takaful firms which will strengthen the industry.”

But any standardization process will likely result in an increase in costs that could hit an industry already struggling to make a profit. That could help spur some long-awaited consolidation, said Justin Balcombe, director of Middle East advisory at Ernst & Young.

 http://www.dailystar.com.lb) 

How Can Insurance Be Islamic?

In the world of Islamic economics and finance, conventional financial instruments such as credit cards, mortgages and insurance are generally considered impermissible.  Like Judaism and Christianity, Islam prohibits usury and financial interest.  Considering credit cards and mortgages depend on financial interest to remain viable for conventional banks, both are generally considered impermissible.

In an effort to provide Muslims with the convenience and flexibility of credit cards and mortgages, Islamic banks have developed shari’ah compliant financial products that eliminate interest.  Instead, these Islamized credit cards and mortgages incorporate a profit-and-loss approach, where the lender assumes ownership risk in the goods and services financed.

However, what of insurance?  Why does insurance need to be Islamized?  Conventional insurance serves a very important function in the global economy by mitigating risk.  Insurance policies effectively transfer risk from the insured to the insurer for a monetary amount.  In the event of an insurance claim event, the insured is guaranteed a monetary payment from the insurer to make the insured whole.

The unequivocal guarantee that an insurer provides is especially problematic for family insurance products such as life insurance.  Because a life insurance policy guarantees payment in the event of death, most Muslim jurists consider this a bet against God.  In Islam, only God knows when a person will die.  Any wager or hedge against this date is theologically insoluble.

In Islam, God is considered omniscient and omnipotent.  Therefore, God’s knowledge is perfect.  More specifically, what God knows to happen must happen.  If what God knows to happen does not happen, then God is either not omniscient or not omnipotent.  However, denouncing God’s omniscience or omnipotence is anathema to Islamic theology and doctrine.

Moreover, conventional insurance typically invests the policy premiums in a variety of financial instruments that include interest.  Therefore, most Muslim jurists consider insurance and more specifically life insurance impermissible.

Instead of conventional insurance products, Islamic insurers offer mutual protection through a takaful fund.  The word “takaful” is a derivative of “kafalah” which means “surety,” “guarantee,” or “mutual care.”

Indeed, this type of a mutual care has been in use throughout Islamic history.  In addition to the myriad proscriptions mentioned above, Islam also demands that each Muslim care for members of the community.  The Qur’an says that one should “spend of your substance, out of love for Him, for your kin, for orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of slaves” (2:177).

Accordingly, takaful embodies the spirit of social solidarity and mutual care.  Instead of insurance policy premiums, a voluntary donation is made to a communal takaful fund.  Using the law of large numbers, the takaful fund operator uses statistical data and mathematical calculations–similar to conventional actuarial sciences–to ensure that the fund is sufficiently capitalized to fund any insurance claim events.

All takaful funds are invested in shari’ah compliant investments that are free from interest and impermissible investments (e.g., equities engaged in the manufacture, distribution, or sale of porcine food products, alcoholic beverages, pornography, gambling, etc.).

Unlike a conventional insurance policy, because the tabarru payment is a donation, policy “premiums” do not accumulate any cash value for the insured.  According to proponents of takaful, this prevents an insured party from profiting from an insurance policy.

While critics of takaful–and Islamic banking and finance in general–may argue that takaful is simply another example of an Islamic financial product being superficially Islamized, takaful does appear to promote social solidarity and mutual care.

 Source : thexaminar

Huge growth potential seen for Takaful market

A leading industry expert has predicted a huge growth potential for Qatar’s Takaful (Islamic insurance) market, estimating its annual growth at 25%.

Dr Ali Mohayeddin al-Qaradaghi, a professor of Islamic jurisprudence at Qatar University, said that the local Islamic insurance market has lots of expansion opportunities since “every policy holders with the conventional insurance firms is willing to turn to the Takaful scheme”.

“I believe that the Takaful market is very active. Before ten years, we had only one Islamic insurer, now we have three big companies and other Islamic branches launched by local conventional insurers,” Dr al-Qaradaghi stated.

He was delivering a lecture on Monday for the staff and managers of the Al Khaleej Insurance and Reinsurance company, the recent conventional insurer to switch to the Islamic system.

Dr al-Qaradaghi said the Islamic Takaful scheme is “totally different” from the conventional insurance, which he said, involve prohibited practices by Islam.

“Securing the needs of people and reaching them out in difficult times like accidents and death is one of the Islamic principles.

This should be the responsibility of the country, but as countries do not do it, then individuals should take it over through Takaful companies,” he said.

About the Islamic insurance, the scholar explained that although policy holders at any Islamic insurance would pay a contribution, which he said was the equivalent of the premium in conventional system, they will be sharing the surplus made by the company at the end of the year.

“The big difference between the two schemes is that the surplus in Islamic system should be divided among the policy holders who retrieve an amount ranging from 1% to 20% of their earlier contributions,” he added.
He also hailed the decision of Al Khaleej insurance and reinsurance to switch to the Islamic system, saying that both shareholders and policy holders will benefit from the company’s step.

The Al Khaleej Insurance and Reinsurance’s chairman, HE Sheikh Abdullah bin Mohamed bin Jabor al-Thani said, in a speech, that his company, which is set to impark on its activities according to the Takaful system from January first next year, seeks to be a leading player in the Islamic insurance industry in the country.

“We promise our clients that we keep offering them the best products and services they need. In Islamic insurance, the main focus is not the profit, but rather to address risks and alleviate their impacts,”
The scholar also estimated the annual Zakat that should be given by banks and companies listed in region’s stock markets at $100bn, which he said, can tackle the poverty problem in the world if invested in aid programmes.

“Based on a recent study I made, I calculated the value of the Zakat due by companies and banks in Gulf and other Islamic states can make $200bn. If this amount was properly invested through a ten-year plan to eradicate poverty, there would be no more poor people who starved to death around the world,” he added.

Link: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=333454&version=1&template_id=36&parent_id=16

Takaful International, Hannover Retakaful in Takaful Partnership

Bahrain-listed Takaful International Co. BSC [90250] said it has signed an agreement with Hannover Retakaful [78849] to increase its family takaful insurance coverage up to US$5 million per individual, aiming to improve its insurance services and portfolio expansions.

Takaful International's chief executive officer, Younis J. Al Sayed, said in a statement that the agreement would give the company higher capacity, especially in family takaful, which provides protection to individuals including savings schemes, children's education schemes, personal loan protection and individual income protection.

Mahomed Akoob, Hannover Retakaful's CEO, said he believes the agreement will extend both companies' cooperative relations. "We are glad to be a part of their expansions in respect of takaful portfolios and services," he said in a statement.

Prior to this agreement, Takaful International signed an agreement with Kuwait's Takaful International Company for Takaful Insurance, and with Qatar Islamic Insurance Co., to provide female-dedicated "Heya" (meaning "she") products in the Kuwaiti insurance market and the Qatar insurance market, respectively.

Established in 1989, Takaful International claims to be the first Islamic insurer in the Middle East region. It provides insurance coverage in line with the Islamic Shariah principles.

In December 2006, Hannover Re set up a wholly owned subsidiary Hannover Retakaful B.S.C., in Manama, Bahrain, for the underwriting of worldwide reinsurance in conformity with Islamic law.

Link: http://insurancenewsnet.com/article.aspx?id=148098&type=newswires

First Takaful Insurance Company founded in Russia

First Takaful insurance company, based on the Islamic Laws, is established in Russia, reports the Kommersant newspaper. The company is going to offer its clients to participate in profits in order to enter into the segment of Islamic insurance in Russia. The potential market size is estimated at $2.6 billion.

The Russian Takaful Insurance company, established by Safinat and Al'ans Kapital investment groups, will open offices in Moscow and Kazan.

Among the first services the company announces motor insurance, property insurance and pilgrim insurance. The clients willing to participate in profits will get a discount for the next year insurance period; in case of termination of the contract the clients will get a compensation payment.

Link:http://www.russia-ic.com/news/show/9199/

Time for takaful

Hollywood director Woody Allen once joked: “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”

But lack of insurance is no laughing matter for people who have lost their jobs in the current financial crisis.

For expatriates, losing a job means an instant notification of loss of salary to their bank. The bank freezes all accounts – in credit or overdrawn; stops all credit cards; no longer honours any post-dated cheques in the market; and, if it is owed money, notifies immigration so that their customers cannot leave the country.

Small wonder that this year has seen a slew of expatriates vanish in the middle of the night without telling their employer or even their friends that they were leaving.

GCC governments do not provide a safety net for expatriates who lose their jobs. Laws typically date back to a time when visiting workers didn’t put down their own roots.

Oil workers, construction engineers and airline staff were taken care of by their companies: housing, schools, transportation were all provided for in the much-missed ‘expat package’.

Banks were barely exposed to any risk with these expats. Customers might have credit cards and overdrafts, but very few had tens of thousands of dollars of exposure on rent cheques and car loans.

I remember the time well. In the early nineties, I had to leave a job in Dubai to return to the UK. My gratuity payment easily covered the outstanding debts I had on a modest car and small overdraft, despite the fact that I’d only been in the UAE for a couple of years on a penurious salary.

How things have changed in the past decade. It is common today for the debit column of a Western expatriate in the lower Gulf to look something like this:

PDCs for year’s rent up front: $55,000

Outstanding car loan: $50,000

Credit card balance: $10,000

Overdraft: $10,000

That’s $125,000 worth of credit secured against the assumption that a salary of, say, $10,000 will land in the bank every month.

And that is just the people that rent their homes. In the boom times banks were offering $500,000 mortgages to people with salaries as low as $3,000 per month. That’s almost 14 times their annual salary.

Against all this colossal debt, there has been virtually no mechanism to insure oneself against being made redundant – an immeasurably more likely event than death or a house being destroyed (both of which are insurable) for the typical expat.

There are cultural barriers to the mass uptake of insurance in the Gulf, and the creation of a broad, deep and sophisticated insurance industry.

But the region’s economies have galloped beyond what might have been deemed culturally acceptable ten years ago, and the insurance industry (and the Islamic version, Takaful), the financial services authorities, the government and the legal system must catch up.

Link:http://www.arabianbusiness.com/571104-time-for-takaful

An evening spent with an insurance salesman might not be the greatest pleasure in life, but it is time for authorities, businesses and individuals of the Gulf to do just that.

Sufficient retakaful capacity is lacking

Lack of sufficient retakaful capacity for specialty lines and big risks is one of the biggest challenges for takaful companies, according to speakers on a panel at the Reactions Middle East Reinsurance Conference.

Lack of sufficient retakaful capacity for specialty lines and big risks is one of the biggest challenges for takaful companies, according to speakers on a panel at the Reactions Middle East Reinsurance Conference.

According to Oussama Kassi, general manager of Abu Dhabi National Takaful Company, takaful capacity has grown over the last few years. There are now around 15 retakaful operators worldwide, with total paid-up capital of $375m.

Link: http://www.reactionsnet.com/Article/2308858/Sectors/23074/Retakaful-capacity-a-challenge-for-takaful-companies.html

Takaful Takes Off In The UK

Principle Insurance, the UK's first fully Shariah compliant car and home insurance provider, has been instrumental in taking the Islamic principle of Takaful insurance to Britain. In doing so, the company has changed the competitive landscape of the UK insurance market over the last 14 months.

The company, which has major investors throughout the GCC region, including the Kingdom of Saudi Arabia, Bahrain, Kuwait, Qatar, the UAE as well as Malaysia, trades under the brand name Salaam Halal insurance.

Despite London being hailed at the emerging global 'hub' for Islamic finance* it was severely lacking in one aspect of Shariah compliant financial services - a dedicated Takaful provider.

Even though the UK insurance market has more than 167 insurance companies** actively writing motor and home insurance, there had never been a real choice for Muslims who wanted the option of buying a product that was aligned with their faith, until now.

After many months of planning, the UK's first independent Islamic insurance company, Principle Insurance, was granted FSA approval in April 2008. At the end of July 2008, it launched its first product, motor insurance, under the Salaam Halal insurance brand. A Shariah compliant home insurance product followed in April 2009.

For the first time, Britain's 2.4 million Muslims are now able to purchase motor and home insurance from Salaam Halal insurance, which offers them all the benefits of conventional insurance, without compromising their religious beliefs. Non-Muslims are also attracted by the ethical nature of the Salaam products and their competitive price.

Key facts about the company:

- Salaam Halal insurance has provided two million motor quotes since launch and conversion rates via the call centre are in excess of 20% and 5% on the web.

- There is a 40% prompted brand awareness of Salaam Halal insurance amongst its target audience - higher than many mainstream insurance providers in the UK.

- The company's objective is to be competitive for the vast majority of its customers.

- The company's UK Call Centres are able to converse with customers in English, Arabic, Bengali, Gujarati or Urdu.

- Principle Insurance has been shortlisted for the category 'Insurance Innovation of the year' for the Insurance Times magazine Awards 2009.

Principle Insurance adopted elements of a classic direct response advertising campaign to promote the Salaam Halal products and adapted it to work for an ethnic audience, using TV, press, direct mail, inserts and online activity. All the advertising directs consumers to a UK-based call centre, or to the website www.salaaminsurance.com where they can get a quote and buy online.

In addition, Principle also embarked on a community awareness and outreach programme with mosques, Imams and community leaders across the UK, as well as organisations such as the Muslim Council of Britain, to raise awareness of its products.

In January 2009, Salaam Halal insurance launched exclusively on Moneysupermarket.com (the UK's leading price comparison website) giving both Muslims and non-Muslims the opportunity to compare prices of Shariah compliant insurance with conventional motor insurance for the first time.

Bradley Brandon Cross, Chief Executive of Principle Insurance Holdings Limited, said: "Salaam Halal insurance has had a huge impact on the UK insurance market over the last 14 months and we have been very encouraged by the level of interest and take up by UK Muslims and non-Muslims alike. Building on the success of the car insurance product, we recently launched the Salaam Halal home insurance product and are now in the process of consolidating our successes to date and looking at the next stage of our development. Further products, including Family Takaful; commercial insurance products for Muslim businesses; and car and home insurance specifically targeted at non-Muslims are all being planned."

Full details of the Salaam Halal insurance products are available at www.salaaminsurance.com

Launch of new shariah-compliant insurance products welcomed

The launch of new shariah-compliant insurance offerings has been welcomed by one organisation.

Last year, Salaam Halal insurance began offering both Muslims and non-Muslims the opportunity to purchase cover products which are consistent with Islamic teachings.

Now, the firm has introduced shariah-compliant home insurance as well.

Responding to the development, moneysupermarket.com said it was "encouraging".

The price comparison site added: "Prior to Salaam Halal insurance's launch in July 2008, British Muslims didn't have the option of buying insurance products aligned with their faith."

It went on to suggest that Salaam Halal insurance will also appeal to non-Muslims who are seeking competitively priced products of an ethical nature.

Firms which offer Halal insurance conform to a number of rules. For example, they are not permitted to invest in industries such as tobacco and alcohol and their business model is based on mutual cooperation.

As such, Muslims can buy cover from them and go through the claims handling process without contravening their faith.

Regulated by the Financial Services Authority, Salaam Halal insurance describes itself as the UK's first cover provider dedicated to providing products for the British Muslim community.

Link: http://www.keoghs.co.uk/informingyou_industrynews_readmore.asp?ID=40537

Ceylinco Takaful registration suspended

The Insurance Board of Sri Lanka (IBSL) has suspended the registration of Ceylinco Takaful Limited in respect of General Insurance Business in terms of Section 18 of the Regulation of Insurance Industry Act No. 43 of 2000 for a period of three weeks with effect from August 5.

Accordingly, Ceylinco Takaful Limited is prohibited from issuing new insurance policies in respect of General Insurance Business until the suspension is removed and informed in writing to Ceylinco Takaful Limited by the IBSL, sources said.

A renewal of an insurance policy in respect of General Insurance Business is considered as a new contract/new insurance policy.

In terms of Section 18 (2) of the Regulation of the Insurance Industry Act No. 43 of 2000, Ceylinco Takaful Limited is required to fulfil its obligations for insurance policies already issued.

Until the IBSL informs otherwise, the suspension imposed hereby on Ceylinco Takaful Limited remains unchanged till 4.30 p.m. on August 26, 2009, IBSL said.

Link: http://www.dailymirror.lk/DM_BLOG/Sections/frmNewsDetailView.aspx?ARTID=57241

Islamic insurance: is it possible?

• Analysis by: GLG Expert Contributor
• Analysis of: Islamic insurers work to build Saudi business
• Published at: www.ft.com

Summary

The rules of conventional insurance have many issues contradicting the rules of Islamic Economy that caused them to be unacceptable by the absolute majority of Muslims. This resulted in the creation of a new industry; Takaful, so described as a Sharia-compliant cooperative insurance. Yet, huge skepticism still exists among the masses because the insurance industry has not addressed the roots of the problem in the most appropriate way. This analysis gives insight into these roots.

Analysis

Islamic insurance: is it possible?

This article of the Financial Times pulls the attention to a basic issue the Insurance Industry is facing in Muslim societies. Needles to say, the Insurance Industry is a huge one, and in Muslim societies (we are not talking about the Saudi society here) where adherence to Islamic norms has a priority, it has been facing serious obstacles. The reason is simple: there is a fundamental problem in the concept of Insurance that makes it non-compliant with the basic principles of Islamic Economy, where there are rules for any contract to be deemed valid, and these rules are not observed in the basis of the Insurance contract.

First of all, let’s highlight the various types of contracts in Islamic Economy:

· Valid Contract;

· Corrupt Contract;

· Invalid Contract.

The Valid Contract adheres in total to all the relevant rules set by Islam. The Corrupt Contract does not adhere in total to the relevant Islamic rules but it has one or more conditions that deviate from that. However, the contract can be fully observed while such conditions are circumvented. In the Invalid Contract, the condition(s) that deviates from the relevant Islamic rules cannot be circumvented. So, the Valid Contract is always acceptable in Islamic Economy (the Muslim is allowed to sign it and observe it), while Invalid Contract is always unacceptable (the Muslim commits a sin in case of signing it, and certainly cannot observe it). In the case of Corrupt Contract, the Muslim can sign and observe it but the non-Islamic condition(s) must be circumvented.

In the case of Insurance Contract, in its very simple definition, the insurer commits to make it up for the insuree once a loss takes place by an asset or its price (for products and commodities), or a pre-determined sum of money (for life). From a terminological point of view, the term (insurance) is not accurate; the fact is: it is a contract with a commitment to make it up in case of loss, as the life itself might be lost or the commodities might be damaged and the insurer does not take a step to protect them; rather promises a compensation if something wrong (loss, damage...etc) happens to them.

The Insurance Contract is a contract because it involves agreement between two parties, and involves an initiation of a contractual relationship and its acceptance; hence it must observe the rules of Islamic Economy for a contract to be deemed valid. The reality is: the Insurance Contract is Invalid according to the rules of Islamic Economy from two perspectives:

1. For a contract to be Valid, a benefit (e.g. renting a house) or an asset (e.g. a house itself) must be the subject of it. The Insurance Contract’s subject is neither; its subject is a mere commitment with no benefit or asset. The commitment itself cannot be regarded as an asset (like a purchased cell phone) because it cannot be used or consumed. Also, its benefit cannot be acquired (like benefiting from a rented house); the compensation that might result from the commitment is not a benefit of it; rather, it’s a consequence of it. Hence; in the absence of asset and benefit, the contract is deemed Invalid from Islamic Economic point of view.

2. The insurer gives a commitment to compensate within certain conditions; hence this is a Guarantee, and a Guarantee must observe certain conditions to be accepted by Islamic Economy. These are:

2.1 The responsibility of the Guarantee Giver (the insurer in our case) must be combined with the responsibility of another entity. For example; someone dies and has a debt, then a relative of him states that he will take care of that debt. In this case, the relative has combined his responsibility with that of the dead person in paying the debt off;

2.2 There must be a monetary right of the Guarantee Taker (the creditor in the above example) against some entity, and the Guarantee Giver (the relative in the above example) is in fact guaranteeing that monetary right;

2.3 The compensation the Guarantee Giver (the relative) is committing must be a right of the Guarantee Taker (the creditor) at the moment of contract signature;

2.4 Three entities must exist in the Guarantee: Giver (the relative), Taker (the creditor), and the Guaranteed-Off (the dead person);

2.5 The Guarantee must be free of charge (the relative is committing to pay the dead person’s debt to the creditor without expecting anything in return).

The Insurance Contract lacks all these five conditions; hence, it cannot be accepted as a Guarantee from Islamic Economy perspective.

As a result, Insurance in its conventional way is forbidden in Islam and cannot be accepted. This explains the askance the Financial Times article talks about. This led to the creation of Takaful; a “Sharia-compliant cooperative insurance”, as the article described it. Yet, many of the entities that offer Takaful are perceived with great skepticism, and scholars review each product such entities offer. Yet again, scholars disagree in many occasions, and those allowing many of those products are perceived to lean against the wind. In the current absence of the authority that has the exclusive right to talk on behalf of Muslims and takes decisions on their behalf, such disagreements will continue to exist, and such industries will keep facing problems (the fact mentioned in the article that regulatory efforts have been partially responsible of the increased insurance in Saudi Arabia is a manifestation of that), unless they take radical measures to eradicate all sources of doubt in the minds and hearts of huge masses that are still reject the insurance concept all together.

Dr. Mosab Hawarey

http://mosab.hawarey.org

Takaful is growing in Sri Lanka

Amana Takaful Insurance recently marked its 10th year of operations in Sri Lanka whilst also marking a significant milestone for Takaful in Sri Lanka by reaching Rs 1 Billion in GWP for the last financial year. Within this short period of time Amana Takaful has been successful in carving a market for themselves in Sri Lanka and also rose in its Brand Rating by 7 notches to 70th position last year, in the rankings researched by Brand Finance. Today Amana Takaful is among the top 10 insurance companies in Sri Lanka and is present in the South, East, West, North Central and Central hills. The Daily Mirror spoke to Mr. Aashiq Aminuddin, Marketing Manager of Amana Takaful Insurance to find out more about the company's objectives and future plans.

"Having started off small with just around 20 employees we now have a staff strength of over 500 working in 18 locations and also in Maldives. Our main strength I would say is our strong Takaful concept for which we have been able to successfully carve out a market in Sri Lanka. Amana Takaful has been able to change the landscape of insurance in Sri Lanka, by offering policyholders the opportunity of sharing underwriting profits", says Mr. Aminuddin.

"At the beginning there were many hurdles to overcome because the concept was new to Sri Lanka. However, through persistent endeavors the staff was able to build a market for Takaful. As mentioned earlier the provision of Surplus Refunds (underwriting profit) helped the attainment of the billion mark as well and Takaful is growing steadily", he added.

The Takaful Insurance system is about fairness. It is a bond and a commitment to serve one another sincerely and truly, by providing financial security through solidarity. The Takaful concept is about helping all parties benefit progressively for the good of the country and its people. Here policy holders are not mere buyers, but are participants of a group fund built with the intention of helping one another through contributions. This good feeling of mutual assistance is the key to Takaful, which also provides the participants the benefit of claiming at times of need.

"When selecting an insurance company, the customer needs to pay more attention to the best service provider and not the best rate provider. What customers yearn for is a friend at times of need; therefore we need to build our offering around this basic customer requirement. Although there is an abundance of information and communication in the market, penetration levels of life insurance is only about 10% in Sri Lanka, therefore we need to create more realization with regards to the importance insurance and the benefits of obtaining a life insurance cover.

"In terms of Life insurance, Sri Lankan's should opt for insurance at a younger age. This habit will definitely benefit them in the long-term as the investment in insurance would be higher later in life. In addition, this needs to be understood is that individuals will be providing for better medical attention and help not to be a burden on the country", further stated Mr. Aminuddin.

"Promoting Takaful in Sri Lanka has been an equally rewarding task for Amana Takaful Insurance which continuously improved its Brand Rating according to the published data by LMD and researched by Brand Finance. The latest report showed Amana Takaful in the 70th position which is 7 positions higher than the previous year. This bears testament of our customer satisfaction, service and awareness that was scrutinized by Brand Finance", Aminuddin explained.

"Through results Amana Takaful Insurance was able to allay the misconception and belief that Takaful is meant for a select few in Sri Lanka.

Our clientele is proof that Takaful is being embraced fully and many Sri Lankans are opting in. We are confident of growth in the future", he stressed.

The company recently stepped up its operations aggressively in its branches located in the East in areas such as Trincomalee, Kathankudy and Kalmunai as well as Kaduruwela in Polonaruwa. With its expansion drive in full swing, Amana Takaful Insurance is aggressively growing in Sri Lanka, in terms of its portfolio size and client base, whilst also taking the Takaful concept of insurance to greater heights.

Amana Takaful provides General, Life and Medical insurance solutions. Its Life arm operates as Amana Takaful Life and is now in the process of expansion. The flagship of General insurance is Amana Takaful Total Drive (Motor policy) that provides easy methods of claim settlement to ease customer's minds with the additional benefit of Surplus Refunds.

In terms of Life insurance, Amana Takaful Life offers financial plans for individuals, children and families through products such as Secura Platinum, Secura Gold, Educate and Secura.

Meanwhile, Medical Takaful was given new impetus and released three new products into the market, by the name of Hale and hearty, sub categorized as Young Minds, Young Adults and Easy, to cater to the 3 main age groups, including young children .

Link: http://www.dailymirror.lk/DM_BLOG/Sections/frmNewsDetailView.aspx?ARTID=56348

Exim Bank to introduce takaful products in 2010

Export-Import Bank of Malaysia Bhd (Exim Bank) is poised to expand its reach further by offering better options to customers via the introduction of Shariah-compliant products.

Export-Import Bank of Malaysia Bhd (Exim Bank) is poised to expand its reach further by offering better options to customers via the introduction of Shariah-compliant products. Islamic financing has been identified as a new area of growth for the bank in view that Malaysia is expanding trade involving the Organization of Islamic Countries (OIC) member states. The bank has envisaged that by end-2009, it would have sufficient Shariah-compliant banking products to cater for the needs of its growing global customers, said managing director/CEO Mohd Fauzi Rahmat. "We are also planning to introduce takaful (Islamic insurance) products by next year," he said in a statement on July 6th, 2009. Exim Bank supports the financing needs of Malaysian companies and investors with operations in four continents across two dozen countries worldwide. Asean and Middle East will continue to be major contributors to the bank's portfolio with about two-third of its exposures while Africa, Europe and Asia Pacific make up the rest. According to Fauzi, the bank is committed to continue its drive to support local exporters and investors extending their international business by providing banking facilities and insurance coverage particularly those that significantly contribute to the extension and enlargement of Malaysia's export volume, value and markets. While the bank recognise that 2009 would be more a challenging year amidst global economic uncertainties, it would continue to provide support to its existing and potential customers and partners who are willing to take the challenge and participate in the still significant global trade and investments and to be ready for future businesses when the economy picks up. In 2008, Exim Bank approved a total of RM460.3 million direct loans and guarantees to customers in various sectors including construction, investment, manufacturing and commodity trading. In addition, the Export Credit Refinancing, extended via participating financial institutions and by far the single largest product of the bank by volume, contributed a total of RM9.5 billion in loan disbursements compared with RM8.4 billion in 2007. In trade credit insurance, it has a total of RM2.43 billion business in force in 2008, against RM2.78 billion in 2007. As for commercial and political risk insurance business, the bank approved RM120 million worth of business in 2008 reflecting it cautious approach in light of the global economic crisis. The total Malaysian exports insured for 2008 amounted to RM2.55 billion and is spread over 72 countries primarily across Asia and Africa. "Exim Bank maintained a positive and stable performance for both banking and insurance businesses although a more selective approach has been adopted to respond to the current global economic situation," Fauzi said. To strengthen its capacity to undertake more businesses, the shareholders' funds of Exim Bank has increased to RM2.8 billion in 2008 from RM839 million a year ago. This would go a long way in ensuring that Exim Bank continues to thrive as a vibrant and active Development Financial Institution for Malaysian exporters and investors over the medium and long-term. Link: http://www.cibafi.org/NewsCenter/English/Details.aspx?Id=4141&Cat=0