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Sami GUELLOUZ Jakarta 6th, April, 2006 1
Syariah compliant General Takaful products
A tailor-made service for Muslim community
Jakarta 6th, April, 2006 2
Overview
Back to the roots of TakafulTakaful customer’s profileEmerging markets development trendsGeneral Takaful products landscape Conclusion
Jakarta 6th, April, 2006 3
Insurance not permissible
Uncertainty (Gharar)Gambling (Maisir)Interest (Riba)
Jakarta 6th, April, 2006 4
Syariah relevant concepts
Takaful Tabarru’Dharoura’
Fortune sharing
Jakarta 6th, April, 2006 5
Takaful concept
1985 Grand Council of scholars approved TakafulMethod and means left to scholars and practitionersMust have : Permanent Syariah Advisory Board Syariah compliant investment strategy Operating model based on Syariah concepts
Jakarta 6th, April, 2006 6
Operating models
Pure mudharabah (Sudan)Modified mudharabah (Malaysia)Wakala (Bahrain)
General Takaful
Family Takaful
Jakarta 6th, April, 2006 7
Re-Takaful concept
Preferred reinsurance is proportional (quota share or surplus) Non proportional permissible
If Re-takaful is unavailable, then it is permissible to use a conventional reinsurer
Jakarta 6th, April, 2006 8
Overview
Back to the roots of TakafulTakaful customer’s profileEmerging markets development trendsGeneral Takaful products landscape Conclusion
Sami GUELLOUZ Jakarta 6th, April, 2006 9
General Takaful contract
A customer’s needs driven product
Jakarta 6th, April, 2006 10
Takaful industry in the World
World Premiums 2003 USD 2.6 trillions
Takaful contributions 2002 USD 2.1billions
Takaful contributions / Ww premiums
1 per mil
Jakarta 6th, April, 2006 11
Takaful in Emerging markets
Takaful contributions 2002 USD 2 billions
Ww Takaful contributions 2002 USD 2.1billions
Emerging markets contrib. / Ww contributions
99%
Jakarta 6th, April, 2006 12
Takaful industry in Emerging markets
Takaful contributions 2002 USD 2 billions
EM Total Premiums in 2002 USD 217 billions
EM Takaful cont. / EM Total Prem. ~1%
Jakarta 6th, April, 2006 13
Main current Takaful Markets
GCC MalaysiaOther Arab countriesOther South & East Asia
Emerging markets…
Jakarta 6th, April, 2006 14
Takaful customer’s profile
MuslimC
itiz
en
of
21
st
cen
tury
Cit
izen
of
em
erg
ing
m
ark
ets
Jakarta 6th, April, 2006 15
Overview
Back to the roots of TakafulTakaful customer’s profileEmerging markets development trendsGeneral Takaful products landscape Conclusion
Jakarta 6th, April, 2006 16
Emerging markets
86% of world’s population 1.3 billions (China) 1.1 billions (India) 0.2 billions (Indonesia)
23% of global economic output10% of global non-life business in 2003Asia is the most important in the emerging world with
62% of population 47% of GDP 47% of non-life premiums
Jakarta 6th, April, 2006 17
Non-life penetration rate & per capita spending
1.5% in 2004 3.9% in industrialized markets
26.6 USD in 2004 1275 USD in industrialized markets
Jakarta 6th, April, 2006 18
Non-life insurance dominated by motor and property insurance
Motor dominant lob in most emerging markets
Compulsory third part liability insurance Own damage insurance (ex: leasing
contracts for cars)
Property, accident and health insurance are generally next biggest
Accident and health depends on governement’s role in this lob (high where WCA are covered by private insurance (Latin America, Asian markets) or where public health is unsufficient).
Jakarta 6th, April, 2006 19
Non-life insurance dominated by motor and property insurance
Transport insurance Insignificant in Eastern Europ 6%-10% of non-life premiums in the other
regions
Liability still of minor importance in most markets
Growth in recent years in Eastern Europe stimulated by EU regulation
Smaller growth in Asia due to demand of product liability for exports to the USA and more widespread regulations.
Jakarta 6th, April, 2006 20
Liability products
Liability accounted for USD2.8billion in 2003
Asia for 50% Latin America & Eastern Europe South Africa & Middle East (less than 10%)
General & product liabilty are the main in emerging marketsProfessional indemnity in Easter Europe in response to EU requirements.In Brazil, South Africa and India, increasing demand for D&O coverage
Jakarta 6th, April, 2006 21
Commercial - Personal lines
Commercial lines dominate the developing marketsIndividual consumption limited
Lack of risk awareness among consumers as well as low household income.
Commercial lines show higher growth rate than personal lines
Jakarta 6th, April, 2006 22
Real growth by major LOB
Real premiums growth 1998-2003
Non-Life Motor Property
India 8.9% na 6.2%
Singapore 13.7% 8.3% 6.8%
Asia 8.8% 8.2% 4.6%
Africa 5.6% 5.0% 16.8%
Middle-East 8.6% 7.2% 8.2%
Jakarta 6th, April, 2006 23
Strong growth between 1998 and 2003
Non-life growth was mainly driven by increases in property business
Risk awareness and rates increases since 2001
Motor premiums strongly increased mainly driven by improving economic conditions
More motor vehicles sales
Jakarta 6th, April, 2006 24
Different in size and structure, but common development trends
Strong economic growth will continue to drive development. New products and new distribution channels will help to tap growth potential.Regulations to be aligned to international best practices (Solvency, corporate governance and transparency).Insurers will find stronger incentives to maintain sound underwriting standards.Emerging insurance markets are moving towards a more liberal regime with fewer entry barriers.
Jakarta 6th, April, 2006 25
Cat nat in the emerging markets
Cat nat like Tsunami (dec 2004) in SE Asia
Many emerging markets to rethink their vulnerability to natural catastrophy,
Better and broader use of insurance as a tool for managing these exposures.
Policy shift that should encourage insurance development in these countries.
Jakarta 6th, April, 2006 26
Forecast growth
Increase 1 to 2 times faster than overall economy
Countries where per capital 2000 USD <per capita income<10000 USD
7,5% increase for 2004-2014 period
In real terms per year 8,9% in 2004
Jakarta 6th, April, 2006 27
Conditions to achieve this growth potential
General factors
Economic growth Products offered
Wealth/distribution of income
Distribution channels
Religion-culture Risk awareness
Education Insurance regulation
Property rights; legal certainty
Trust in insurance
Non-life insurance
Compulsory insurance
Natural cat exposure
Public role in health and workers compensation insurance
Claims awards
Jakarta 6th, April, 2006 28
Overview
Back to the roots of TakafulTakaful customer’s profileEmerging markets development trendsGeneral Takaful products landscape Conclusion
Jakarta 6th, April, 2006 29
Increasing array of risks faced by individuals and companies
Natural catastrophyFire,Business interruption,Product recalls,Directors and officers,Asbestos litigation,Terrorism,Financial volatility,Weather volatility; etc.
Sami GUELLOUZ Jakarta 6th, April, 2006 30
No limits for the General Takaful products landscape
Except the criteria of insurability
Jakarta 6th, April, 2006 31
Criteria of insurabilityCategory Criterion Characteristic
1
Actuarial
Risk/Uncertainty Measurable
2 Loss occurences Independent
3 Maximum loss Manageable
4 Average loss Moderate
5 Loss frequency High
6 Moral hazard, adverse selection
Not excessive
7 Market-determined
Takaful contribution Adequate, affordable
8 Takaful cover limits Acceptable
9 Industry capacity Sufficient
10 Societal
Public policy Consistent with cover
11 Legal and syariah system
Permit the cover
Jakarta 6th, April, 2006 32
Conclusion, hopefully…
General Takaful will benefit from the growth trend in emerging markets in motor, property and liability lobBoth commercial General Takaful lines and personal will benefit from this growth trend Personal lines will increase more than commercial lines owing to Takaful conceptGeneral Takaful will participate to natural catastrophies coversInnovative contracts targeting specific needs of Muslims will make the growth of General Takaful faster than that of non-life insurance
Sami GUELLOUZ Jakarta 6th, April, 2006 33
Thank you
Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005