Syariah compliant General Takaful products

Sami GUELLOUZ Jakarta 6th, April, 2006 1

Syariah compliant General Takaful productsA tailor-made service for Muslim community

Jakarta 6th, April, 2006 2

OverviewBack to the roots of TakafulTakaful customer’s profileEmerging markets development trendsGeneral Takaful products landscape Conclusion


Insurance not permissibleUncertainty (Gharar)Gambling (Maisir)Interest (Riba)


Syariah relevant conceptsTakaful Tabarru’Dharoura’

Fortune sharing


Takaful concept1985 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


Operating modelsPure mudharabah (Sudan)Modified mudharabah (Malaysia)Wakala (Bahrain)

General Takaful

Family Takaful


Re-Takaful conceptPreferred reinsurance is proportional (quota share or surplus) Non proportional permissible

If Re-takaful is unavailable, then it is permissible to use a conventional reinsurer




General Takaful contractA customer’s needs driven product


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


Takaful in Emerging markets

Takaful contributions 2002 USD 2 billions

Ww Takaful contributions 2002 USD 2.1billions

Emerging markets contrib. / Ww contributions

99%


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%


Main current Takaful Markets

GCC MalaysiaOther Arab countriesOther South & East Asia

Emerging markets…


Takaful customer’s profile

MuslimCi

tizen

of 2

1st

cent

ury

Citiz

en o

f em

ergi

ng

mar

kets




Emerging markets86% 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


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


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).


Non-life insurance dominated by motor and property insurance

Transport insurance Insignificant in Eastern Europ 6%-10% of non-life premiums in the other

regionsLiability 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.


Liability productsLiability 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


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


Real growth by major LOBReal premiums growth 1998-

2003Non-Life Motor Propert

y

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%


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


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.


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.


Forecast growthIncrease 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


Conditions to achieve this growth potentialGeneral factors

Economic growth Products offeredWealth/distribution of income

Distribution channels

Religion-culture Risk awarenessEducation Insurance

regulationProperty rights; legal certainty

Trust in insurance

Non-life insurance

Compulsory insuranceNatural cat exposurePublic role in health and workers compensation insuranceClaims awards




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.


No limits for the General Takaful products landscapeExcept the criteria of insurability


Criteria of insurabilityCategory Criterion Characteristic

1

Actuarial

Risk/Uncertainty Measurable2 Loss occurences Independent3 Maximum loss Manageable4 Average loss Moderate5 Loss frequency High6 Moral hazard, adverse

selectionNot excessive

7 Market-determined

Takaful contribution Adequate, affordable

8 Takaful cover limits Acceptable9 Industry capacity Sufficient10

SocietalPublic policy Consistent with

cover11 Legal and syariah

systemPermit the cover


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


Thank you

Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005

Date post:	10-Feb-2016
Category:	Documents
Upload:	terrel
View:	133 times
Download:	4 times

Syariah compliant General Takaful products

Documents