Syariah compliant General Takaful products

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Syariah compliant General Takaful products

• A tailor-made service for Muslim community

2
Overview

• Back to the roots of Takaful
• Takaful customers profile
• Emerging markets development trends
• General Takaful products landscape
• Conclusion

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Insurance not permissible

• Uncertainty (Gharar)
• Gambling (Maisir)
• Interest (Riba)

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Syariah relevant concepts

• Takaful
• Tabarru
• Dharoura
• Fortune sharing

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Takaful concept

• 1985 Grand Council of scholars approved Takaful
• Method and means left to scholars and
  practitioners
• Must have
• Permanent Syariah Advisory Board
• Syariah compliant investment strategy
• Operating model based on Syariah concepts

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Operating models

• Pure mudharabah (Sudan)
• Modified mudharabah (Malaysia)
• Wakala (Bahrain)

• General Takaful
• Family Takaful

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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

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Overview

• Back to the roots of Takaful
• Takaful customers profile
• Emerging markets development trends
• General Takaful products landscape
• Conclusion

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General Takaful contract

• A customers needs driven product

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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

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Takaful in Emerging markets

• Takaful contributions 2002
• USD 2 billions
• Ww Takaful contributions 2002
• USD 2.1billions
• Emerging markets contrib. / Ww contributions
• 99

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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

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Main current Takaful Markets

• GCC
• Malaysia
• Other Arab countries
• Other South East Asia
• Emerging markets

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Takaful customers profile
Citizen of 21st century
Citizen of emerging markets
Muslim
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Overview

• Back to the roots of Takaful
• Takaful customers profile
• Emerging markets development trends
• General Takaful products landscape
• Conclusion

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Emerging markets

• 86 of worlds population
• 1.3 billions (China)
• 1.1 billions (India)
• 0.2 billions (Indonesia)
• 23 of global economic output
• 10 of global non-life business in 2003
• Asia is the most important in the emerging world
  with
• 62 of population
• 47 of GDP
• 47 of non-life premiums

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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

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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 governements role
  in this lob (high where WCA are covered by
  private insurance (Latin America, Asian markets)
  or where public health is unsufficient).

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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.

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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 markets
• Professional indemnity in Easter Europe in
  response to EU requirements.
• In Brazil, South Africa and India, increasing
  demand for DO coverage

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Commercial - Personal lines

• Commercial lines dominate the developing markets
• Individual consumption limited
• Lack of risk awareness among consumers as well as
  low household income.
• Commercial lines show higher growth rate than
  personal lines

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Real growth by major LOB
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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

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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.

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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.

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Forecast growth

• Increase 1 to 2 times faster than overall economy
• Countries where per capital 2000 USD ltper capita
  incomelt10000 USD
• 7,5 increase for 2004-2014 period
• In real terms per year
• 8,9 in 2004

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Conditions to achieve this growth potential
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Overview

• Back to the roots of Takaful
• Takaful customers profile
• Emerging markets development trends
• General Takaful products landscape
• Conclusion

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Increasing array of risks faced by individuals
and companies

• Natural catastrophy
• Fire,
• Business interruption,
• Product recalls,
• Directors and officers,
• Asbestos litigation,
• Terrorism,
• Financial volatility,
• Weather volatility etc.

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No limits for the General Takaful products
landscape

• Except the criteria of insurability

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Criteria of insurability
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Conclusion, hopefully

• General Takaful will benefit from the growth
  trend in emerging markets in motor, property and
  liability lob
• Both commercial General Takaful lines and
  personal will benefit from this growth trend
• Personal lines will increase more than commercial
  lines owing to Takaful concept
• General Takaful will participate to natural
  catastrophies covers
• Innovative contracts targeting specific needs of
  Muslims will make the growth of General Takaful
  faster than that of non-life insurance

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Thank you
Sources Sigma6_2003 Sigma5_2004
Sigma1-4-5_2005