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Standard & Poor's Ratings Services has affirmed at 'BBB' its insurer financial strength and counterparty credit ratings on Saudi Arabia-based Weqaya Takaful Insurance and Reinsurance Co. (Weqaya) but the outlook is negative. The affirmation reflects S&P’s view that despite a comprehensive net loss of Saudi Arabian riyal (SAR) 90.7 million ($24.2 million) for 2013 Weqaya's new senior management is taking appropriate remedial action. Consequently, policyholder confidence will be maintained and Weqaya will continue to enjoy both a satisfactory business risk profile, and at least a lower adequate financial risk profile. The negative outlook reflects S&P's belief that senior management at Weqaya must continue to work quickly and effectively to reinforce capital and earnings.

After waging a legal battle with the regulator as well as conventional insurers for almost two years, Islamic insurance companies have finally agreed to an out-of-court settlement of the longstanding dispute over controversial Takaful Rules 2012. General and family Takaful companies will withdraw their constitutional petition against the SECP, 23 insurance companies and the federation of Pakistan within this week, thus allowing conventional insurers to run Shariah-compliant insurance business through parallel window operations. The SECP is said to have agreed to the Takaful players’ suggestion that conventional insurance companies should be required to maintain separate capital accounts for the two lines of business.

At the 9th annual world Islamic insurance conference in Dubai, the emphasis, as usual, was on the industry’s seemingly limitless expansion potential. True, takaful business worldwide increased at around 8% to $19 billion in 2012, with plenty of room for the sector to expand. However, the current takaful industry is very fragmented with few players that can claim to be pan-regional, let alone global players. That in itself adds to the lack of global accountancy, corporate governance and procedural standards. There are currently few signs of heightened mergers and acquisitions activity in the takaful sector, indicating the issue of scale is not one that will be addressed in the near future.

A mutual insurance scheme based on Islamic Sharia law has been launched to reduce the impact of extreme weather events on pastoral livelihoods in Kenya’s arid northern regions where perennial drought often decimates thousands of livestock. The Islamic Takaful insurance is boosting risk management. Those insured under the Tafakul scheme are compensated for the loss, or reduction in value, of their livestock based on an index formulated by the International Livestock Research Institute (ILRI), and according to information gathered by satellites to measure vegetation coverage and thus the severity of drought. Recently, some 101 livestock farmers received their first pay-out.

Etiqa Takaful Bhd, Malaysia's largest Islamic insurance provider and a unit of Malayan Banking Bhd, will issue a sukuk to raise 300 million Malaysian ringgit ($91.39 million). Etiqa is supported by a strong liquidity position although its family takaful business has seen poor growth due to unattractive pricing and a limited portfolio.

Researchers in Kenya have developed a pioneering insurance policy for nomadic Muslim livestock herders, which has now delivered its first payout of approximately $5,800 to 101 farmers to compensate them for drought losses. The policy, which was purchased by about 4,000 pastoralists in Northern Kenya, was developed by the International Livestock Research Institute and commercially delivered by Takaful Insurance of Africa. Since the farmers usually habitat isolated areas, index-based insurance works better than traditional insurance. For Takaful Insurance of Africa, the project is a leap of faith, as they are not currently making a profit. However, hopes are the project will eventually be self-sustaining.

Dubai Islamic Insurance & Reinsurance Co. (Aman) has announced a loss of AED 51.6 million at year-end 2013 that has impaired its capital adequacy. Given that this loss represents about half of Aman's shareholders' equity, S&P consider that Aman's capital and earnings position and overall financial profile have weakened significantly. The rating agency is therefore lowering its ratings on Aman to 'BB+' from 'BBB-' and placing them on CreditWatch negative. S&P also believes that Aman's retained earnings over the next two years are unlikely to be sufficient to rebuild its capital adequacy to levels consistent with higher ratings.

Turkey has significant potential in the sector of Islamic insurance, according to the Global Islamic Insurance Forecasts Report prepared by Ernst & Young (EY) for the period 2013-2014. The report also stressed that Turkey's high potential for Islamic insurance is based upon its young population, along with ongoing regulatory reforms and a government that is willing to promote financial inclusion through participation banking. However, as only four participation banks currently operate in Turkey, there is a major supply-side constraint, as well as limited legal infrastructure in the Islamic finance sector. Another factor negatively affecting Islamic insurance in Turkey is the problematic pricing of this insurance, which leads prices to remain relatively low in the sector.

The Islamic Financial Services Board (IFSB) successfully organised four events in Khartoum, Sudan on 18 - 20 February 2014. The Insurance Supervisory Authority of Sudan hosted the 6th Seminar on the Regulation of Takaful and the Facilitating the Implementation of the IFSB Standards (FIS) on Takaful while the Central Bank of Sudan (CBoS) was the host for the IFSB Meet the Members Session and the FIS Workshops on Banking. In addition, two workshops were held in Khartoum: the Facilitating the Implementation of the IFSB Standards (FIS) Workshops on Banking and the FIS Workshop on Takaful.

The Securities and Exchange Commission of Pakistan (SECP) has notified the Securities and Exchange Commission (micro-insurance) Rules, 2014, which will also regulate the micro-takaful business in the country. According to the rules, the word micro-insurance may be used interchangeably with the word micro-takaful; life micro-insurance with family micro-takaful; non-life micro-insurance with general micro-takaful; premium with contribution and insurer with operator. The commission has limited the sums insured under different concepts of micro-insurance. The SECP has also issued Code of Consumer Protection applicable on all insurers / operators in the business of micro-insurance / takaful. Moreover, the commission issued the Code of Conduct for Micro-insurance Agents applicable on all micro-insurance / takaful agents and their specified persons.

Companies selling takaful in Indonesia are boosting agent numbers and product ranges ahead of a new rule that will require them to be run independently. Indonesia is so far dominated by takaful "windows" which allow insurers to offer Islamic and conventional products side by side. However, a new law requiring takaful firms to be spun off into stand-alone businesses is expected this year. Operating costs are expected to triple when the takaful business is spun off. Takaful firms have also begun to explore new streams of revenue in market segments that remain relatively untapped, like savings products for pilgrimages to Mecca. Moreover, agents are branching out into Indonesia's rural areas, moving beyond markets already crowded with conventional players.

Brunei will introduce new guidelines for its takaful sector by June, in order to standardise the way agents are managed by firms. The guidelines will regulate commission rates payable to agents and the qualifications required for them to sell takaful products, Osman Jair, chairman of industry body Brunei Insurance & Takaful Association (BITA) said. An inter-company agreement will be signed, so companies will be better disciplined and the correct treatment of agents ensured. The impending guidelines are being reviewed by industry consultants and Autoriti Monetari Brunei Darussalam (AMBD), the country's central bank.

American International Group Inc. is plotting its entry into Malaysia’s Islamic insurance market, lured by the country’s economic expansion and an industry that has grown more than fivefold in less than a decade. The insurer will start a Shariah-compliant reinsurance business by June and may eventually offer a fuller range of services, Antony Lee, chief executive officer at AIG’s Malaysian unit, said. In line with the continuing expansion of the takaful business, the demand for retakaful is expected to expand between 15 percent and 20 percent on an annual basis. However, a key challenge for retakaful companies is their limited ability to compete with their larger non-Islamic counterparts for business that requires a bigger balance sheet.

After outsourcing its information technology (IT) infrastructure for about five years, Syarikat Takaful Malaysia has decided to bring it back inhouse. The company has adopted Microsoft System Center 2012 to manage its IT infrastructure and end-user computing. It said that the decision to go inhouse has shown immediate benefits, and it has been experiencing a 40 per cent improvement in response time and 27 per cent in cost reduction. Takaful’s adoption of Microsoft System Center was mainly helped by system integrator Redynamics Asia System Management. The cost savings the company achieved from going inhouse can now be used to help the company expand into other areas.

Pakistani Meezan Bank has launched Meezan Kafalah, a Shariah-compliant alternative to Bancassurance, in collaboration with takaful firm Pak Qatar Family Takaful Limited (PQFTL). Meezan Kafalah is a savings product through which customers can save money for their future plans. In addition, the customers also get Free Takaful coverage through PQFTL that in the case of the customer’s death during the savings period, the Takaful Partner will provide the funds needed for completing the savings. This new product, thus, offers a combination of saving, investment and protection. A differentiating feature of Meezan Kafalah is the accumulation of 100% cash value from day one of the investment with flexibility and ease of exit from the plan without any penalty or charges.

Kuwait's takaful firms are still struggling in a crowded market that faces cut-throat competition. This has led to stagnant growth and persistent losses for takaful firms operating in Kuwait, raising doubts about the sector's long-term viability. In a market with 32 insurers, takaful firms say they are at a disadvantage to their conventional peers which have built solid customer bases and amassed large financial surpluses. Kuwaiti takaful firms posted a combined 47.4 million dinars ($167.7 million) in premiums in 2012, an 18.7 percent share of the total. However, many companies in the sector have failed to post consistent profits. Furthermore, the takaful sector lacks a dedicated supervisory body, leaving an opening for negative competitive practices. In the meantime, looking abroad may be the only good option for the Kuwaiti takaful firms which can afford it.

This month, Oman's insurer Al Madina Takaful converted itself from a conventional insurer to a takaful company. It changed its conventional insurance clients to takaful policies after a customer education process, reportedly without client exits or other problems. In the next two years, the firm plans to add up to seven new branches to its network of three, and distribute products via Islamic banks, a practice known as bancatakaful. Two new firms could soon follow in Al Madina's footsteps: Takaful Oman Insurance and Oman United Insurance. However, their entry could crowd the market further and add to pressure on profitability. The Capital Market Authority (CMA) has yet to publish its final rules on takaful, while an insurance law is still in the draft stage.

Noor Takaful, the Islamic insurance arm of Noor Investment Group, announced on Tuesday that the company’s CEO Parvaiz Seddiqi has stepped down from his role. Seddiqi is the founder member of Noor Takaful. The company also announced that Andrew Greenwood has been named acting CEO. Noor Takaful offers general and family Islamic products to cater to individual and corporate customer segments.

Bahrain's central bank will release a new regulatory framework for takaful this quarter. Bahrain already has takaful-specific rules but the regulatory refom could help it grab a larger chunk of the sector. The new rules, developed after two years of consultations with the industry, cover the operations and solvency of takaful firms. They are expected to increase takaful firms' ability to distribute surpluses to policy holders and dividends to shareholders. In addition, the new rules require financial reporting by takaful firms annually rather than once every three years, restrict the use of performance fees, and introduce the concept of earmarked assets. In December, the central bank formally combined existing rules for issuing and listing financial securities, including sukuk, in an effort to make the process more efficient.

The first ever Islamic re-insurance is expected to be launched this year as the Kenya Reinsurance Corporation ventures into Sharia-compliant business. The Capital Markets Authority says in its new 10-year master plan that Kenya Re has the potential to provide a regional platform for this product since it has presence in West Africa and Middle East markets. The master plan has also proposed for the creation of a regulatory framework for Islamic capital markets focusing on corporate governance, disclosures, a policyholder compensation fund and responsible pricing. The CMA has in addition proposed the development of a separate policy, legislative and regulatory framework for Islamic products and services covering Islamic financial institutions, financial regulators, Islamic groups and the Ministry of Finance. This policy will run parallel to the conventional Act.