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The conveners of the longest running Insurance platform for the Middle East – the Middle East Insurance Forum (MEIF) – announced that a report on the region’s insurance industry will be launched at MEIF 2016 that will take place on Feb. 2-3, 2016 in Bahrain. The “Finance Forward Insurance Outlook Report 2016” will be launched at the forum. The report aims to help leaders in the insurance industry make key strategic decisions and capitalize on emerging opportunities. The report states that in 2014, growth in commercial lines grew just 6.6% (compared to 19.6% for personal lines) which may account for survey respondents’ more optimistic outlook for medium-term premium growth in personal lines. Many respondents are looking into online channels, particularly for personal lines, and into expanding outreach to underinsured consumers.

The net profit of the shareholders of Damaan Islamic Insurance’s (Beema) touched QR63m for the full-year 2015. Abdullatif Abdulla Zaid Al Mahmoud, the Deputy Chairman of the company, said Beema has achieved a gross contribution of QR314m in the year 2015; a 23 percent increase on year-on-year; and a surplus of QR16.5m from insurance operations, up 114 percent compared to the year 2014. The shareholders profit increased 17 percent to QR46.5m. The investment portfolio achieved an income of QR19.2m during the year 2015. The financial results were announced after the company’s board of directors’ meeting yesterday.

Premier Insurance appointed Imran Taqi Usmani as Shari’ah Adviser and Ernst and Young Ford Rhodes Sidat Hyder as Shari’ah Auditor. Premier Insurance, which deals in various conventional insurance products, is offering Shariah compliant products, Takaful. The Securities and Exchange Commission of Pakistan (SECP) enable Takaful business in the country and Premier Insurance offers the various services to clients across all economic sectors and products in all classes of general insurance. Imran Taqi Usmani, son of Justice (r) Taqi Usmani, renowned Islamic scholar holds LLB, MPhil and PhD degrees in Islamic Finance. He also holds an Alamiyya and a Takhassus (Specialisation in Islamic Jurisprudence) from Jamia Darul-Uloom, Karachi.

The Saudi insurance sector will grow by up to 17 per cent a year over the next five years thanks to regulation enforcement and growth in motor insurance, the Dubai-based investment bank Arqaam Capital said yesterday. Arquaam expects the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively. According to an Alpen Capital report released last year, the Saudi central bank has issued several new regulations regarding underwriting practices, reserving, actuarial-backed pricing and solvency requirements in the past two years, to help grow the industry.

Meezan Bank and EFU General Insurance Limited have joined hands for Takaful Coverage of Car Ijarah vehicles. As per the agreement, EFU Takaful will provide coverage to the vehicles leased by Meezan Bank through its Shariah-compliant car financing service Car Ijarah. The MoU was signed by Ariful Islam, Deputy CEO, Meezan Bank and Mr. Hasan Ali Abdullah, Managing Director, EFU General Insurance Limited Window Takaful Operations, at Meezan Bank’s Head Office, Karachi. Irfan Siddiqui, President & CEO of Meezan Bank was also present at the occasion.

The government is making it easier for the public to save for their higher education through its National Education Savings Scheme SSPN-i Plus. The SSPN-i Plus, which was introduced by the National Higher Education Fund Corporation (PTPTN) in June, doubles as an education fund besides providing affordable Takaful (Islamic insurance) coverage to the depositor. The product, a result of the strategic collaboration between PTPTN and Hong Leong MSIG Takaful (HLM Takaful), aims to instil in Malaysians the savings culture. The government has also provided a variety of exemptions for taxpayers to reduce their tax burden, with 21 tax exemptions given to taxpayers for the 2015 assessment year.

Speaking at a conference about UK’s general insurance in London, Max Taylor, chairman of the Islamic Insurance Association of London, said that the success of the takaful model relied on the participation of policy holders as the actions of one have an affect on all policy holders. There have been many attempts to establish takaful insurance operations in the UK in the past, but he said projects failed because of issues with capitalisation, underwriting approaches, and investment strategies under Shariah principles. He added that, internationally, takaful models had been successful in personal lines, but the vast majority of operators of such models were “small” and “risk averse”.

MAA Group Bhd, Solidarity Group Holdings BSC and Zurich Insurance Co Ltd (Zurich) has jointly submitted an application to Bank Negara Malaysia (BNM), for the sale of MAA Takaful Bhd stakes. In a filing with Bursa Malaysia, MAA Group said the application was for the Minister of Finance's approval, pursuant to the Islamic Financial Services Act 2013. The group did not reveal any detail of the divestment. MAA Takaful is a joint venture between MAA Group and Solidarity Company BSC (C) of Bahrain, of which MAA controlled a 75% equity stake, while the remaining 25% is controlled by Solidarity Group. BNM had on June 15 said it granted its greenlight for MAA Group to commence negotiations with Zurich for disposal of its 75% stake in its takaful insurance arm.

Product innovation has become imperative for the Islamic finance industry. This is going to be one of the key growth drivers for the industry in the coming years as demand for new products across segments such as Islamic banking, Takaful, sukuk and funds rises thanks to increased understanding and acceptance of Sharia-compliant products.
Islamic banking
Islamic banks are struggling with lower profitability compared to the conventional banks. The estimated 19 % lower profitability of Islamic banks compared to the conventional banks can be primarily attributed to higher expenses and lower average product holding (APH) per customer. Islamic banks have an APH of 2.1 compared to the APH of 4.9 for the conventional banks. Higher profitability can be aimed and achieved by Islamic banks by developing new products, which would provide cross-selling opportunities and higher APH. Islamic banks can also benefit from shedding their existing obsolete systems and embracing technological innovation to bring down costs.
Sukuk

The US and Canada are expected to follow London's lead with the development of Islamic insurance products. Not just because of the burgeoning market for Shariah-compliant financial products worldwide but also because of increasing demand for old-fashioned transparency.

So says James Bagshawe, a member of the executive committee of the recently established Islamic Insurance Association of London (IIAL) and COO of UK-based Cobalt Underwriting.

Earlier this month, the London Market pointed to the growth of commercial Shariah-compliant products as an important example of the innovation required by London to maintain its position as a global insurance hub. At the inaugural conference of the IIAL in Dubai, chief executive of the International Underwriting Association (IUA), Dave Matcham, said that Islamic financial activity in London is developing a growing maturity and said the IUA and IIAL are cooperating to support the trade in Islamic insurance, promoting standards and transparency.

The Chairman of the Islamic Insurance Association of London (IIAL) has told delegates at its inaugural conference that cooperation will be vital if growth in the Islamic insurance sector is to be achieved.
Max Taylor said the London market was ready willing and able to work with local markets to drive the expertise and growth in Islamic commercial insurance products to meet the growing demand from the business community.
“We have long believed that to enhance the market and deliver change in the Islamic insurance sector there is a real need for greater expertise and knowledge and this is where the London market can play a leading role,” Taylor said.
“The UK government has been quite clear that it wants to create a global centre of excellence for Islamic financial services in London.”
However, while both the London market and the Islamic underwriting community had the same aims of driving growth and professionalism in the sector it could not be achieved in isolation.

Malaysia’s takaful industry grew at a faster rate than conventional insurance, recording a compound annual growth rate of 12.4% in the last five years and outperforming the conventional insurance’s CAGR of 7.8%. Malaysian Takaful Association chairman Ahmad Rizlan Azman said takaful contributions last year were RM6.3 billion, accounting for a 13% share of the total insurance market.
“With Malaysia’s low insurance penetration rate of 5.2% of gross domestic product (GDP) in 2014 and its young demographics, significant market growth opportunities are yet to be tapped by its insurance and takaful sector,” Ahmad Rizlan said at the launch of the Malaysian Takaful Dynamics report on the sidelines of the 11th World Islamic Economic Forum yesterday.
The jointly developed report by the Malaysian Takaful Association and Ernst & Young (EY) Malaysia is the country’s first central compendium on Islamic insurance.
Ahmad Rizlan said the low penetration rate of takaful in the country is due to a lack of awareness about takaful-related products as well as the issue of affordability, especially among low-income groups.

The Islamic countries of South-East Asia represent a rich potential area of growth for insurers, especially those able to offer Sharia-compliant products, Richard Bishop, chief executive officer of Cobalt Underwriting, told SIRC Today. Bishop said that counties such as Indonesia, Malaysia and Pakistan offered a plentiful source of potential business for insurers, especially those familiar with and able to offer Sharia-compliant insurance.
Cobalt Insurance Holdings and its two specialist operations, Cobalt Underwriting Services and Cobalt Advisory Services, were formed in 2012 with the objective of establishing London as a leading global centre for Sharia-compliant insurance capacity.
“When we started we principally focused our efforts on the Middle East as a market,” Bishop said. “We do business in the UK, or inward investment into the UK via Islamic investors, but we wanted to make our product available in the Islamic markets, and the closest Islamic market to the UK is the Middle East. It’s worked quite well for us as a starter market.”

The Dubai Center for Islamic Banking and Finance (DCIBF) released an extensive report entitled ‘Takaful: Global Challenges to Growth Performance and Governance’ during the 2015 Global Islamic Economic Summit in Dubai. There are still critical gaps that need to be addressed by industry practitioners and experts in cooperation with government. The report reveals that the GCC region currently dominates the Takaful business, with Southeast Asia and Africa as the next biggest markets. The report notes that the future rate of growth of Takaful sales is being inhibited by the relative under-development of insurance distribution channels in several emerging markets into which Takaful is being launched.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Muhammad Adrees appreciated the joint collaboration between Pak-Qatar General Takaful Limited (PQGTL) and non-bank financial institutions (NBFI) & Modaraba Association of Pakistan (MAP) while speaking at the memorandum of understanding (MoU) signing ceremony. He said that it is a milestone of collaboration for promotion of the Islamic financial system. The ceremony was jointly arranged by NBFI&MAP and PQGTL for providing takaful coverage to the members of the association on the basis of Islamic modes.

Standard & Poor's Ratings Services said that it lowered its long-term counterparty credit and insurer financial strength ratings on United Arab Emirates-based Takaful Re Ltd. (TRL) to 'BBB-' from 'BBB'. the ratings agency subsequently withdrew the ratings on TRL at its request. At the time of the withdrawal, the outlook was stable. The downgrade reflects the deterioration of TRL's business risk profile, mostly due to challenges within the Islamic insurance sector that have been exacerbated by the company's lack of scale, S&P said. The stable outlook at the time of withdrawal reflected S&P's view that TRL's risk-based capital would remain at extremely strong levels. This is supported by TRL's excess level of capital relative to its low level of premium income.

Egypt's Wethaq Takaful Insurance is to launch its first real estate fund during upcoming general assembly scheduled for next November, head of financial and administration affairs Abdel El Aziz Labib said. Wethaq will present 50 million Egyptian pounds (US$6.4 million) as an initial capital for the new fund. The Egyptian Financial Supervisory Authority (EFSA) has granted initial approval for the fund. Wethaq intends to raise the capital of its fund to 250 million pounds within few years after inception, a step toward a plan to launch another fund. Furthermore, Labib said Wethaq's talks with the Egyptian regulator had also included a proposal to establish a new subsidiary to manage the new fund. The new subsidiary shall be 20% owned by Wethaq Egypt, he added.

Allianz Life Insurance Malaysia Bhd, which is aiming to have 10,000 agents by year-end from 8,300 now - remains interested in the takaful business although it is not in talks with any potential acquisition target now. Allianz Life CEO Rangam Bir said it sees that a large part of the market has the need for takaful solutions. Allianz Life is a subsidiary of Allianz Malaysia Bhd, which in turn is Allianz SE’s subsidiary. Allianz SE had failed in an attempt to buy a local takaful operator in 2011. Last year, a member of the board at Allianz SE said that it is not economically viable to enter into the domestic takaful market just yet.

Adam Capital Micro Credit Ltd, a Sharia compliant company and wholly owned subsidiary of Adam Capital PLC, entered in to an agreement with Islamic Insurance provider Amana Takaful Life Limited to promote their products, playing a facilitator role on a fee sharing basis. Adam Capital Micro Credit business has grown steadily since commencing operations in July 2015, and expects to generate steady additional fee based income by this arrangement. The plan is to serve the underserved community within a radius of 15km from the office located at Grandpass Road, Colombo 14, assisting them to up lift their living standards.

Thanks to a regulatory action last year, the landscape of the country’s Islamic insurance industry is set to change forever with the entry of conventional insurance giants in the Takaful market. Jubilee Life Insurance and EFU Life Assurance, which control over Rs115 billion in total assets between them, have just launched Takaful products. The first set of rules governing the Islamic insurance industry did not allow conventional insurance companies to enter the Takaful market unless they set up stand-alone subsidiaries with separate paid-up share capital. However, the Securities and Exchange Commission of Pakistan (SECP) replaced Takaful Rules 2005 with Takaful Rules 2012 three years ago, which allowed conventional insurance companies to set up Islamic ‘windows’.