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Kingdom come

October 2007
The Takaful market in Saudi Arabia is tipped to become the biggest in the Middle East within a decade. Mike Gallagher spoke to Dr. Omar Zuhair Hafiz from ACIG about its plans for the Kingdom
The Allied Cooperative Insurance Group (Saudi ACIG) was founded in October 2006 after the Islamic Development Bank (IDB) , the Allied Cooperative Insurance Group from Bahrain and several Saudi Arabian investors joined forces. Both the IDB and Bahrain's ACIG each own 20 per cent of the company, while 40 per cent of the company was recently floated on the Tadawul and the remaining 40 per cent is in the hands of a number of individual and institutional investors.

Dr. Omar Zuhair Hafiz is the president and chief executive of Saudi ACIG . He received his PhD in economics from Indiana University in the US and then spent nearly 10 years teaching at the university before joining the IDB, where he worked for 13 years before he joined Saudi ACIG .

Which of ACIG's products is the most popular?
The most popular is motor vehicle Takaful and health Takaful. This is because a new regulation has been introduced to the market which means that it is compulsory for all expatriates in Saudi Arabia to have health and motor insurance.

Which policy was the most difficult to structure?
The policies of professional indemnity and the senior liability are the most complicated policies and require a lot of care in writing. They need a reinsurance arrangement to be able to get the right support from international reinsurers.

Is there much demand for the engineering policy? Why did ACIG introduce it? Which projects have you insured?
There is a lot of demand from engineering businesses because a considerable number of infrastructure projects are underway in the Kingdom and more are being lined up. Large scale projects in places such as King Abdullah Economic City in Jeddah as well in places like as Riyadh and Qassim are creating a lot of the demand.

ACIG introduced this product because, first of all, it is needed at this time and it can be a profitable area if the policies are written comprehensively and receive the support from the best reinsurer. The product will eventually be converted into a property insurance policy after the construction of the project has finished. We have insured a range of different projects in the Kingdom and across the Gulf.

Where do you think the greatest area of competition in Takaful will be?
The competition, I believe, will be in medical and motor business.

What is the most noticeable trend in Takaful at the moment, both in Saudi Arabia and beyond?
I believe the most noticeable trend is in trying to structure the Takaful products and market them to people who are not very familiar with the concept of Takaful. Trying to explain what Takaful is and the benefits it offers compared to conventional insurance can be challenging when you are dealing, not only with clients, but also with regulators. This is something we notice when we have meetings with clients and regulators all over the world. The challenge is just as great in the east as it is in the west. A considerable amount of effort is needed on the regulatory side, as well as when it comes to dealing with accounting and auditing issues.

Why are foreign Takaful companies not allowed to go it alone in Saudi Arabia?
Foreign Takaful companies are allowed to operate in the country by law. They are required to comply with the insurance regulations of the Kingdom. I believe the market is now open to foreign Takaful companies to open branches. My personal view is that any foreign company that is thinking of entering the Takaful market in Saudi Arabia should study the possibility of becoming part of an existing, licensed Saudi Takaful company rather than having their own branches. These will strengthen the existing companies and bring updated technical expertise in to the country. This will benefit everyone in the Takaful market in Saudi Arabia, especially if the number of licensed Takaful companies in the country rises to 30. Greater competition will mean greater variety and this can only be good for everyone. It will encourage innovation and provide customers with a wider range of products.

Is there much demand for reTakaful in Saudi Arabia?
Yes, there is quite a lot of demand for reTakaful in Saudi Arabia as by law at least 30 per cent of all businesses should be reinsured locally.

What are ACIG's plans for the future?
We are planning to be one of the top five Takaful providers in the Saudi Takaful market within a few years. The Takaful industry in the Middle East is still in its infancy and any company that pays attention to the needs of its customers and uses innovative marketing techniques to reach the client base can substantially increase its bottom line. There is plenty of room to develop in the Takaful market in Saudi Arabia and I am confident that with the support of our shareholders, we can become a significant player in the industry. We are planning to go into all areas of Takaful and all parts of the Kingdom, not just the major cities.

© Banker Middle East 2007