Sep 28 2011

ReTakaful firms struggling to meet original plans

By John Foster Ratings agency A.M. Best has said that despite a spate of reTakaful companies coming to market, they are struggling to meet their original business plans.

The agency argued that the Takaful market has not grown as quickly as anticipated and although the demand for Takaful - especially in the GCC - has grown rapidly in the past few years, Takaful operators have found themselves having to compete with the large conventional insurers on price, which has put them at a disadvantage.

Most Takaful firms hoped to appeal to customers' religious sensitivities, but found that this was not enough. The knock-on effect, said A.M. Best, was that the Takaful firms were using conventional reinsurers, as opposed to specialist reTakaful firms to keep their costs low, as the conventional reinsurers offered the cheapest protection.

Carlos Wong-Fupuy, senior director of analytics for A.M. Best in London, told The Islamic Globe: "The GCC Takaful companies have not achieved the level of business they anticipated, so many crossed over into conventional insurance as well and in a new market like the GCC are not competing on ethics, but on price.

"Often the Takaful firms find this difficult. The story is similar with reTakaful, and the companies that are growing have a mixed bag of conventional and reTakaful business. However, the reTakaful providers have been handicapped compared to the conventional reinsurers with the mechanics of providing Shari'ah compliant protection for Takaful firms - which adds costs to their offerings."

© The Islamic Globe 2011

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