More foreign companies are beginning to look at Malaysia as it opens up its market to Takaful players, while regulatory concerns are also making news as Mike Gallagher reports in this month's Takaful roundup
The Middle East is continuing to attract increasing numbers of international insurance players that are eyeing a market that has huge untapped potential. This could bode well for Takaful as many are likely to be interested in offering Takaful products as part of their overall package. Established Takaful operators in the region are well aware that they stand to gain significant market share if they successfully ride the wave of the increasing popularity of insurance by offering innovative products.
Tokio Marine Middle East (TMME) recently set up shop in Dubai under the aegis of chief executive Ajmal Bhatty, who used to run HSBC's Takaful operations and Hisato Hamada, the president of Tokio Marine Middle East. TMME has been offering Takaful in the region since 2001 when it entered Saudi Arabia. It also has a presence in Malaysia, where it was quick to spot the lack of reTakaful availability, something it began providing in 2004. It is also understood to be examining a similar offering in the MENA region. TMME has moved into the Egyptian market by launching a joint venture with Egypt Kuwait Holding Company to offer Takaful services there as the government is presently examining plans to make health insurance compulsory.
In Bahrain, Unicorn Investment Bank launched a Takaful company called T'azur with $500 million of authorised capital which will offer life, medical and general Takaful products initially. Bernhard Schluep, who previously worked for Zurich Financial Services Group in New York and Switzerland, will be taking charge of the new company which will be supported by A-rated reinsurance and T'azur has plans to underwrite its first policies by the end of 2007 or early in 2008.
Majid Al Sayed Bader Al-Refai, chief executive and managing director of Unicorn, who recently won the 'Outstanding Contribution to the Industry' award at the 2007 Islamic Business and Finance Awards in Dubai, said, "The founding of T'azur marks the culmination of over two years of intensive research, due diligence and capital raising on the part of Unicorn's Takaful division and is a response by Unicorn to a clear gap in the market for a major regional Takaful player able to meet the demands of a marketplace that continues to grow in geographical span, penetration level and sophistication."
Staying in Bahrain, calls were made for a transparent, legal and regulatory framework for Takaful operations to be put in place to help move the industry forward at the World Islamic Banking conference. "Regulatory mechanism in isolation will not help. It should be backed by solid legal framework. Given the operational differences between Takaful firms, such as the usage of different Takaful models, a deeper assessment of the protection offered to participants is required. A seamless platform for Takaful operators is the need of the hour," said Ashraf Adnan Bseisu, chairman of Bahrain Insurance Association in a speech at the conference.
"The development of a comprehensive legal and regulatory regime to govern the segregation of assets between the Takaful operator and those of the participants is one of the most important challenges, to establish confidence in the industry. After all, the end users look at a certain sense of security notwithstanding the religious element involved in Takaful operations. The business and legal sides are equally important for them, as consumers look to judge effectively the value provided by Takaful as compared to conventional insurance," he added.
Bseisu said that Takaful would find its feet in Western markets quite quickly because of the increasing demand for companies and products that make socially and ethically responsible investments.
Standard & Poor's gave the thumbs up to Bahrain-based Hannover Re Takaful by giving it an 'A' rating, saying it would likely reach its target of $100 million in gross premiums written by 2009. Its target of $100 million in gross premiums written by 2009 is viewed as achievable in light of the favourable market conditions and still-modest levels of competition, said Standard & Poor's credit analyst Jelena Bjelanovic. "Underwriting performance should stabilise within two years, achieving targeted combined ratios of about 90 per cent following the start-up expense strain in the early years. We expect capitalisation to at least remain in line with the rating for the medium term."
Syarikat Takaful Malaysia, which has been in negotiations with a couple of Middle Eastern investors who are interested in acquiring a stake in the Takaful company said it had also been approached by two European multinational companies. Abu Dhabi-Kuwait-Malaysia Strategic Investment Corp and Islamic Arab Insurance Co threw their respective hats into the ring a few months ago in their bids to acquire the 49 per cent that is being offered. The names of the two European companies have not been disclosed, but Allianz recently expressed an interest in the Malaysian Takaful market.
Syarikat Takaful Malaysia has over 120 branches in the country and posted a net profit of $6.3 million for the year ended 30 June 2007 from just under $10 million last year. However, Syarikat Takaful Malaysia is not the only Malaysian insurance company to be looking for suitors. Malaysian Assurance Alliance is also believed to be in talks with a number of foreign and local insurance companies who are looking to buy a stake there. Syarikat Takaful Malaysia recently sold its 10 percent stake in Amana Takaful, a Sri Lankan Takaful insurance company to Amana Investments, a Sri Lankan merchant banking operation which is the largest investor in Amana Takaful.
Bumiputra-Commerce Holdings, CIMB's listed holding company, said it saw a 109 per cent jump in its nine-month pre-tax profit to $887.5 million after it sold off its general insurance operations to Allianz and 49 per cent of its life and Takaful businesses to Aviva.
Meanwhile Mayban Fortis, the joint insurance venture between Maybank, which owns 70 per cent and Fortis which owns the remaining 30 per cent, said it was aiming for around $2.3 billion in gross premiums by the middle of 2009 and said its new Takaful arm, Etiqa would be instrumental in achieving this.
Etiqa Insurance and Etiqa Takaful chairman Tan Sri Megat Zaharuddin Megat Mohd Nor said Etiqa would be a single brand that would cover both the conventional insurance and Takaful businesses under the Mayban Fortis umbrella. Mayban Fortis already controls 54 per cent of the insurance market in Malaysia, but Megat said that he hoped to increase its share of the Takaful business in the country, pointing out that it only accounts for 6 per cent of the insurance industry.
Hong Leong Tokio Marine Takaful Capital Protection Investment-Linked (CPIL) fund recently achieved its sales target of $30 million and the company said it had managed to attract a significant number non-Muslim investors. Chief executive Ezamshah Ismail said that the success was as a result of a combination of factors, one of them being the sophisticated branch distribution network through which the Shari'ah compliant product was sold. He said that the CPIL's returns would be benchmarked against property-related indices such as the European Public Real Estate Index and the Tokyo Stock Exchange REIT Index, backed up by commodities such as oil, copper and zinc.
FWU Group which was recently awarded Best Takaful Operator at The Islamic Business and Finance Awards signed an agreement in Doha, Qatar to jointly provide Takaful products through bank branches with Pak-Qatar Family Takaful. FWU Group has a large distribution network in a large number of banks, both regionally and worldwide and Pak-Qatar hopes to use that network to increase business. Pak-Qatar is jointly owned by Qatar International Islamic Bank (QIIB) along with Qatar Islamic Insurance Company (QIIC).
FWU has also agreed to team up with Dubai Islamic Insurance and Reinsurance Company (AMAN) and financial advisor Nexus to begin the provision of Takaful products. Nexus will be the distributor of AMAN's Unit Linked Takaful and saving plans, both for regular and lump sum contributions.
© Banker Middle East 2008
