New Deloitte report examines emerging regulatory and practice challenges faced by the Takaful industry
Deloitte: Takaful business strategies and models need to be revamped to serve the mass markets
Key figureheads from the Islamic finance industry from across the world were brought together in June for the second year at an executive roundtable in Bahrain hosted by Deloitte Middle East's Islamic Finance Knowledge Center. The event was supported by the Bahrain Economic Development Board.
The roundtable was held following the release of the new Takaful report by Deloitte titled: 'The global Takaful insurance market: charting the road to mass markets'. The report studies the emerging regulatory and practice challenges that will impact the Takaful industry, as well as assesses the business structures and strategies, market developments and growth trends globally. During the event, Deloitte experts were joined by national regulators, and executive Islamic bankers to discuss the report and focus on the regulatory and industry challenges specifically facing the Middle East Takaful market as well as identifying potential business strategies in the region.
Latest industry data estimates that the global Takaful business will reach US20 billion by 2017. The GCC market contributes more than 62% of the gross Takaful premiums globally and, led by Saudi Arabia, maintained the largest share of contributions, growing a further 17% to US5.7 billion during 2010.
Ten key challenges were identified that would significantly impact the future of the Takaful industry. These are grouped into 5 industry disciplines which are:
- Governance and regulatory compliance: the report finds that more consistency of regulatory frameworks is needed, and optimizing capital adequacy through consolidation will achieve growth and sound corporate structures.
- Risk management and internal controls: Making risk-based business a priority, unified with Takaful operators' strategic planning, and improving risk and Sharia' disclosures and governance.
- Operational and Business Excellence: There is a need for new business models to accommodate wider niche markets and improved technology capabilities to achieve cost efficiency and productivity.
- Product governance and strategy: Improving product governance and product development processes, and placing emphasis on target markets, sales and distribution.
- Capacity building: talent and leadership development: Switching emphasis to internal development to build specialized knowledge and refocusing on competency-based training and leadership programs.
Deloitte's report shows that the key to maximizing industry potential lies in addressing challenges and issues that will better position the industry to reach mass markets and achieve organic growth and development. It highlights that it is not sufficient for these challenges to be addressed or implemented without the commitment and support of boards and executives of Takaful firms who should enhance their risk management governance and controls processes. The report proposes that the impetus of an enterprise-wide risk strategy should not be overlooked, and support and oversight from boards is a key driver for the implementation of an effective risk-based business in the Takaful sector.
During the roundtable, Dr. Hatim El Tahir, Director of the Islamic Finance Knowledge Center of Deloitte Middle East, noted that: 'Heightened focus on governance, fiduciary responsibility, risk management and accountability are direct consequences of the global financial crisis and will likely present Takaful with challenging practice and regulatory issues during the next five years'.
In the Deloitte Middle East event, and under a specialized session on generating growth in the Takaful sector in the Middle East North Africa (MENA) and South East Asia (SEA) regions, presentations and discussions focused on the need for new business models to accommodate for wider niche markets, as well as regulatory, risk and sharia' compliance issues. A second session put forth a 'Forward Plan' where the main issues discussed were impediments to growth, as well as an analysis on the target market, and sales and distribution channels needed to achieve growth and profitability.
More than 40 participants from Bahrain, Gulf Cooperation Council countries, and Malaysia attended Deloitte Middle East's Islamic Finance Knowledge Center event in Bahrain, during which 10 guest Islamic Finance speakers shared their expertise and thoughts on the future of the Takaful market.
"The deliberations and discussions emphasized the imperative need for a continuous 'knowledge-sharing' and intellectual dialogues between industry stakeholders, to strengthen best practices in the Takaful landscape" concluded Dr. El-Tahir.
To read the full report, visit 'The global Takaful insurance market 'Charting the road to mass markets.'
About Deloitte & Touche (M.E.):
Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence for over 85 years. Deloitte is among the region's leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with over 2,500 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region (International Tax Review World Tax 2010, 2011 and 2012 Rankings) and was recognized as the 2010 Best Consulting Firm of the Year in the Complinet GCC Compliance Awards. In 2011, the firm received the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).
About Deloitte:
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.
© Press Release 2013
