the growth potential of islamic insurance takaful in arab market
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The Growth Potantial Of Islamic Insurance takaful in Arab MarketTRANSCRIPT
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The growth potential for Islamic Insurance (takaful) in the Arab Market
A.Rahman Tolefat Head, Licensing and Information
Manama, 21stMarch 2006
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MENA REGIO IS A SIGNIFICANT LARGE MARKET WITH HIGHER
GROWTH TREND
North Africa
Egypt
Algeria
Tunisia
Morocco
GCC countries
Bahrain
UAE
Kuwait
Oman
Qatar
Kingdom of Saudi Arabia
Other Middle Eastern countries
Lebanon
Syria
Jordan
Iran
Iraq
GDP GROWTH OF MORE THAN 5% in 2004
SECOND FASTEST GROWING REGION
AFTER CHINA
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Attractive opportunitie
s for new international
players
THE INSURANCE MARKET IN THE REGION IS EXPECTED TO GROW SIGNFICANTLY IN THE NEAR-MEDIUM TERM
Growth expected in the premium Revenue Pool in the MENA region
US $ million
1,700
6,000
2000 2007
Source: McKinsey Team Analysis, Swiss Re, WMI
average growth of 36% per
annum
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what Takaful?
Derive from the verb KhafelDerive from the verb Khafel
Mean in Arabic mutually joint Mean in Arabic mutually joint guarantees or Guarantees each otherguarantees or Guarantees each other
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Pact among group of Pact among group of participants who agree to participants who agree to
jointly guarantee each other jointly guarantee each other in case of any member suffer in case of any member suffer from a loss or misfortune in from a loss or misfortune in
the future.the future.
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Flow of contributions
Policyholders
funds
Contributions
(premiums) base on donation
Pay claims, reinsurance &
expenses
Investments
(Mudarabah)
Surplus
Shareholders
funds
Wakhala
fees
70%
30%
Reserves
Dividends
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Obligation of participants
Shareholders fund
Participants fund
Insurance operation
Deficit
Option(1): Qarad Hassan
Investment
Participants
Option (2):Pay additional premiums
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Issues Specific to Takaful
Conventional
An exchange contract (sale An exchange contract (sale and purchase) between and purchase) between insurer and insuredinsurer and insured
A combination of donation A combination of donation and Agency or profit and Agency or profit sharing contract.sharing contract.
Premiums owned by Premiums owned by policyholderspolicyholders
Premiums owned by Premiums owned by insurance companyinsurance company
Takaful
Premiums
Contract
PolicyholdersPolicyholders pay Policyholders pay premiums to the insurer.premiums to the insurer.
Participants mutually Participants mutually expected to share the expected to share the surplus or pay the deficitsurplus or pay the deficit
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Issues Specific to Takaful
Conventional
Insurer is liable to pay the Insurer is liable to pay the insurance benefits as insurance benefits as promised from its assets.promised from its assets.
Takaful operator act an agent. If Takaful operator act an agent. If there is a deficit in takaful funds, there is a deficit in takaful funds, the operator expected to provide the operator expected to provide interest free loaninterest free loan
Takaful
No restriction apart those No restriction apart those imposed for prudential imposed for prudential reasons.reasons.
Assets must be invested in Assets must be invested in shari’ah compliance shari’ah compliance instrumentsinstruments
Insurer
Investment
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Takaful companies
Country Number
Bahrain 14
Malaysia 8
Kuwait 4
Qatar 1
Iran 5
UAE 4
Sudan 16
other 8
Total 60
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Geographical Distribution of Takaful contributions
GPW (US$ Million)
Market share (%)
Arab Countries 580 28
Iran 777 37
Malaysia 280 13
Other Asia Pacific Countries
425 20
Other 52 2
Total 2,114 100
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Arab Countries Vs Malaysia Market
Arab countries Market
94%
6%
General Family
Malaysia Market
34%
66%
General Family
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Growth Potential for Takaful
GCC & MENA
Malaysia
Iran Why?
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Family Takaful would grow at faster rate of 20% p.a. than general takaful of
8% p.a.
Family Vs General growth?
Family General
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Enhancement of Islamic
banking and finance
huge infrastructure project (multi billion projects):
-Durrat al-Bahrain.
-Qatar energy city.
-Financial Harbor.
Growth Factors for General takaful?
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General Takaful
Enhancement of Islamic
banking and finance
Market share of Islamic banks in customer finance:
-Islamic Mortgages
-Automobiles
- Personal financing.
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Growth Factors for Family takaful?
Factors
Cost of education
Compulsory insurance
Joint family system
Social security benefit
Young populations
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Growth Factors for Family Takaful
Demographic
Young and more educated
population
- Takaful product awareness (health and financial securities).
- Demand of takaful products (housing …)
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Growth Factors for Family Takaful
Reducing Government
security benefits
Population will save more for the future (Annuity and saving plans)
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Growth Factors for Family Takaful
Cost of education
Education is greater priority for people in Arab countries
Saving plan for children education
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Growth Factors for Family Takaful
Economic Growth, per
capita income and insurance
penetration
Insurance penetration:
-Saudi 0.5%
-Malaysia 6%
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Growth Factors for Family Takaful
Diminishing of joint family
system
Force to have their own financial security
Compulsory Insurance
Open the market further for takaful products
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Survey Conducted
Saving for the future (education)?
80% with Banks
Do they understand differences between banks and insurance
91% No
Awareness campaigns are needed
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The most important factor
Branding Identity
Surplus distributed to the participants for both general
and family takaful
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Survey Conducted
Change from conventional to Takaful if a reasonable percentage of surplus distributed?
70% will move to takaful companies on a condition that the same customer services quality will be provided
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International conventional insurers
Movement of international
players to takaful
Foster growth of takaful
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Market potential for takaful worldwide – projection for 2015
US$ Billion Market share (%)
Middle East 4.2 38
South East Asia 3.7 34
America 1.3 11.7
Africa 1.1 9.6
Europe 0.39 3.5
Other 0.4 3.2
Total 11.09 100
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Market potential for takaful - projection 2015
4.2
3.7
1.3 1.1
0.39 0.23 0.13
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
MiddleEast
South EastAsia
America Africa Europe South Asia China
Region
US
$ B
illio
n
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Thank You ..