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<strong>Islamic</strong> <strong>Finance</strong> news Guide 2008<br />
2007 Global Takaful Review: Evolving Trends, Opportunities and<br />
Challenges (<strong>continued</strong>...)<br />
sector, new business contributions increased signifi cantly by<br />
74.6%, mainly due to the growth in mortgage Takaful and<br />
investment-linked businesses which accounted for 68.2% of<br />
new business.<br />
In Malaysia, the current market penetration is low but<br />
“Takaful is expected to constitute 20% of the total insurance<br />
market by 2010 (currently 6.5%). By then, Takaful’s share of<br />
the Malaysian insurance industry is estimated to be worth<br />
US$1.85 billion (RM7 billion)”.<br />
As part of Malaysia’s drive to attract global insurance<br />
brands, Aviva UK formed a JV with the CIMB group. The<br />
JV permitted Aviva to acquire a 49% equity stake in two<br />
of CIMB’s subsidiaries, Commerce Life Assurance and<br />
Commerce Takaful .<br />
• Indonesia<br />
The growth of Takaful operators in Indonesia was slow at the<br />
beginning, with only fi ve Takaful companies until 2002. The<br />
development of the Takaful business has lagged far behind<br />
that of the conventional insurance industry.<br />
Data from the State <strong>Finance</strong> Department shows that the<br />
assets of Takaful companies in 2006 stood at only US$95<br />
million compared to total insurance assets of some US$10.2<br />
billion. However, in 2007, the number of Takaful operators<br />
jumped signifi cantly from fi ve to 43 with 20 in life insurance,<br />
19 in general and four in reinsurance. International insurers<br />
active in this market include Allianz, ING and Manulife.<br />
UK<br />
A new <strong>Islamic</strong> insurance fi rm, British <strong>Islamic</strong> Insurance<br />
Holdings (BIIH), is awaiting regulatory approval from the UK’s<br />
Financial Services Authority (FSA) to offer Shariah-based<br />
insurance solutions to British Muslims. BIIH is currently<br />
working on strategy and recruiting management .<br />
Industry developments<br />
ReTakaful capacity<br />
Vital to the growth of the Takaful industry is the corresponding<br />
development of Shariah compliant reinsurance. Few<br />
reTakaful operators have been established in comparison<br />
to the number of direct Takaful operators. Noteworthy is the<br />
entry of international reinsurers as Tokio Marine ReTakaful<br />
(TM ReTakaful) , Swiss Re and Converium into the reTakaful<br />
business in various jurisdictions such as Bahrain, the Dubai<br />
International Financial Center and Malaysia.<br />
Page 66<br />
www.islamicfi nancenews.com<br />
Recently, CBB issued a license to Hannover Re in Germany<br />
to establish a wholly owned <strong>Islamic</strong> reinsurance company<br />
in Bahrain. Hannover Re Takaful will have a paid-up capital<br />
of BHD20 million (US$53 million) and will focus on general<br />
and life classes. Hannover Re Takaful will be the principal<br />
underwriter of Hannover Re’s worldwide reTakaful business.<br />
“The growth of the global Takaful<br />
industry would be encouraged<br />
by the introduction of uniform<br />
regulation and conduct of Takaful<br />
business to promote cross-border<br />
activity and the global marketing of<br />
Takaful”<br />
BNM, the central bank in Malaysia, granted three reTakaful<br />
licenses to, inter alia, Munich Re to conduct general and<br />
family reTakaful business . Recently, London-based Lloyd’s<br />
announced plans to offer reTakaful from its newly incorporated<br />
offshore reinsurance unit in Labuan. Lloyd’s is optimistic<br />
about the reinsurance market in Malaysia and expects it to<br />
grow to US$100 million by 2010 .<br />
The Monetary Authority of Singapore has authorized SCOR<br />
Asia-Pacifi c to apply to the Labuan Offshore Financial Services<br />
Authority for a license to allow SCOR Asia-Pacifi c’s non-life<br />
branch to expand and underwrite reTakaful contracts.<br />
Global Takaful standard<br />
Currently, the regulation of Takaful is at various stages of<br />
development throughout the world. Jurisdictions such as<br />
Malaysia, Bahrain and Pakistan have introduced specifi c<br />
Takaful laws or regulations. However, the growth of the global<br />
Takaful industry would be encouraged by the introduction of<br />
uniform regulation and conduct of Takaful business to promote<br />
cross-border activity and the global marketing of Takaful.<br />
To this end, the International Financial Services Board (IFSB)<br />
and the International Association of Insurance Supervisors<br />
(IAIS) have established a joint working group which released<br />
an issues paper on the applicability of the existing IAIS core<br />
principles to the regulatory and supervisory standards for<br />
Takaful to be developed by the IFSB.<br />
The issues paper dated August 2006 identifi ed four critical<br />
areas to the regulatory and supervisory framework of the<br />
<strong>continued</strong>...
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