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Syariah-Compliant Takaful Products for the Muslim Community in Jakarta

Explore the landscape of Syariah-compliant Takaful products tailored for the Muslim community in Jakarta. Understand the core concepts, operating models, and emerging market trends in the Takaful industry. Discover how Takaful contracts align with Syariah principles, offering a customer-centric approach.

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Syariah-Compliant Takaful Products for the Muslim Community in Jakarta

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  1. Syariah compliant General Takaful products A tailor-made service for Muslim community Jakarta 6th, April, 2006

  2. Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion

  3. Insurance not permissible • Uncertainty (Gharar) • Gambling (Maisir) • Interest (Riba)

  4. Syariah relevant concepts • Takaful • Tabarru’ • Dharoura’ • Fortune sharing

  5. Takaful concept • 1985 Grand Council of scholars approved Takaful • Method and means left to scholars and practitioners • Must have : • Permanent Syariah Advisory Board • Syariah compliant investment strategy • Operating model based on Syariah concepts

  6. Pure mudharabah (Sudan) Modified mudharabah (Malaysia) Wakala (Bahrain) General Takaful Family Takaful Operating models

  7. Re-Takaful concept • Preferred reinsurance is proportional (quota share or surplus) • Non proportional permissible • If Re-takaful is unavailable, then it is permissible to use a conventional reinsurer

  8. Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion

  9. General Takaful contract A customer’s needs driven product Jakarta 6th, April, 2006

  10. Takaful industry in the World • World Premiums 2003 • USD 2.6trillions • Takaful contributions 2002 • USD 2.1billions • Takaful contributions / Ww premiums • 1 per mil

  11. Takaful in Emerging markets • Takaful contributions 2002 • USD 2 billions • Ww Takaful contributions 2002 • USD 2.1billions • Emerging markets contrib. / Ww contributions • 99%

  12. Takaful industry in Emerging markets • Takaful contributions 2002 • USD 2 billions • EM Total Premiums in 2002 • USD 217 billions • EM Takaful cont. / EM Total Prem. • ~1%

  13. Main current Takaful Markets • GCC • Malaysia • Other Arab countries • Other South & East Asia • Emerging markets…

  14. Takaful customer’s profile Citizen of 21st century Citizen of emerging markets Muslim

  15. Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion

  16. Emerging markets • 86% of world’s population • 1.3 billions (China) • 1.1 billions (India) • 0.2 billions (Indonesia) • 23% of global economic output • 10% of global non-life business in 2003 • Asia is the most important in the emerging world with • 62% of population • 47% of GDP • 47% of non-life premiums

  17. Non-life penetration rate & per capita spending • 1.5% in 2004 • 3.9% in industrialized markets • 26.6 USD in 2004 • 1275 USD in industrialized markets

  18. Non-life insurance dominated by motor and property insurance • Motor dominant lob in most emerging markets • Compulsory third part liability insurance • Own damage insurance (ex: leasing contracts for cars) • Property, accident and health insurance are generally next biggest • Accident and health depends on governement’s role in this lob (high where WCA are covered by private insurance (Latin America, Asian markets) or where public health is unsufficient).

  19. Non-life insurance dominated by motor and property insurance • Transport insurance • Insignificant in Eastern Europ • 6%-10% of non-life premiums in the other regions • Liability still of minor importance in most markets • Growth in recent years in Eastern Europe stimulated by EU regulation • Smaller growth in Asia due to demand of product liability for exports to the USA and more widespread regulations.

  20. Liability products • Liability accounted for USD2.8billion in 2003 • Asia for 50% • Latin America & Eastern Europe • South Africa & Middle East (less than 10%) • General & product liabilty are the main in emerging markets • Professional indemnity in Easter Europe in response to EU requirements. • In Brazil, South Africa and India, increasing demand for D&O coverage

  21. Commercial - Personal lines • Commercial lines dominate the developing markets • Individual consumption limited • Lack of risk awareness among consumers as well as low household income. • Commercial lines show higher growth rate than personal lines

  22. Real growth by major LOB

  23. Strong growth between 1998 and 2003 • Non-life growth was mainly driven by increases in property business • Risk awareness and rates increases since 2001 • Motor premiums strongly increased mainly driven by improving economic conditions • More motor vehicles sales

  24. Different in size and structure, but common development trends • Strong economic growth will continue to drive development. • New products and new distribution channels will help to tap growth potential. • Regulations to be aligned to international best practices (Solvency, corporate governance and transparency). • Insurers will find stronger incentives to maintain sound underwriting standards. • Emerging insurance markets are moving towards a more liberal regime with fewer entry barriers.

  25. Cat nat in the emerging markets • Cat nat like Tsunami (dec 2004) in SE Asia • Many emerging markets to rethink their vulnerability to natural catastrophy, • Better and broader use of insurance as a tool for managing these exposures. • Policy shift that should encourage insurance development in these countries.

  26. Forecast growth • Increase 1 to 2 times faster than overall economy • Countries where per capital 2000 USD <per capita income<10000 USD • 7,5% increase for 2004-2014 period • In real terms per year • 8,9% in 2004

  27. Conditions to achieve this growth potential

  28. Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion

  29. Increasing array of risks faced by individuals and companies • Natural catastrophy • Fire, • Business interruption, • Product recalls, • Directors and officers, • Asbestos litigation, • Terrorism, • Financial volatility, • Weather volatility; etc.

  30. No limits for the General Takaful products landscape Except the criteria of insurability Jakarta 6th, April, 2006

  31. Criteria of insurability

  32. Conclusion, hopefully… • General Takaful will benefit from the growth trend in emerging markets in motor, property and liability lob • Both commercial General Takaful lines and personal will benefit from this growth trend • Personal lines will increase more than commercial lines owing to Takaful concept • General Takaful will participate to natural catastrophies covers • Innovative contracts targeting specific needs of Muslims will make the growth of General Takaful faster than that of non-life insurance

  33. Thank you Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005 Jakarta 6th, April, 2006

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