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Syariah compliant General Takaful products. A tailor-made service for Muslim community. Overview. Back to the roots of Takaful Takaful customer’s profile Emerging markets development trends General Takaful products landscape Conclusion. Insurance not permissible. Uncertainty (Gharar)
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Syariah compliant General Takaful products A tailor-made service for Muslim community Jakarta 6th, April, 2006
Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion
Insurance not permissible • Uncertainty (Gharar) • Gambling (Maisir) • Interest (Riba)
Syariah relevant concepts • Takaful • Tabarru’ • Dharoura’ • Fortune sharing
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
Pure mudharabah (Sudan) Modified mudharabah (Malaysia) Wakala (Bahrain) General Takaful Family Takaful Operating models
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
Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion
General Takaful contract A customer’s needs driven product Jakarta 6th, April, 2006
Takaful industry in the World • World Premiums 2003 • USD 2.6trillions • Takaful contributions 2002 • USD 2.1billions • Takaful contributions / Ww premiums • 1 per mil
Takaful in Emerging markets • Takaful contributions 2002 • USD 2 billions • Ww Takaful contributions 2002 • USD 2.1billions • Emerging markets contrib. / Ww contributions • 99%
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%
Main current Takaful Markets • GCC • Malaysia • Other Arab countries • Other South & East Asia • Emerging markets…
Takaful customer’s profile Citizen of 21st century Citizen of emerging markets Muslim
Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion
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
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
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).
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.
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
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
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
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.
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.
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
Overview • Back to the roots of Takaful • Takaful customer’s profile • Emerging markets development trends • General Takaful products landscape • Conclusion
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.
No limits for the General Takaful products landscape Except the criteria of insurability Jakarta 6th, April, 2006
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
Thank you Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005 Jakarta 6th, April, 2006