Islamic Finance News

Supplements

THE TAKAFUL AND RE-TAKAFUL INDUSTRY Although the Takaful industry has seen double digit growth since 2010 according to reports, it still suffers from a lack of penetration in supposedly vibrant markets, and is still performing at what is considered to be lackluster levels. Saudi Arabia remains by far the largest Takaful market, contributing US$4.3 billion or 51.8% of the industry at an average contribution per operator of US$141 million. Malaysia, considered one of the largest markets in the Islamic capital market space, grew 24% to reach contributions of US$1.4 billion at an average contribution per operator of US$141 million. The UAE, with contributions of US$818 million, has charted a growth rate of 28%; whilst Sudan, which is considered to be the most significant market outside of the GCC and Southeast Asia, has seen more than 7% growth since 2010, with contributions totalling US$363 million. Many within the industry have admitted to a gamut of issues which need to be addressed urgently and effectively in order to allow the industry to perform at its best; particularly in the investment space, where Takaful companies are suffering from a dearth of long-term investment opportunities to suit their risk and investment profiles. Another issue stems from the lack of risk-based capital, where there is a mismatch between the companies� assets and liabilities, and the universal issue of lack of talent and understanding of Shariah based insurance products. And although the global credit crisis has contributed to the slow-down in the growth of the Takaful industry, with lower returns all round for shareholders and Takaful policyholders and slower business growth on the back of a contracting economy, there is still much untapped potential in the re-Takaful sector, which has on the contrary seen new players entering the market due to the lower entry cost for re-Takaful operators, and the ability to write business on a global scale. In this issue of Islamic Finance news Supplements, we take a closer look at the fundamentals of the Takaful industry, its issues from a macro and micro perspective, and what needs to be done to mitigate these problems in order to prevent a stagnation of growth within a sector which is ultimately brimming with potential. View interactive book View PDF Edition

CONTENTS COVER STORY The Takaful and re-Takaful industry: An overview An in-depth look at the Takaful and re-Takaful industry including the issues stymying its growth and solution for its progress. FEATURES On the horizon Takaful market share in the GCC and Malaysia currently stands at 15% and 10% respectively; much less than the industry�s potential as a whole in these markets. In terms of consumer segmentation, the Shariah appeal of Takaful makes it predominantly retail-driven in most markets. Which markets have the most potential, and how can they be penetrated? Effective Engagement What are the best distribution channels for Takaful operators, and how can they effectively expand their business lines? Fund Woes? The Takaful industry possesses considerable potential in the mobilization of funds and primary market activity, and is touted to be a major growth driver in the industry moving forward. So why has this not happened yet? CHAPTERS The global Takaful outlook The double digit growth rates of Takaful continued at a lower rate this year. The total contributions for 2010 fell short of the US$9.1 billion forecast by the World Takaful Report 2011 and totaled only US$8.3 billion. Shariah Compliant UCITS to Satisfy the Appetite of International Investors One outcome of the global financial shocks of the past five years has been a shift in the nature of investors� demand. The priority now is to access investment products and solutions that are less volatile, with comparable risk-adjusted returns. Takaful and Waqf: An ideal partnership? Mention the word Waqf and most people will think of a mosque, a Madrasah, a charitable organization or other religious institutions, buildings or land. This perception is correct, but not entirely complete. The Global Islamic Debt Market: Has it reached a plateau? The general public and many conventional bankers have traced the adoptability of Islamic finance via the growth of the Sukuk market, and in many ways it has become the benchmark for the usability of Islamic finance by practitioners in the conventional financial system. Development, Growth and Challenges of Takaful in Malaysia Up until 33 years ago, both Muslims and Non-Muslims had only one means of insurance protection: that is, via the conventional insurers.