Moody’s forecasts strong Islamic insurance growth
Alfred Kleine Beverborch
Moody’s forecasts strong Islamic insurance growth
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=112257&version=1&template_id=48&parent_id=28
Wednesday, 11 October, 2006
Gulf Times Newspaper, 2006
MANAMA: Moody’s Investors Service sees great potential in the
burgeoning Islamic insurance industry, although it said a need for
Islamic re-insurers might constrain its growth.
The industry supplying insurance products that comply with Islamic
law, or takaful, has grown at an annual rate of 20% in recent
years, the credit rating agency said yesterday. The market will
grow to $7.4bn by 2015 from $2bn in 2005, it added.
“Availability of ample takaful reinsurance capacity would seem to
be very important for the further successful development for the
primary takaful industry as a whole,” Moody’s said.
Re-insurers provide backup insurance to insurance companies in the
case of catastrophes.
Because takaful firms are relatively young and tend to operate in a
limited geographical location currently concentrated in the Middle
East and Malaysia, re-insurers also could act as advisers and help
to diversify risk, Moody’s said.
Traditional insurance products are seen by some Islamic bodies as
containing an element of gambling, which is against Islamic law,
because the premium has no predictable relationship with the amount
of compensation in the event of a claim.
Also in traditional insurance, risk and reward is not shared.
Insurance companies make a profit from investing premiums but bear
all the risk of claims.
Takaful firms emphasise the shared risk and reward from their
schemes. The cost of claims is divided between all the participants
in a takaful scheme, and returns from investments made from the
takaful fund are also shared.
Participants do not pay a premium, but donate towards a takaful
fund, which is then invested according to Islamic law.
“Let’s say $20 goes to the takaful fund ... Everyone else also puts
in $20. If I had a problem, I take some of your money for my
problem, so it’s sharing responsibilities,” Bassel Hanbali of the
Solidarity Islamic Insurance Company said.
“If none of us has any problem, we have already invested money.
This money has a return. This return will be given back to us, not
like conventional insurance,” he added.
The first takaful company was formed in 1979, but in recent years
the industry has got a boost from Muslims in the Gulf who have
looked to invest profits from high oil prices in ways that comply
with Islamic teaching.
Takaful also has proven popular with non-Muslims looking to invest
money ethically and those seeking a return for their insurance
premiums, Hanbali said, adding that Solidarity’s first six clients
were non-Muslims.
He also pointed to the Gulf states’ decreasing willingness to
provide cradle-to-grave benefits for their citizens, forcing them
to consider schemes to ensure their financial security through
takaful companies. – Reuters
Alfred Kleine Beverborch
>Moody’s forecasts strong Islamic insurance growth
>http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=112257&version=1&template_id=48&parent_id=28
>Wednesday, 11 October, 2006
>Gulf Times Newspaper, 2006
Premiums to soar for Islam-based insurance
http://www.iht.com/articles/2006/10/10/business/insure.php#
Bloomberg News
Published: October 10, 2006
DUBAI: Worldwide premiums in the Islamic insurance industry will
almost quadruple by 2015 because of demand from Muslims seeking to
comply with their religious beliefs, Moody's Investors Service said
Tuesday.
The world's 250 Islamic insurers, or Takaful operators, will write
$7.4 billion in premiums by 2015, up from $2 billion last year,
Moody's said in a note to clients.
"This is a rapidly growing industry which sells innovative
financial products in a context of increasing competitive
pressure," analysts including Timour Boudkeev and Simon Harris
wrote in the note.
Takaful is a form of insurance based on the Koranic principle of
mutual assistance. It is similar to mutual insurance in that
members are the insurers as well as the insured. Conventional
insurance is prohibited under Islamic law because it is judged by
Muslim scholars to involve speculation and interest payments, both
of which are forbidden.
Takaful insurers are barred from buying conventional bonds and many
types of noncompliant equities to support their liabilities,
Moody's said. Also, many operators have limited geographic reach,
and all face a shortage of underwriting capacity for Islamic
reinsurance, or Retakaful.
American International Group opened an office in Bahrain on Oct. 1
to start selling Islamic nonlife insurance products. Charles
Bouloux, chairman of AIG Takaful, said the unit would focus on the
300 million Muslims who it estimates could become Takaful buyers.
Western reinsurers including Hannover Re and Swiss Re have started
Retakaful units since June to serve a Takaful industry booming amid
oil revenue pouring into the Gulf.
Ajmal Bhatty, global head of Takaful for HSBC's Amanah Islamic
finance unit, said in April that the global market for Takaful
could be worth $14 billion by 2015.
Alfred Kleine Beverborch
>>Moody’s forecasts strong Islamic insurance growth
>>http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=112257&version=1&template_id=48&parent_id=28
>>Wednesday, 11 October, 2006
>>Gulf Times Newspaper, 2006
>Premiums to soar for Islam-based insurance
>http://www.iht.com/articles/2006/10/10/business/insure.php#
>Bloomberg News
>Published: October 10, 2006
Saudi Arabia: Cabinet opens up insurance market
http://www.muslimnews.co.uk/news/news.php?article=11856
11-10-2006 By P.K. Abdul Ghafour
JEDDAH, Arab News — The Council of Ministers yesterday licensed 13
new insurance companies in the Kingdom in a move that will
dramatically change Saudi Arabia’s insurance market. The change
ends the current monopoly held by the National Company for
Cooperative Insurance (NCCI). It is expected to create thousands of
jobs.
“The Cabinet approved a request from the minister of commerce and
industry to license 13 joint stock companies for cooperative
insurance,” the Saudi Press Agency reported, quoting a Cabinet
statement.
The new companies are: Gulf Union Cooperative Insurance, Arabian
Shield Insurance, Sanad for Cooperative Insurance, Saudi United
Cooperative Insurance (Amity), Assurance Saudi Fransi, Al-Ahlia
Insurance, Mediterranean & Gulf Insurance & Reinsurance (MedGulf),
Malath Insurance, Saudi Indian Insurance, Saudi IAIC for Insurance,
Allied Cooperative Insurance Group, SABB Takaful and Saudi Arabian
Insurance.
“It ‘s a giant step forward,” said economist and Shoura Council
member Ihsan Buhulaiga. It would also boost the economy, he told
Arab News. He believed it would draw billions of dollars of foreign
investment into Kingdom.
Most of the new businesses are joint ventures with foreign
insurance companies and they have to retain 30 percent of income in
the Kingdom to cover payouts.
Buhulaiga said the listing of the new joint stock companies on the
Saudi bourse would also strengthen and diversify the Kingdom’s
capital market. “It’s a wise decision. It will organize the market
and grow its volume to SR30 billion,” said Abdul Ilah Saati,
professor of insurance at King Abdul Aziz University, and member of
the International Insurance Association.
Saati urged the government to license yet more insurance companies
to meet market demand. He was sure there would be public confidence
in the new companies. “The activities of the newly licensed
companies will be regulated by Saudi Arabian Monetary Agency and
this will increase business trust in these companies,” he believed.
Businessmen also welcomed the much-awaited Cabinet decision saying
it would have significant impact on business and economy.
“This is very good news for businesses in the Kingdom,” said Rafeek
Younus, general manager of the Alkhobar-based Saudi Engineering
Group International. “Up until now we have had to depend on NCCI,
the only licensed insurance company in the Kingdom. The licensing
of the 13 new companies would increase competition in the market
and improve services. It’s also good for both employers and
employees,” Younus told Arab News.
Hamad Al-Sayari, governor of SAMA, said the decision to license the
13 new companies had involved considerable effort including the
preparation of a new law to monitor insurance firms. “Following the
law’s drafting, SAMA has taken steps to organize the market,
protect the rights of investors and ensure fair competition among
the firms,” he said. Al-Sayari also spoke about strict procedures
adopted by the agency to license the new firms.
The 13 companies will have a total capital of SR2.62 billion and
they will float shares worth SR936.44 million for public
subscription.
The capital of the companies ranges between SR100 million and SR800
million. One has agreed to float 47.49 percent of its shares, nine
will float 40 percent and the remainder between 25 and 31 percent
of shares. Al-Sayari also believed the licensing of new companies
would promote fair competition, improve the quality of service and
make it available at reasonable prices.
The Cabinet approval came more than a year after the Saudi Arabian
General Investment Authority (SAGIA) issued investment licenses —
the first step to doing business in the Kingdom — to 13 insurance
firms, some of which have now won their operational license, while
others still await Cabinet endorsement. The latter are BUPA Arabia,
Al-Alamiya Insurance, United Cooperative Assurance, Tokio Marine &
Nichido, and AXA Cooperative Insurance.
The decision to approve the new companies follows the government’s
ruling earlier this summer on compulsory health insurance for the
Kingdom’s seven million expatriate workers. By the end of the year,
all foreigners will have to provide evidence that they have health
insurance cover to obtain or renew work or residence permits
(iqamas).
According to Health Minister Dr. Hamad Al-Manie, the number of
people who have joined a cooperative health insurance scheme
increased 335.5 percent in August 2006, up from 60,179 to 262,055
policy holders. The ministry has approved 393 health service
providers — hospitals, clinics and surgeries — in different parts
of the Kingdom, he added.
According to the latest economic report by National Commercial
Bank, the development of health insurance will result in a further
SR30 billion being invested in the Saudi health sector. The bank
also predicts that the Kingdom’s insurance market will jump from
SR8 billion to SR18 billion within the next five years.
Culture and Information Minister Iyad Madani said Monday’s Cabinet
meeting also took a number of other important decisions including
the licensing of a transport company. The new joint stock firm will
engage in transporting posts and other parcels within and outside
the Kingdom, providing cargo and customs clearance services, SPA
said. The Cabinet also approved conditions regulating donation of
organs by non-relatives. In such cases the donor will receive
SR50,000 ($13,333) for donating one of his organs or part of an
organ.
http://www.arabnews.com/?page=1§ion=0&article=88004&d=11&m=10&y=2006
Alfred Kleine Beverborch
>>>Moody’s forecasts strong Islamic insurance growth
>>>http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=112257&version=1&template_id=48&parent_id=28
>>>Wednesday, 11 October, 2006
>>>Gulf Times Newspaper, 2006
>>Premiums to soar for Islam-based insurance
>>http://www.iht.com/articles/2006/10/10/business/insure.php#
>>Bloomberg News
>>Published: October 10, 2006
>Saudi Arabia: Cabinet opens up insurance market
>http://www.muslimnews.co.uk/news/news.php?article=11856
Insurance Meets Islam
http://msnbc.msn.com/id/15234714/
Long prohibited by religious law, insurance is entering the Islamic
world.
By Selena Maranjian The Motley Fool Oct. 12, 2006
You may not know a lot of things about the Islamic world. For
starters, in many Islamic nations, the weekend falls on Thursday
and Friday instead of Saturday and Sunday. (Expect to find many
offices closed on Fridays in Saudi Arabia, Malaysia, and the United
Arab Emirates, to name a few.)
Here's another thing you might not have known: For a long time,
conventional insurance has been frowned upon in the Islamic world,
since it contradicts teachings of Islamic Shari'ah law. (It's seen
as a lopsided agreement, with the two parties involved not being
treated equally.)
But there are ways ant round the objection. Takaful is an
acceptable alternative in which the insured parties contribute into
a fund that pays claims that arise.
Why does this matter to Western non-Islamic investors? Some of the
companies in which we already invest are now getting into the
takaful business. Insurance giant American International
Group(NYSE: AIG), for example, is planning to soon begin offering
its first insurance coverage to comply with Islamic law. According
to a report in Dubai's Khaleej Times, the Islamic market for such
offerings might be worth $15 billion by 2015.
According to the article: "AIG's Enaya unit will offer Islamic
insurance coverage, or takaful, for areas such as health, motor and
property to Gulf Arab customers, before expanding to Asia ... The
market for takaful, which is based on a concept similar to mutual
funds, is growing at about 20% a year...."
As long as insurance is on your mind, take a few minutes to assess
your personal insurance needs. It might prove much more important
and profitable than any insurance-company stock. If you fail to
protect yourself on a critical front, you may end up wiped out, or
at least severely hurt, financially.
Learn more about the boring-but-critical topic of insurance in our
Insurance Center. You may not have thought about some kinds of
insurance, such as disability or long-term care insurance, but
they're as vital as property insurance for many people. Take a
little time to learn more. If some calamity occurs in the future,
you may be very happy you did.
Further Foolishness is our policy:
When Your House Burns Down
60-Second Guide to Insurance
Avoid Insurance Sticker Shock
How to Insure a Bundle
Disaster-Proof Your Prized Possessions
Longtime Fool contributor Selena Maranjian holds no financial
position in any companies mentioned. The Motley Fool has a healthy
disclosure policy.