Download Growth Factors for Family takaful?

The growth potential for
Islamic Insurance (takaful)
in the Arab Market
A.Rahman Tolefat
Head, Licensing and Information
Manama, 21stMarch 2006
1
MENA
REGIO IS
GDP GROWTH
OFA SIGNIFICANT LARGE MARKET WITH HIGHER
MORE THAN 5% in 2004
GROWTH TREND
SECOND FASTEST
GROWING REGION
AFTER CHINA
Other Middle
Eastern countries
Lebanon
Syria
Jordan
Iran
GCC countries
North Africa
Egypt
Algeria
Tunisia
Morocco
Bahrain
UAE
Kuwait
Oman
Qatar
Kingdom of Saudi
Arabia
Iraq
2
THE INSURANCE MARKET IN THE REGION IS EXPECTED TO GROW
SIGNFICANTLY IN THE NEAR-MEDIUM TERM
Growth expected in the premium
Revenue Pool in the MENA region
US $ million
average growth
of 36% per
annum
6,000
Attractive
opportunities
for new
international
players
1,700
2000
2007
Source: McKinsey Team Analysis, Swiss Re, WMI
3
what Takaful?
Derive from the verb Khafel
Mean in Arabic mutually joint
guarantees or Guarantees each other
4
Pact among group of
participants who agree to
jointly guarantee each other
in case of any member suffer
from a loss or misfortune in
the future.
5
Flow of contributions
Policyholders
Pay claims,
reinsurance &
expenses
Reserves
funds
Surplus
Investments
Contributions
(Mudarabah)
premiums) base
on donation
Wakhala
Shareholders
fees
funds
70%
Dividends
30%
6
Obligation of participants
Shareholders
fund
Option(1):
Qarad Hassan
Participants
fund
Option (2):Pay
additional
premiums
Investment
Insurance
operation
Participants
Deficit
7
Issues Specific to Takaful
Takaful
Premiums
Premiums owned by
policyholders
Contract
A combination of
donation and Agency
or profit sharing
contract.
Policyholders
Participants mutually
expected to share the
surplus or pay the
deficit
Conventional
Premiums owned by
insurance company
An
exchange
contract (sale and
purchase) between
insurer and insured
Policyholders
premiums to
insurer.
pay
the
8
Issues Specific to Takaful
Takaful
Insurer
Investment
Takaful operator act
an agent. If there is a
deficit in takaful
funds, the operator
expected to provide
interest free loan
Assets
must
be
invested in shari’ah
compliance
instruments
Conventional
Insurer is liable to
pay the insurance
benefits as promised
from its assets.
No restriction apart
those imposed for
prudential reasons.
9
Takaful companies
Country
Number
Bahrain
14
Malaysia
8
Kuwait
4
Qatar
1
Iran
5
UAE
4
Sudan
16
other
8
Total
60
10
Geographical Distribution of
Takaful contributions
Arab Countries
GPW (US$
Million)
580
Market
share (%)
28
Iran
777
37
Malaysia
280
13
Other Asia Pacific
Countries
Other
425
20
52
2
2,114
100
Total
11
Arab Countries Vs Malaysia
Market
Malaysia Marke t
Arab countries Market
6%
34%
66%
94%
General
Family
General Family
12
Growth Potential for Takaful
GCC & MENA
Malaysia
Iran
Why?
13
Family Vs General growth?
Family
General
Family Takaful would grow at faster
rate of 20% p.a. than general takaful of
8% p.a.
14
Growth Factors for General
takaful?
Enhancement
of Islamic
banking and
finance
huge infrastructure
project (multi billion
projects):
-Durrat al-Bahrain.
-Qatar energy city.
-Financial Harbor.
15
General Takaful
Enhancement
of Islamic
banking and
finance
Market share of Islamic
banks in customer finance:
-Islamic Mortgages
-Automobiles
- Personal financing.
16
Growth Factors for Family
takaful?
Social
security
benefit
Cost of
education
Compulsory
insurance
Young
populations
Factors
Joint family
system
17
Growth Factors for Family
Takaful
Demographic
Young and
more educated
population
- Takaful product
awareness (health
and financial
securities).
- Demand of
takaful products
(housing …)
18
Growth Factors for Family
Takaful
Reducing
Government
security
benefits
Population will
save more for
the future
(Annuity and
saving plans)
19
Growth Factors for Family
Takaful
Cost of
education
Education is
greater priority
for people in
Arab countries
Saving plan for
children
education
20
Growth Factors for Family
Takaful
Economic
Growth, per
capita income
and insurance
penetration
Insurance
penetration:
-Saudi 0.5%
-Malaysia 6%
21
Growth Factors for Family
Takaful
Diminishing of
joint family
system
Force to have their
own financial
security
Compulsory
Insurance
Open the market
further for takaful
products
22
Survey Conducted
Saving for the future
(education)?
80% with
Banks
Do they understand
differences between
banks and insurance
91% No
Awareness campaigns are needed
23
The most important factor
Branding Identity
Surplus distributed to the
participants for both general
and family takaful
24
Survey Conducted
Change from conventional to Takaful if a
reasonable percentage of surplus
distributed?
70% will move to takaful companies
on a condition that the same
customer services quality will be
provided
25
International conventional
insurers
Movement of
international
players to
takaful
Foster growth of
takaful
26
Market potential for takaful worldwide
– projection for 2015
US$ Billion
Market
share (%)
38
Middle East
4.2
South East Asia
3.7
34
America
1.3
11.7
Africa
1.1
9.6
Europe
0.39
3.5
Other
0.4
3.2
Total
11.09
100
27
Market potential for takaful - projection
2015
4.5
4.2
3.7
US$ Billion
4
3.5
3
2.5
2
1.3
1.5
1.1
1
0.39
0.5
0.23
0.13
0
Middle
East
South East
Asia
America
Africa
Europe
South Asia
China
Region
28
Thank You ..
29