Takful Report - Revision history

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World Takaful Report 2010

Managing performance in a recovery

Ashar Nazim - Islamic Financial Services Group

Justin Balcombe - Middle East Insurance Leader

Mark Stanley - Islamic Financial Services Group

Key messages

1. Resilient Growth

Takaful has experienced continued growth but penetration remains low in

key markets

2. Takaful Varies Across Geographies

Increased dialogue between regulators and Shari'a scholars will help build

consistency

3. Mixed Financial Performance

Performance of operators in the GCC and Malaysia varies significantly due

to different business and operational strategies

4. Challenging Business Environment

Business risks from last year resonate in 2010 but shifts suggest M&A is

likely

Page 2 The World Takaful Report 2010

Global takaful contributions totalled US$5.3b in

2008

Global Gross Takaful Contributions (US$m)

5,318 28 CAGR 2005-2008

104

CAGR (2005-2008) = 39% 299

4,122 Levant 18%

22 1,146

276 76

3,068 Indian Sub- 135%

18 901 Continent

256 11

1,988 17 695 Africa 18%

8

1,384 14 181 3,742

5 544 2,846 South-East Asia 28%

474 121 2,089

1,239

770 GCC 45%

2004 2005 2006 2007 2008 (e)

Iran - Gross Contributions by Year (US$m)

2,164 2,561 2,896 3,415 4,096 17%

Source: World Islamic Insurance Directory 2010 (Reproduced with permission from Takaful Re Limited), Ernst & Young analysis

Page 3 The World Takaful Report 2010

Insurance penetration rates remain low across

OIC countries

Insurance Penetration and Real GDP Growth for Select Countries

18%

UK

16%

Insurance Penetration (Gross

14%

12%

Organisation of the

10% Islamic Conference (OIC)

France

Singapore member states (2010)

premiums/Nominal GDP in 2008)

USA

8%

World

Italy Germany

6% Canada

Malaysia

India

4% Thailand Morocco

Russia Jordan Qatar

2% UAE Tunisia

Turkey Indonesia

Pakistan Bangladesh

Kuwait KSA Egypt

Algeria Oman Nigeria

0%

-2% 0% 2% 4% 6% 8% 10% 12% 14%

Estimated Real GDP Growth (2009-2011)

Source: Swiss RE - Sigma No. 3 (2009), Global Insight, Ernst & Young analysis

Page 4 The World Takaful Report 2010

Key messages

1. Resilient Growth

Takaful has experienced continued growth but penetration remains low in

key markets

2. Takaful Varies Across Geographies

Increased dialogue between regulators and Shari'a scholars will help build

consistency

3. Mixed Financial Performance

Performance of operators in the GCC and Malaysia varies significantly due

to different business and operational strategies

4. Challenging Business Environment

Business risks from last year resonate in 2010 but shifts suggest M&A is

likely

Page 5 The World Takaful Report 2010

Four business models reflect a diversified

industry

Mudaraba Wakala Combined Wakala Waqf

Strengths ► Enhanced ► No sharing in the ► Two sources of ► Two sources of

profitability technical result revenues revenues

► Operator is ► Excessive risk taking ► No sharing in the ► No sharing in the

incentivized to is fully mitigated as technical result technical result

achieve strong no upside exists ► Qard Al-Hasan

technical results partially limits

► Qard Al-Hasan excessive risk taking

partially limits

excessive risk taking

Constraints ► Shareholders are ► Profitability is ► Excessive risk taking ► No Qard Al-Hasan to

permitted to share in reduced as there is only partially address deficits (e.g.

the technical results no upside from the mitigated through during catastrophic

► Excessive risk taking policyholders’ fund. Qard events), which may

only partially ► Direct financial ► Direct financial impact long-term

mitigated through incentives to improve incentives to improve sustainability

Qard technical results are technical results are

limited limited

► Corporate governance for participants

► Equitable distribution of surplus over time

Source: Ernst & Young analysis

Page 6 The World Takaful Report 2010

Takaful business models - the way forward

Key Strategic Issues

Revenue drivers Shari’a and regulatory Building customer trust /

1 2 3

vary significantly requirements vary brand loyalty

► Fee structures and ► Takaful regulations are ► Governance standards

profitability vary specific to jurisdictions remain limited

► Resilience of each model ► Shari’a framework is yet ► Policyholders are sole

is impacted by these to be convincingly applied providers of risk capital

revenue streams as a business advantage

Recommendations

Review feasibility of Address local leading Strengthen corporate

A B C

operating models practices governance

► Clearly understanding ► Understanding of Shari'a ► Communicate uniqueness

each model and its requirements and of takaful models

practical implementation regulations is key ► Position as competitive

is key advantage

Source: Ernst & Young analysis

Page 7 The World Takaful Report 2010

Key messages

1. Resilient Growth

Takaful has experienced continued growth but penetration remains low in

key markets

2. Takaful Varies Across Geographies

Increased dialogue between regulators and Shari'a scholars will help build

consistency

3. Mixed Financial Performance

Performance of operators in the GCC and Malaysia varies significantly due

to different business and operational strategies

4. Challenging Business Environment

Business risks from last year resonate in 2010 but shifts suggest M&A is

likely

Page 8 The World Takaful Report 2010

Average RoE for a sample of takaful operators

in GCC and Malaysia

20%

15%

11.1%

9.7%

10%

10.0% 6.2% 7.6%

5% 5.7%

1.6% 5.2%

0%

2005 2006 2007 2008 2009

-5%

-6.5%

-5.3%

-10%

GCC Malaysia

Takaful has not historically been a 20% RoE industry

Source: Company Annual Reports, Ernst & Young analysis

Page 9 The World Takaful Report 2010

Net income breakup for takaful operators in the

GCC and Malaysia

GCC (Sample) Malaysia (Takaful Industry)

100% 100%

90% 16% 90% 22% 19% 22%

25% 27%

80% 80%

70% 62% 70%

60% 80% 60%

Investment

50% 97% income 50%

40% 84% 40% 81%

Underwriting 75% 78% 78%

73%

30% income 30%

20% 38% 20%

10% 20% 10%

3%

0% 0%

2005 2006 2007 2008 2005 2006 2007 2008 2009

GCC takaful industry’s income is not derived from underwriting

Source: Company Annual Reports, CBB Insurance Market Review (Bahrain), Financial Stability and Payments Systems Report (Malaysia), Ernst & Young Analysis

Page 10 The World Takaful Report 2010

Retakaful ratios for a sample of operators in

GCC and Malaysia

45% 42.2%

37.9% 39.3%

40% 36.3%

37.0%

35%

30%

25%

20%

15%

9.1% 8.5%

10%

3.9% 4.7%

5% 4.5%

0%

2005 2006 2007 2008 2009

GCC Malaysia

GCC operators also rely heavily upon retakaful

Source: Company Annual Reports, Ernst & Young analysis

Page 11 The World Takaful Report 2010

Average claims ratio for takaful operators in the

GCC and Malaysia

70%

60.9%

55.6%

60% 54.2%

49.5% 47.3% 53.6%

50%

43.2% 43.8%

41.3% 43.2% 47.8%

40% 38.6% 41.5%

Ratio (%)

30% 33.6% 34.8%

32.4%

27.6% 29.3% 28.6%

20%

10%

0%

2003 2004 2005 2006 2007 2008

Saudi Arabia Insurance Claims Ratio UAE Insurance Claims Ratio

Bahrain Takaful Claims Ratio Malaysia Takaful Claims Ratio

Business mix and claims management needs to improve

Source: CBB Insurance Market Review (Bahrain), Annual Takaful Statistics issued by Bank Negara Malaysia (Malaysia), Annual Insurance Statistics issued by Insurance Authority (UAE), SAMA Insurance

Review (Saudi Arabia)

Page 12 The World Takaful Report 2010

Financial performance - the way forward

Key Strategic Issues

Quality of underwritten Ensuring investment

1 2 3 Efficiency in operation

business discipline

► Limited access to quality ► Limited access to Shari’a ► Critical business volume

customers compliant capital markets not achieved

► Complex risks are a ► High direct exposure to ► High combined ratios

challenge equity markets ► Service quality remains

► Business mix is sub- ► Ad-hoc approach to sub optimal

optimal portfolio management

Recommendations

Revisit strategy and Sustainable investment

A B C Lower cost of operation

implementation plan management

► Revisit business mix and ► Manage portfolio via ► Target economies of

build scale specialist intermediaries scale and scope

► Specialize - customer, ► Actively lobby for ► Improve loss ratios -

sectors, business lines deepening local Islamic business mix and claims

► Build risk infrastructure capital markets ► Shared service

and improve retention arrangements

Source: Ernst & Young analysis

Page 13 The World Takaful Report 2010

Key messages

1. Resilient Growth

Takaful has experienced continued growth but penetration remains low in

key markets

2. Takaful Varies Across Geographies

Increased dialogue between regulators and Shari'a scholars will help build

consistency

3. Mixed Financial Performance

Performance of operators in the GCC and Malaysia varies significantly due

to different business and operational strategies

4. Challenging Business Environment

Business risks from last year resonate in 2010 but shifts suggest M&A is

likely

Page 14 The World Takaful Report 2010

Takaful business risks in 2010 reflect improved

market conditions and potential for M&A

Takaful Global Business Risks 2010

Key Business Risks 2009

Financial Compliance

High-risk

1 Investment

Portfolios Regulatory

Shortage of High-risk Compliance

2

Expertise

Investment

3 Competition Portfolios -

Global Economic

4

Downturn

Enterprise Risk Inability to

5

Management Limited Achieve

Regulatory Financial Underwriting

6

Compliance Flexibility Profit

Inability to Achieve

7

Underwriting Profit

Lack of Rated Shortage of

8

ReTakaful Competition Expertise

Limited Financial

9

Flexibility

Inability to Tap Pent-

10 Strategic Operational

up Demand

Source: Corporate Interviews, Ernst & Young analysis

Page 15 The World Takaful Report 2010

Business risks - the way forward

Mitigating Key Strategic Business Risks

Balancing investment

1 Developing talent pool 2 Managing competition 3

portfolios

► Boards to actively direct ► Quickly build critical ► Disciplined approach to

investment in skill building business volumes - M&A investing

► Establish alliances ► Specialization, service ► Lobby for new products

► Initiate industry-wide quality and Shari'a and deeper Shari’a

compulsory training and ► Strategy execution and capital markets

qualification programs accountability

Strengthening underwriting Regulatory guidance

4 5 Creating financial flexibility 6

capabilities as a business enabler

► Specialize by customer ► Boards to actively direct ► Embrace regulatory

segment, sectors and strategic M&A compliance

business lines ► Capital planning to ► Infrastructure institutions

► Link-up with specialists address business and like IFSB, AAOIFI and

► Focus on originating regulatory requirements IIFM to play a more

quality business ► Prudent use of retakaful proactive role

Source: Ernst & Young analysis

Page 16 The World Takaful Report 2010

Key executive level takeaways

1. Achieving Scale

Takaful needs to build scale if it is to improve technical income and reduce

its reliance upon investments - M&A and specialization are key drivers

2. Differentiation

Convincing customers of the value of takaful remains a challenge - a

focused offering and brand credibility are key to addressing this issue

3. Strategy Development and Execution

Benchmarking performance, developing the right strategy and successful

implementation and accountability will differentiate market leaders

Page 17 The World Takaful Report 2010

Thank you

Contact us:

Ashar Nazim - ashar.nazim@bh.ey.com

Justin Balcombe - justin.balcombe@ae.ey.com

Mark Stanley - mark.stanley@bh.ey.com

← Older revision		Revision as of 04:54, 10 November 2017
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−	[~~http~~://45.40.~~136.134~~/~~~hodhood~~/HodHoodDocuments/IslamicFinance/Takaful/Takful%20-%20Zubair%20Mughal.pdf Read the Full Document]	+	[https://www.hodhood.com/en/HodHoodDocuments/IslamicFinance/Takaful/Takful%20-%20Zubair%20Mughal.pdf Read the Full Document]

← Older revision	Revision as of 02:33, 21 September 2016
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	+
	+
	+	== Top 20 FREQUENT WORDS ==
	+	takaful 39
	+	islamic 16
	+	insurance 7
	+	financial 6
	+	institutions 6
	+	model 5
	+	asia 4
	+	based 4
	+	challenges 4
	+	countries 4
	+	markets 4
	+	operators 4
	+	participants 4
	+	products 4
	+	riba 4
	+	shariah 4
	+	agency 3
	+	arab 3
	+	bedouin 3
	+	business 3
	+	camel 3
	+	companies 3
	+	estimated 3
	+	growth 3
	+	malaysia 3
	+	movement 3
	+	operator 3
	+	risk 3
	+	role 3
	+	sharia 3
	+	specific 3
	+	uncertainty 3
	+	wakalah 3
	+
	+
	+
	+	== DOCUMENT KEY POINTS ==
	+	*it provide provides mutual protection and joint risk sharing in the event of a loss by one of its member
	+	*introduction takaful is the sharia compliant brand name for the islamic alternative to conventional insurance
	+
	+	*from the holly quran i R the need for insurance is shown in the following verse of the quran
	+	*those of you who die and leave widows should bequeath for their widows a year s maintenance and residence
	+
	+	*he asked the bedouin why don t you tie down your camel the bedouin answered i put my trust in allah swt
	+	*from the hadiths i R by anas bin malik one day prophet muhammad pbuh notced a bedouin leaving his camel without tying it
	+
	+	*riba in insurance i R direct riba excess on one side in case of exchange between the amount of premium
	+	*i R indirect riba the interest earned on interest based investments
	+
	+	*the concept of takaful i R taburro contribution from the participants policy holders i R partnership among the participants
	+	*i R need of an operator i R investment in sharia compliant modes
	+
	+	*i R the role of the shariah board is vital in meeting the specific demand of a public who would not insure otherwise
	+	*shariah compliance i R shariah compliance is an essential element in takaful
	+
	+	*i R wakalah model an agency agreement is made between participants and operators on the basis of wakalah agency agreements i R wakalah based on waqf model the participant s donate the fund and operator charge an agency fee
	+	*different models of takaful i R pure mudarabah model the participants and operator enter into modarabah contract
	+
	+	*takaful pioneers i R takaful started some years ago in the middle east with the launching of two companies i R the islamic arab insurance co
	+	*of sudan i R but it took some time for the movement to take shape
	+
	+	*i R this was instrumental in the successful launching of the takaful movement in malaysia and in other countries of south east asia
	+	*takaful pioneers i R later in malaysia played a pioneering role in setting the first legal framework specific to takaful takaful act
	+
	+	*other islamic takaful legislations i R other markets such as the sudan and iran have islamic regulatory environments and became naturally takaful markets
	+	*i R in the gulf countries specific takaful legislations are coming through in bahrain and in saudi arabia
	+
	+	*on average i R world takaful contributions are conservatively estimated at around us billions of which i R general takaful i R family takaful
	+	*takaful premium i R takaful is one of the fastest growing segments in insurance at around pa
	+
	+	*i R a two digit growth in the range of to can be reasonably sustained for at least the next years in the existing markets far and middle east
	+	*billions of which around are based in asia and africa
	+
	+	*conclusions i R despite the challenges facing this new industry exciting times are ahead once the latent potential is unleashed
	+	*i R the success of takaful largely depends on that of islamic financial institutions on a global basis
	+
	+
	+	''Please note, This is an auto generated summary based on sentances position in the document and other factors''
	+	== DOCUMENT WORD ANALYSIS ==
	+	=== Main Category ===
	+	: AlHuda Material\takaful
	+
	+
	+	=== KeyWords ===
	+	taka islam insur malaysia productdeferred shariah countries muslim financial retakaful model growth custom partner developed service mutual bankable provided scheme
	+
	+
	+
	+	== RELATED DOCUMENTS ==
	+	:[[A Review of Takaful by Prof. Khawaja Ahmed Saeed]]
	+	:[[Agency Management,Training and Incentive Programme]]
	+	:[[Audit Issue of Islamic Banking]]
	+	:[[Banca Takaful by Faisal Shahzad Abbassi]]
	+	:[[Best Practices from e- Insurance to e-Takaful by Sami Guello]]
	+	:[[Calculated Risks, Measurable Results]]
	+	:[[Challenges & Issues Faced by Takaful Industry by Mr. Imtiaz ]]
	+	:[[Co-Operative Insurance and Takaful]]
	+	:[[Current Achievements of Takaful by Dr. S. J Malaikah]]
	+	:[[International Cooperative & Mutual Insurance Federation]]
	+	:[[Islamic Banking And Finance Malaysia’s Experience And Achiev]]
	+	:[[Islamic Finance & Investment Symposium by Sohail Jaffar]]
	+	:[[Islamic Insurance in 21st Century by Ahmad Feizal]]
	+	:[[Islamic Insurance Opertunities and Challenges]]
	+	:[[Issues and Challenges in Retakaful by Azman Ismail]]
	+	:[[Leveraging BancaTakaful as a Key Growth Channel by Mr. Rohai]]
	+	:[[Life Family Takaful by Mr. P Ahmed]]
	+	:[[Micro Insurance Co-Operative and Takaful]]
	+	:[[Micro Takaful by Shabir Patal]]
	+	:[[Microinsurance and Takaful]]
	+	:[[Microinsurance, cooperatives and Takaful]]
	+	:[[MicroTakaful – the way forward by Capt. M. Jamil Akhtar]]
	+	:[[Opertunities in Islamic Insurance]]
	+	:[[Present Scenario and Future Potentials of Takaful by Kazi Md]]
	+	:[[ReTakaful by Rohail Ali Khan]]
	+	:[[Syariah Compliant General Takaful Products by Sami Guellouz]]
	+	:[[Takaful and Mutuality by Mohd. Masua Billah]]
	+	:[[Takaful by Abdul Rahim]]
	+	:[[Takaful for Microfinance]]
	+	:[[Takaful Opperunities and Challenges By Azeem Pirani]]
	+	:[[Takaful Products Family Takaful Linked Investment Plans by S]]
	+	:[[Takaful World Prospective Middle East & North Africa]]
	+	:[[Takaful]]
	+	:[[Takful - Zubair Mughal]]
	+	:[[Takful Report]]
	+	:[[The Islamic Vision Presentation]]
	+	:[[The Success of Retakaful by Farid Benbouzid]]
	+
	+
	+
	+	== DOCUMENT REFERENCES ==
	+
	+
	+	=== Number of Pages ===
	+	28
	+
	+
	+	=== Published Date ===
	+	2016-09-17 01:21:15
	+
	+
	+	== Full Document ==
	+
	+
	+	[http://45.40.136.134/~hodhood/HodHoodDocuments/IslamicFinance/Takaful/Takful%20-%20Zubair%20Mughal.pdf Read the Full Document]
	+
	+
	+	[[Category:Islamic Finance]]
	+
	+	[[Category: Takaful]]