The Success of Retakaful by Farid Benbouzid - Revision history

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The success of Retakaful

Arab Insurance, outlook and

actual new economical situation

Farid Benbouzid Cairo 20 & 21-07-05 1

Overview

Introduction

Achievements

Challenges ahead

Strategy

Conclusion

Cairo 20 & 21-07-05 2

Introduction

Conventional insurance

Takaful Concept

Retakaful concept

Cairo 20 & 21-07-05 3

Insurance not permissible

Uncertainty (Gharar)

Gambling (Maisir)

Interest (Riba)

Cairo 20 & 21-07-05 4

Takaful concept

1985 Grand Council of scholars approved

Takaful

Method and means left to scholars and

practitioners

Must have :

 Permanent Sharia Advisory Board

 Sharia compliant investment strategy

 Operating model based on Shariaa concepts

Cairo 20 & 21-07-05 5

Operating models

Pure mudharabah

(Sudan) Family takaful

Modified

mudharabah General Takaful

(Malaysia)

Wakala (Bahrain)

Cairo 20 & 21-07-05 6

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

Cairo 20 & 21-07-05 7

Overview

Introduction

Achievements

Challenges ahead

Strategy

Conclusion

Cairo 20 & 21-07-05 8

Achievements

Takaful industry

Retakaful industry

Best Re’s position

Cairo 20 & 21-07-05 9

Takaful Industry in the World

World Premiums 2003

 USD 2.6 trillions

Takaful contributions 2002

 USD 2.1billions

Number of companies

  59

Number of countries

 23

Cairo 20 & 21-07-05 10

Takaful Industry in the World

Geographical Spread

Mid-East

7% 1%

South &

East Asia

Africa

36% 56%

Others

Cairo 20 & 21-07-05 11

Takaful industry in EM

EM Takaful contributions 2002

 USD 2 billions

EM/WW Takaful contributions

 99%

EM Total Premiums

 USD 217 billions

Number of Companies

 >45

Cairo 20 & 21-07-05 12

Main EM Takaful Markets

GCC

Malaysia

Other Arab countries

Other South & East Asia

Cairo 20 & 21-07-05 13

Retakaful cessions drivers

Heavy exposure to cat events

 > No exposure to cat events

Small local players

 > Larger international insurers

Specific line or customer Group focused

 > Multiline insurers

Commercial lines (Aviation)

 > Personal lines (Motor)

Cairo 20 & 21-07-05 14

Retakaful cessions drivers

Life protection lines

 > Life saving

Expansion into new products

 Or regions

Regulatory and rating considerations

 Solvency ratio and claims payment ability

Cairo 20 & 21-07-05 15

High demand for Retakaful

Many of Takafuls are local players

Many of them are also newly set up

Small takaful market

 In number

 In size

Rely heavily on Retakaful support

Demand for Retakaful expected to grow with

industry

Cairo 20 & 21-07-05 16

Unsufficient supply

Very few Professionnal Retakafuls

 2 (Best Re, Asean Re - ARIL)

Takafuls accept a small part of

Retakaful business from each other

Cairo 20 & 21-07-05 17

Takaful dilemma

Participants opt for the product because

it is sharia compliant

Takafuls forced to cede business to

conventional reinsurance

Otherwise disappear !

Cairo 20 & 21-07-05 18

Retakaful dilemma

Retakafuls are Takafuls focused

Retakafuls forced to accept business

from conventional market

Retakafuls forced to retrocede business

to conventional market

Otherwise disappear !

Cairo 20 & 21-07-05 19

Best Re

Modified Mudharaba model

Permanent Shariaa Board

Avoids “Ribaa”

 Interest on deposits are offset

 Investments are compliant with “Shariaa”

requirements

Manages separate accounts

 Ceding companies account (Technical operations)

 Shareholders’ account (Shareholders’ operations)

Cairo 20 & 21-07-05 20

Best Re

Niche market player set up in 1985

Internationally recognized as Retakaful

Strong capital basis and claims-paying

ability

Well rated by well reputed agencies

 Standard & Poor’s : BBB (Stable Outlook)

 AM Best : B++ (Very Good)

Cairo 20 & 21-07-05 21

Best Re

Accepted contributions from Takafuls (2003)

 USD 8 millions out of 62

In % of whole portfolio

 13%

Markets

 16

Number of Ceding Takafuls

 28

Number of Contracts

 319

Cairo 20 & 21-07-05 22

Overview

Introduction

Achievements

Challenges ahead

Strategy

Conclusion

Cairo 20 & 21-07-05 23

Challenges ahead

Mission statement

Takaful growth perspectives

Learn from conventionals

Retakafuls’ duties

Cairo 20 & 21-07-05 24

Mission statement

Pave the way for takafuls to achieve their

growth potential and build a strong and

sound industry

Cairo 20 & 21-07-05 25

Takaful growth perspectives

Non life insurance demand in EM

Life insurance demand in EM

Outlook

Cairo 20 & 21-07-05 26

Non-life insurance demand

Low Premium as % of GDP

 Min = 0.2% (Bangladesh)

 Max=2.9% (Jamaïca, South Africa)

Low per-capita Spending

 Min = USD 8 (Africa)

 Max = USD 54 (Latin America)

Cairo 20 & 21-07-05 27

Life insurance demand

Very low Premium as % of GDP

 Min = 0% (Saudi Arabia)

 Max = 3.8% (Trinidad & Tobago)

Very low per-capita Spending

 Min = USD 14 (Middle East)

 Max = USD 30 (South & East Asia)

Cairo 20 & 21-07-05 28

Outlook

Large potential

 to be captured

Takaful is a specific answer

 to an unfulfilled demand

Takaful could capture a large part of

the population

 which would not, otherwise, insure.

Cairo 20 & 21-07-05 29

Takaful Growth Perspectives

New markets likely to introduce Takaful

in the near future

 Philippines, Bangladesh, Former Soviet Union,

South Africa etc.

Takaful windows set up by conventional

insurers

 Good indicators of brand success

Cairo 20 & 21-07-05 30

Takaful Growth Perspectives

Strong growth trend in South & East

Asia

 +30% p.a. in Malaysia

 likely to continue

Sustained average growth in double

digits in the coming years

 +15% p.a.

Cairo 20 & 21-07-05 31

Learn from conventionals

250 professional reinsurers

2003 ceded premiums : USD 176 billion

 Non life reinsurance :

 USD 146 billion (13.7% insurance premiums)

 Life reinsurance :

 USD 30 billion (1.9% insurance premiums)

Cairo 20 & 21-07-05 32

Learn from conventionals

Top ten reinsurers market share :

 54%

Shareholders equity of top 40 :

 USD 249 billion

Of top ten, 6 have a financial strength rating:

 At least “AA-” by S&P (very strong financial security)

Stable and sound capital base for reinsurance

industry :

 Negligeable bankrupties between 1980-2003

Cairo 20 & 21-07-05 33

Reinsurance cessions drivers

Reduced uw results volatility

 Escape from insolvency in case of cat event

Capital relief and flexible financing

 Accept more business with the same capital

Access to reinsurers’ expertise and

services

 Product development

 Pricing

 Underwriting

 Claims management

Cairo 20 & 21-07-05 34

Reinsurers have to be financially

secure

Part of underwriting risk

Insurer Reinsurer

Counterparty credit risk

Cairo 20 & 21-07-05 35

Reinsurers’ risk management

Scope : Underwriting

 Long term survival of

the reinsurance

company

Underwriting and Risk

Management

investment risks are

aligned with capital Capital Asset

available (R.B.C) management management

Cairo 20 & 21-07-05 36

Risk modelling

Exchange

Stock markets rates Tsunami

Interest Earthquakes

rates

Insurance risk Credit risk Market risk

Inflation Operational risk Influenza

epidemic

Credit risks Tropical

cyclones

Cairo 20 & 21-07-05 37

Diversification across time

Less expensive

Lower capital reinsurance cover

Better need

diversification or

Lower Cost Higher level of

given the exposure Protection _ given the

level of capital

Cairo 20 & 21-07-05 38

Retakafuls’ duties

Providers of secure covers

 Strong capital base

 Focus on Risk Management models

 Diversification across time

Expertise providers

 Product development

 Pricing

 Underwriting

 Claims management

Cairo 20 & 21-07-05 39

Overview

Introduction

Achievements

Challenges ahead

Strategy

Conclusion

Cairo 20 & 21-07-05 40

Strategy – 1st step -

Establish an annual meeting of ArabTakafuls

and Retakafuls

 Networking benefits

Set up a « Takaful Association »

 Practitioners’ intelligence networks

 Best practices’ exchange

 Reinsurance placing facilities

Set up an informative Takaful & Retakaful

website

 Wise information exchange among members

Cairo 20 & 21-07-05 41

Strategy – 2nd step -

More and more cooperation between

Takafuls

Web site becomes transactional

« Takaful Association » is efficient

 Improved structures

 Successful Annual Meeting

New well rated Retakafuls are set up

 2 to 3

Cairo 20 & 21-07-05 42

Strategy – 3rd step -

Design a framework of cooperation with

conventional reinsurers

 Associate members’ status

 Interested in the Takaful market development

Set up a brokerage company focused

on Retakaful placing

 By the Association

Cairo 20 & 21-07-05 43

Specific position of Middle East

Homogenious religious status

Oil producer countries generating

financial surplus

Eligible to play a major role in this

strategy

Strategy could benefit from the financial

synergy existing in Dubai & Bahrain

Cairo 20 & 21-07-05 44

Overview

Introduction

Achievements

Challenges ahead

Strategy

Conclusion

Cairo 20 & 21-07-05 45

Conclusion

To be or not to be?

 Is no longer the question

Other questions prevail now

 How many?

 How much strong? Capital, rating?

 How much knowledgeable?

Successful answers to those questions

will involve a virtuous business cycle

 Takaful & Retakaful development

 Benefits for overall economy and society

Cairo 20 & 21-07-05 46

Retakaful &Takaful’s virtuous cycle

Less expensive takaful products

Higher profitability

Retakaful Lower cost

Enhanced Stronger Secure

insurability growth of capital industry

Takaful Company

Overall economy

Cairo 20 & 21-07-05 47

Thank you

Sources

Islamic Insurance Conference, London,

Sept. 26-27, 2003

Swiss Re, Understanding reinsurance,

2004

Swiss Re, sigma N°6/ 2002.

Farid Benbouzid Cairo 20 & 21-07-05 48

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← Older revision	Revision as of 02:34, 21 September 2016
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	+
	+
	+	== Top 20 FREQUENT WORDS ==
	+	enrichment 9
	+	faith 9
	+	intellect 9
	+	posterity 9
	+	wealth 9
	+	development 8
	+	maqasid 6
	+	aql 5
	+	education 5
	+	freedom 5
	+	nasl 5
	+	shariah 5
	+	social 5
	+	employment 4
	+	moral 4
	+	nafs 4
	+	solidarity 4
	+	din 3
	+	equitable 3
	+	falah 3
	+	mal 3
	+	political 3
	+	removal 3
	+	research 3
	+	security 3
	+	trust 3
	+	vision 3
	+	vol 3
	+
	+
	+
	+	== DOCUMENT KEY POINTS ==
	+	*the islamic vision of development in the light of maqasid al shariah m
	+	*umer chapra research adviser irti idb
	+
	+	*are these maqasid independent of each other or are they interdependent a c the human self pv a a a c faith rf a a a c intellect y a a a c posterity yiv a a a c wealth a aa x a a
	+	*do we just safeguard or do we go beyond this to enrich and strengthen
	+
	+	*figure enrichment of faith worldview tawh d khilafah ris lah and khirah values education rules of proper motivation moral as well as behaviour material justice freedom security of life property and honour honesty removal of poverty equitable family integrity fulfillment of all socioneed fulfilment of all distribution social solidarity economic and political employment and human and political obligations patience self employment brotherhood stability thriftners prudence opportunities tolerance mutual care and trust etc
	+	*good governance enrichment of self intellect and posterity well being of all fal h
	+
	+
	+	''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 ===
	+	11
	+
	+
	+	=== Published Date ===
	+	2010-05-29 17:59:05
	+
	+
	+	== Full Document ==
	+
	+
	+	[http://45.40.136.134/~hodhood/HodHoodDocuments/IslamicFinance/Takaful/The%20Islamic%20Vision%20Presentation.pdf Read the Full Document]
	+
	+
	+	[[Category:Islamic Finance]]
	+
	+	[[Category: Takaful]]