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| − | Cooperative Insurance and
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| − | Takaful
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| − | Takaful Forum July 20-21 2005
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| − | Overview of presentation
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| − | • Cooperative and mutual insurance principles
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| − | • The global cooperative and mutual movement
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| − | • Similarities and differences with Takaful
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| − | • Opportunities for collaboration
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| − | Cooperative definition
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| − | ”A cooperative is an autonomous association of
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| − | persons united voluntarily to meet their common
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| − | economic, social, and cultural needs and
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| − | aspirations through a jointly-owned and
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| − | democratically controlled enterprise”.
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| − | Source: International Cooperative Alliance (ICA)
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| − | Cooperative/mutual values
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| − | • Self-help, self-responsibility
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| − | • Democracy, equality, equity
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| − | • Solidarity
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| − | • Honesty, openness
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| − | • Social responsibility, caring for others
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| − | Cooperative principles
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| − | • Voluntary and open membership
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| − | • Democratic member control
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| − | • Member economic participation
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| − | • Autonomy and independence
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| − | • Education, training and information
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| − | • Cooperation among co-operatives
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| − | • Concern for community
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| − | Source: International Cooperative Alliance (ICA)
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| − | Cooperative v Mutuals
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| − | Cooperative principles Mutual principles
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| − | Open and voluntary membership Free association
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| − | One member, one vote User must be member
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| − | Limited interest on shares "Not for profit”
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| − | For the benefit of user-members Quality products
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| − | Cooperative education Personal development
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| − | Cooperation among cooperatives Solidarity
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| − | ESTIMATES
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| − | Worldwide importance of mutual insurers, 2001
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| − | Percent of total premiums
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| − | 100% = 2416 bio USD
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| − | USA
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| − | 32
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| − | EUR
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| − | 21
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| − | CAN
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| − | 25 19
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| − | JAP
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| − | 16
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| − | KOR
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| − | 14
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| − | Source: Swiss Re for worldwide total premium; ICMIF
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| − | VERY ROUGH
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| − | Europe, importance of mutual insurance sector*, 2002 ESTIMATES
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| − | Percentage of gross direct domestic** premium •Mut + Coop +
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| − | Joint Stock
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| − | written •Mut + Joint
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| − | Stock
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| − | Finland ~69 Luxembourg ~16 •Coop + Joint
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| − | Stock
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| − | Sweden ~45 Netherlands ~15
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| − | France ~40 Belgium ~15
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| − | Germany ~30 UK ~12
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| − | Austria ~22 Italy ~12
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| − | Slovenia ~21 Ireland ~8
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| − | Spain ~20 Hungary ~8
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| − | Czech Rep. ~17 Denmark ~8
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| − | * Mutual and cooperative insurers; mutual insurers controlled by mutual holding
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| − | ** Except Luxembourg and Ireland: domestic and foreign
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| − | Source: National supervisory authorities; Industry associates; Company websites / annual reports, AISAM and ACME analysis
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| − | Similarities and differences
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| − | between Cooperative
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| − | Insurance and Takaful
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| − | Cooperative/mutual values
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| − | • Self-help, self-responsibility
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| − | • Democracy, equality, equity
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| − | • Solidarity
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| − | • Honesty, openness
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| − | • Social responsibility, caring for others
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| − |
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| − | Principles of Takaful
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| − | • Solidarity and joint guarantee
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| − | • Self reliance and self sustaining for community well being
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| − | • Assist those that need assistance
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| − | • Community pooling system
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| − | • Shari’ah approved investments and products
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| − | “Bear ye one another’s burden”
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| − |
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| − | Fiqh Academy Resolution 1985
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| − | • Commerical insurance is prohibited
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| − | • Alternative contract confirming to principles of Islamic
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| − | dealings is the contract of cooperative insurance, which is
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| − | founded on the basis of charitable donation and Shariah
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| − | compliant dealings
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| − | Takaful model in Sudan
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| − | • Surplus belongs to policyholders
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| − | – proportionally distributed
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| − | – special reserve
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| − | – invested on behalf of policyholders
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| − | • Policyholders represented on the board of directors
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| − | • Shareholders share of investment income
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| − | Differences between
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| − | Cooperative and Takaful
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| − | • Takaful is not insurance
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| − | • Shariah compliant investments and products
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| − | • Sharholder surplus participation
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| − | • Shareholder governance
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| − | ”A cooperative and mutual scheme providing
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| − | Shariah approved products and investments
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| − | is permissible under Islamic Law”.
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| − | Opportunities for
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| − | Collaboration
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| − | Technical Cooperation
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| − | • Industry development
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| − | • 13 Takaful companies are members ICMIF
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| − | • Takaful Network
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| − | • Takaful Xchange
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| − | • Policyholder participation
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| − | • Disseminating information www.icmif.org/takaful
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| − | Retakaful
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| − | • Preferred reinsurance is proportional (quota share or
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| − | surplus)
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| − | • Non proportional permissible on a strict profit commission
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| − | • If takaful reinsurance is unavailable then it is permissible to
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| − | use a conventional reinsurer
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| − | Reinsurance capacity
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| − | “If there is a need to turn to the conventional
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| − | reinsurance market then the Takaful
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| − | operator should first try and obtain coverage
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| − | from the cooperative and mutual
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| − | reinsurance sector.”
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| − | Takaful for the low-income
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| − | sector
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| − | Can insurance assist poverty
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| − | alleviation?
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| − | • The poor are the most vulnerable
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| − | • The impact of losses are more severe
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| − | • They have minimum means of recovery
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| − | • Success of microfinance schemes show the poor can and
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| − | want to save
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| − | • Savings and credit are used unproductively
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| − | • The poor need a safety net to escape poverty
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| − | “Insurance is recognized as an
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| − | important tool for poverty
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| − | alleviation”
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| − | Providing microinsurance
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| − | The challenges
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| − | • Coverage
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| − | • Regulation
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| − | • Moral hazard and Fraud
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| − | • Adverse selection
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| − | • Education and trust
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| − | • Technical expertise
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| − | • Affordability
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| − | • Retention
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| − | • Sustainability
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| − | Providing microinsurance
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| − | The possibilities
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| − | • The cooperative microinsurance model
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| − | History of organising the poor
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| − | Operate for the interest of members by
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| − | members
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| − | Trust
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| − | Ownership and loyalty
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| − | Peer pressure
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| − | Surplus reinvested or redistributed
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| − | Providing microinsurance
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| − | The possibilities
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| − | • The partner agent model
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| − | No-risk fee for microinsurance provider
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| − | Better coverage for policyholder
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| − | Access to new market
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| − | Pooling of risks between informal and formal
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| − | sector
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| − | Providing microinsurance
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| − | The possibilities
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| − | • The donor agent model
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| − | Access to expertise
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| − | Financial sustainability
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| − | Guiding hand
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| − | The need in Muslim countries
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| − | • Social services inadequate or unavailable
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| − | • Large sectors of poverty in many Muslim countries
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| − | • Over half of world’s lowest developed countries have a
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| − | majority Muslim population
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| − | • Increasing inequality in Middle East and Gulf countries
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| − | “Takaful is the second most important social
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| − | institution to counter poverty and
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| − | deprivation”
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| − | Omar Fisher,1999
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| − | How can microtakaful be
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| − | provided?
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| − | • Establish informal cooperative microtakaful schemes
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| − | • Encouragement of pro-poor organisations
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| − | • Education of government and donor agencies
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| − | • Involvement of Takaful sector
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| − | Technical expertise
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| − | Financial assistance
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| − | Partner-agent model
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| − | Takaful in Non-Muslim
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| − | countries
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| − | Takaful in Non-Muslim Countries
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| − | Is there a need?
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| − | Country Est. Muslim Country Est. Muslim
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| − | population population
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| − | Argentina 800,000 Italy 600,000
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| − | Brazil 1 million Japan 1.3 million
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| − | Canada 500,000 Kenya 8.4 million
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| − | France 4.8 million Netherlands 500,000
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| − | Germany 3 million UK 2 million
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| − | Takaful in Non-Muslim countries
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| − | Is there a need?
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| − | • Fasting growing immigrant population
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| − | • Belief in will of God
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| − | • Acceptance that insurance is not allowed
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| − | • First and second generations are purchasing insurance
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| − | • Increased availability of information
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| − | • Development of Islamic financial sector
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| − | Takaful in Non-Muslim countries
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| − | The challenges
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| − | • Dispersed population
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| − | • Capital requirements
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| − | • Regulation
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| − | • Awareness
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| − | • Credibility
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| − | • Technical expertise
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| − | Ruling by the European Council of Fatwa
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| − | and Research
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| − | “… It is well known that in most non-Islamic countries there
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| − | are cooperative and mutual insurance companies. There is
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| − | no harm from the Shari`ah point of view to participate in
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| − | these services. So, it is unlawful for a Muslim living in a
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| − | country where there is such a cooperative insurance
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| − | company to make an agreement with a commercial
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| − | insurance company…..”
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| − | Ruling by the European Council of Fatwa
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| − | and Research
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| − | Muslims are directed to purchase their statutory
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| − | insurance requirements from the cooperative and
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| − | mutual insurer if there is no Takaful company in the
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| − | country
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| − | The case of Folksam - Sweden
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| − | • 350,000 Muslim population
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| − | • Fastest growing immigrant community
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| − | • Collaboration with Swedish Muslim Council
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| − | • Marketing of Folksam products through
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| − | representatives of Council in communities and
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| − | mosques
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| − | • Insurance committee has been established
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| − | The Possibilities in Non-Muslim countries
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| − | There is a growing awareness and demand for Islamic
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| − | financial instruments including insurance in non-Muslim
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| − | countries. There is a great potential for established
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| − | financial institutes to set up Takaful windows. In particular
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| − | the Shari’ah ruling presents an opportunity for cooperative
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| − | and mutual insurers to penetrate this niche market with
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| − | minimal costs.
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| − | Conclusion
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| − | “The Takaful sector is experiencing phenomenal growth
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| − | and is facing a multitude of challenges and issues in
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| − | its present development cycle. The similarities in
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| − | principles with the established cooperative and mutual
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| − | insurance sector provides an opportunity for
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| − | cooperation which will benefit existing and potential
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| − | policyholders in the Muslim world”
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| − | Thank you
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| − | www.icmif.org/takaful
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