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| Line 1: |
Line 1: |
| − | The success of Retakaful
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| − | Arab Insurance, outlook and
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| − | actual new economical situation
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| − | Farid Benbouzid Cairo 20 & 21-07-05 1
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| | | | |
| − | Overview
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| − | Introduction
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| − | Achievements
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| − | Challenges ahead
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| − | Strategy
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| − | Conclusion
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| − | Cairo 20 & 21-07-05 2
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| − |
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| − | Introduction
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| − | Conventional insurance
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| − | Takaful Concept
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| − | Retakaful concept
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| − | Cairo 20 & 21-07-05 3
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| − |
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| − | Insurance not permissible
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| − | Uncertainty (Gharar)
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| − | Gambling (Maisir)
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| − | Interest (Riba)
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| − | Cairo 20 & 21-07-05 4
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| − |
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| − | Takaful concept
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| − | 1985 Grand Council of scholars approved
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| − | Takaful
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| − | Method and means left to scholars and
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| − | practitioners
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| − | Must have :
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| − | Permanent Sharia Advisory Board
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| − | Sharia compliant investment strategy
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| − | Operating model based on Shariaa concepts
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| − | Cairo 20 & 21-07-05 5
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| − |
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| − | Operating models
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| − | Pure mudharabah
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| − | (Sudan) Family takaful
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| − | Modified
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| − | mudharabah General Takaful
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| − | (Malaysia)
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| − | Wakala (Bahrain)
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| − | Cairo 20 & 21-07-05 6
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| − |
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| − | Re-Takaful concept
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| − | Preferred reinsurance is proportional
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| − | (quota share or surplus)
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| − | Non proportional permissible
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| − | If Re-takaful is unavailable, then it is
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| − | permissible to use a conventional
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| − | reinsurer
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| − | Cairo 20 & 21-07-05 7
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| − |
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| − | Overview
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| − | Introduction
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| − | Achievements
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| − | Challenges ahead
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| − | Strategy
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| − | Conclusion
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| − | Cairo 20 & 21-07-05 8
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| − |
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| − | Achievements
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| − | Takaful industry
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| − | Retakaful industry
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| − | Best Re’s position
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| − | Cairo 20 & 21-07-05 9
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| − |
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| − | Takaful Industry in the World
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| − | World Premiums 2003
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| − | USD 2.6 trillions
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| − | Takaful contributions 2002
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| − | USD 2.1billions
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| − | Number of companies
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| − | 59
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| − | Number of countries
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| − | 23
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| − | Cairo 20 & 21-07-05 10
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| − |
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| − | Takaful Industry in the World
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| − | Geographical Spread
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| − | Mid-East
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| − | 7% 1%
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| − | South &
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| − | East Asia
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| − | Africa
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| − | 36% 56%
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| − | Others
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| − | Cairo 20 & 21-07-05 11
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| − |
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| − | Takaful industry in EM
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| − | EM Takaful contributions 2002
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| − | USD 2 billions
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| − | EM/WW Takaful contributions
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| − | 99%
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| − | EM Total Premiums
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| − | USD 217 billions
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| − | Number of Companies
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| − | >45
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| − | Cairo 20 & 21-07-05 12
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| − |
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| − | Main EM Takaful Markets
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| − | GCC
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| − | Malaysia
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| − | Other Arab countries
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| − | Other South & East Asia
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| − | Cairo 20 & 21-07-05 13
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| − |
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| − | Retakaful cessions drivers
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| − | Heavy exposure to cat events
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| − | > No exposure to cat events
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| − | Small local players
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| − | > Larger international insurers
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| − | Specific line or customer Group focused
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| − | > Multiline insurers
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| − | Commercial lines (Aviation)
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| − | > Personal lines (Motor)
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| − | Cairo 20 & 21-07-05 14
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| − |
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| − | Retakaful cessions drivers
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| − | Life protection lines
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| − | > Life saving
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| − | Expansion into new products
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| − | Or regions
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| − | Regulatory and rating considerations
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| − | Solvency ratio and claims payment ability
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| − | Cairo 20 & 21-07-05 15
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| − |
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| − | High demand for Retakaful
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| − | Many of Takafuls are local players
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| − | Many of them are also newly set up
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| − | Small takaful market
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| − | In number
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| − | In size
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| − | Rely heavily on Retakaful support
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| − | Demand for Retakaful expected to grow with
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| − | industry
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| − | Cairo 20 & 21-07-05 16
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| − |
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| − | Unsufficient supply
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| − | Very few Professionnal Retakafuls
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| − | 2 (Best Re, Asean Re - ARIL)
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| − | Takafuls accept a small part of
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| − | Retakaful business from each other
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| − | Cairo 20 & 21-07-05 17
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| − |
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| − | Takaful dilemma
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| − | Participants opt for the product because
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| − | it is sharia compliant
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| − | Takafuls forced to cede business to
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| − | conventional reinsurance
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| − | Otherwise disappear !
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| − | Cairo 20 & 21-07-05 18
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| − |
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| − | Retakaful dilemma
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| − | Retakafuls are Takafuls focused
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| − | Retakafuls forced to accept business
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| − | from conventional market
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| − | Retakafuls forced to retrocede business
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| − | to conventional market
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| − | Otherwise disappear !
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| − | Cairo 20 & 21-07-05 19
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| − |
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| − | Best Re
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| − | Modified Mudharaba model
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| − | Permanent Shariaa Board
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| − | Avoids “Ribaa”
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| − | Interest on deposits are offset
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| − | Investments are compliant with “Shariaa”
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| − | requirements
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| − | Manages separate accounts
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| − | Ceding companies account (Technical operations)
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| − | Shareholders’ account (Shareholders’ operations)
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| − | Cairo 20 & 21-07-05 20
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| − |
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| − | Best Re
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| − | Niche market player set up in 1985
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| − | Internationally recognized as Retakaful
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| − | Strong capital basis and claims-paying
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| − | ability
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| − | Well rated by well reputed agencies
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| − | Standard & Poor’s : BBB (Stable Outlook)
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| − | AM Best : B++ (Very Good)
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| − | Cairo 20 & 21-07-05 21
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| − |
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| − | Best Re
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| − | Accepted contributions from Takafuls (2003)
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| − | USD 8 millions out of 62
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| − | In % of whole portfolio
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| − | 13%
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| − | Markets
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| − | 16
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| − | Number of Ceding Takafuls
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| − | 28
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| − | Number of Contracts
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| − | 319
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| − | Cairo 20 & 21-07-05 22
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| − |
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| − | Overview
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| − | Introduction
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| − | Achievements
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| − | Challenges ahead
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| − | Strategy
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| − | Conclusion
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| − | Cairo 20 & 21-07-05 23
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| − |
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| − | Challenges ahead
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| − | Mission statement
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| − | Takaful growth perspectives
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| − | Learn from conventionals
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| − | Retakafuls’ duties
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| − | Cairo 20 & 21-07-05 24
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| − |
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| − | Mission statement
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| − | Pave the way for takafuls to achieve their
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| − | growth potential and build a strong and
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| − | sound industry
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| − | Cairo 20 & 21-07-05 25
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| − |
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| − | Takaful growth perspectives
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| − | Non life insurance demand in EM
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| − | Life insurance demand in EM
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| − | Outlook
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| − | Cairo 20 & 21-07-05 26
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| − |
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| − | Non-life insurance demand
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| − | Low Premium as % of GDP
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| − | Min = 0.2% (Bangladesh)
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| − | Max=2.9% (Jamaïca, South Africa)
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| − | Low per-capita Spending
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| − | Min = USD 8 (Africa)
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| − | Max = USD 54 (Latin America)
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| − | Cairo 20 & 21-07-05 27
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| − |
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| − | Life insurance demand
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| − | Very low Premium as % of GDP
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| − | Min = 0% (Saudi Arabia)
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| − | Max = 3.8% (Trinidad & Tobago)
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| − | Very low per-capita Spending
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| − | Min = USD 14 (Middle East)
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| − | Max = USD 30 (South & East Asia)
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| − | Cairo 20 & 21-07-05 28
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| − |
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| − | Outlook
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| − | Large potential
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| − | to be captured
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| − | Takaful is a specific answer
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| − | to an unfulfilled demand
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| − | Takaful could capture a large part of
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| − | the population
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| − | which would not, otherwise, insure.
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| − | Cairo 20 & 21-07-05 29
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| − |
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| − | Takaful Growth Perspectives
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| − | New markets likely to introduce Takaful
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| − | in the near future
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| − | Philippines, Bangladesh, Former Soviet Union,
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| − | South Africa etc.
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| − | Takaful windows set up by conventional
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| − | insurers
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| − | Good indicators of brand success
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| − | Cairo 20 & 21-07-05 30
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| − |
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| − | Takaful Growth Perspectives
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| − | Strong growth trend in South & East
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| − | Asia
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| − | +30% p.a. in Malaysia
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| − | likely to continue
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| − | Sustained average growth in double
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| − | digits in the coming years
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| − | +15% p.a.
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| − | Cairo 20 & 21-07-05 31
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| − |
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| − | Learn from conventionals
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| − | 250 professional reinsurers
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| − | 2003 ceded premiums : USD 176 billion
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| − | Non life reinsurance :
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| − | USD 146 billion (13.7% insurance premiums)
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| − | Life reinsurance :
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| − | USD 30 billion (1.9% insurance premiums)
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| − | Cairo 20 & 21-07-05 32
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| − |
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| − | Learn from conventionals
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| − | Top ten reinsurers market share :
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| − | 54%
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| − | Shareholders equity of top 40 :
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| − | USD 249 billion
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| − | Of top ten, 6 have a financial strength rating:
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| − | At least “AA-” by S&P (very strong financial security)
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| − | Stable and sound capital base for reinsurance
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| − | industry :
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| − | Negligeable bankrupties between 1980-2003
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| − | Cairo 20 & 21-07-05 33
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| − |
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| − | Reinsurance cessions drivers
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| − | Reduced uw results volatility
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| − | Escape from insolvency in case of cat event
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| − | Capital relief and flexible financing
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| − | Accept more business with the same capital
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| − | Access to reinsurers’ expertise and
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| − | services
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| − | Product development
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| − | Pricing
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| − | Underwriting
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| − | Claims management
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| − | Cairo 20 & 21-07-05 34
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| − |
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| − | Reinsurers have to be financially
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| − | secure
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| − | Part of underwriting risk
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| − | Insurer Reinsurer
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| − | Counterparty credit risk
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| − | Cairo 20 & 21-07-05 35
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| − |
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| − | Reinsurers’ risk management
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| − | Scope : Underwriting
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| − | Long term survival of
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| − | the reinsurance
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| − | company
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| − | Underwriting and Risk
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| − | Management
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| − | investment risks are
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| − | aligned with capital Capital Asset
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| − | available (R.B.C) management management
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| − | Cairo 20 & 21-07-05 36
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| − |
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| − | Risk modelling
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| − | Exchange
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| − | Stock markets rates Tsunami
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| − | Interest Earthquakes
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| − | rates
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| − | Insurance risk Credit risk Market risk
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| − | Inflation Operational risk Influenza
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| − | epidemic
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| − | Credit risks Tropical
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| − | cyclones
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| − | Cairo 20 & 21-07-05 37
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| − |
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| − | Diversification across time
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| − | Less expensive
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| − | Lower capital reinsurance cover
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| − | Better need
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| − | diversification or
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| − | Lower Cost Higher level of
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| − | given the exposure Protection _ given the
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| − | level of capital
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| − | Cairo 20 & 21-07-05 38
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| − |
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| − | Retakafuls’ duties
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| − | Providers of secure covers
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| − | Strong capital base
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| − | Focus on Risk Management models
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| − | Diversification across time
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| − | Expertise providers
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| − | Product development
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| − | Pricing
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| − | Underwriting
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| − | Claims management
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| − | Cairo 20 & 21-07-05 39
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| − |
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| − | Overview
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| − | Introduction
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| − | Achievements
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| − | Challenges ahead
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| − | Strategy
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| − | Conclusion
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| − | Cairo 20 & 21-07-05 40
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| − |
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| − | Strategy – 1st step -
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| − | Establish an annual meeting of ArabTakafuls
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| − | and Retakafuls
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| − | Networking benefits
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| − | Set up a « Takaful Association »
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| − | Practitioners’ intelligence networks
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| − | Best practices’ exchange
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| − | Reinsurance placing facilities
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| − | Set up an informative Takaful & Retakaful
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| − | website
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| − | Wise information exchange among members
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| − | Cairo 20 & 21-07-05 41
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| − |
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| − | Strategy – 2nd step -
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| − | More and more cooperation between
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| − | Takafuls
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| − | Web site becomes transactional
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| − | « Takaful Association » is efficient
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| − | Improved structures
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| − | Successful Annual Meeting
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| − | New well rated Retakafuls are set up
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| − | 2 to 3
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| − | Cairo 20 & 21-07-05 42
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| − |
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| − | Strategy – 3rd step -
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| − | Design a framework of cooperation with
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| − | conventional reinsurers
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| − | Associate members’ status
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| − | Interested in the Takaful market development
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| − | Set up a brokerage company focused
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| − | on Retakaful placing
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| − | By the Association
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| − | Cairo 20 & 21-07-05 43
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| − |
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| − | Specific position of Middle East
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| − | Homogenious religious status
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| − | Oil producer countries generating
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| − | financial surplus
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| − | Eligible to play a major role in this
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| − | strategy
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| − | Strategy could benefit from the financial
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| − | synergy existing in Dubai & Bahrain
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| − | Cairo 20 & 21-07-05 44
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| − |
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| − | Overview
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| − | Introduction
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| − | Achievements
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| − | Challenges ahead
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| − | Strategy
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| − | Conclusion
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| − | Cairo 20 & 21-07-05 45
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| − |
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| − | Conclusion
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| − | To be or not to be?
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| − | Is no longer the question
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| − | Other questions prevail now
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| − | How many?
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| − | How much strong? Capital, rating?
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| − | How much knowledgeable?
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| − | Successful answers to those questions
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| − | will involve a virtuous business cycle
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| − | Takaful & Retakaful development
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| − | Benefits for overall economy and society
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| − | Cairo 20 & 21-07-05 46
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| − |
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| − | Retakaful &Takaful’s virtuous cycle
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| − | Less expensive takaful products
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| − | Higher profitability
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| − | Retakaful Lower cost
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| − | Enhanced Stronger Secure
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| − | insurability growth of capital industry
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| − | Takaful Company
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| − | Overall economy
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| − | Cairo 20 & 21-07-05 47
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| − |
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| − | Thank you
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| − | Sources
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| − | Islamic Insurance Conference, London,
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| − | Sept. 26-27, 2003
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| − | Swiss Re, Understanding reinsurance,
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| − | 2004
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| − | Swiss Re, sigma N°6/ 2002.
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| − | Farid Benbouzid Cairo 20 & 21-07-05 48
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