Islamic Insurance: Trends, Opportunities and the Future of Takaful

Takaful Industry

The Islamic insurance, or Takaful industry, is in a rapid phase of expansion, with numerous Takaful operations in 30 countries with Takaful premiums covering non-life and life. This growth gives rise to both opportunities and challenges to traditional and Islamic financial institutions in the provision, distribution and underwriting of Islamic insurance products.

Edited by the best-selling author Sohail Jaffer with contributions from 21 specialist contributors, this is the only book to explore every aspect of Islamic Insurance.

Topics covered include:
- Takaful models and their development
- Re-Takaful
- Concerns in the provision of Takaful
- Business models
- Retailing Takaful
- Marketing financial services
- Distributing through joint ventures
- Innovations in the Northern and Southern African markets
- Integrating Takaful within conventional bancassurance
- Legal, regulatory and operational issues
- Rating of Takaful companies

"This book is written by professionals with extensive experience of takaful. It will be an invaluable guide … to understanding the models and mechanisms in use and the challenges and opportunities facing the takaful market." - From the foreword by Susan Dingwall, Partner, Norton Rose.

Table of Contents

Islamic Insurance: Trends, Opportunities and the Future of Takaful

PART I – AN INTRODUCTION TO TAKAFUL

Chapter 1: The growth and global market for Islamic insurance products
Ajmal Bhatty, HSBC Amanah

Chapter 2: Factors driving growth from consumers or Takaful providers
Sameer Abdi, Ernst & Young

PART II – THE TAKAFUL MODELS AND MECHANISMS

Chapter 3: Takaful as a wealth management vehicle
Douglas Clark Johnson, Stephanie Mumford Brown & Kirk B Smith, Calyx Financial LLC

Chapter 4: Takaful models and Banctakaful in Malaysia
Zainal Kassim, Mercer Zainal

Chapter 5: Developing comprehensive Takaful products
Atsuhiko Ayabe, Hong Leong Islamic Bank*

Chapter 6: Re-Takaful
Chakib Abouzaid, Takaful Re

Chapter 7: Misconceptions and concerns in the provision of Takaful
Rodney Wilson, University of Durham

PART III – BUSINESS DEVELOPMENT AND DISTRIBUTION ISSUES

Chapter 8: Business models
Andrew Smith, Saudi British Bank

Chapter 9: Retailing Takaful
Ajmal Bhatty, HSBC Amanah

Chapter 10:  Marketing financial services
Bassel Issam Hanbali, Solidarity

Chapter 11: Distributing through joint ventures
Keith Driver, HSBC

Chapter 12: Innovations in the Northern and Southern African markets 
Adam Ebrahim, Oasis

Chapter 13: Strength and opportunity of Takaful. Integrating Takaful within conventional bancassurance
Mohd Tarmidzi bin Ahmad Nordin, Maybank

PART IV – LEGAL, REGULATORY AND OPERATIONAL ISSUES

Chapter 14: Legal challenges facing the structuring of Sharia-compliant investment mechanisms for Takaful products
Ayman Khaleq, Vinso & Elkins LLP

Chapter 15: Operating considerations for Takaful companies
Omar Fisher, Unicorn Investment Bank

Chapter 16: The legal and regulatory challenges for Takaful providers
Susan Dingwall, Norton Rose

Chapter 17: DIFC regulatory framework for Takaful and Retakaful companies
Peter Casey, Dubai Financial Services Authority

Chapter 18: Regulatory issues from Qatar 
Shankar Garigiparthy, QFCRA

Chaptyer 19: Regulatory issues from Malaysia
Wan Mohd Nzri Wan Osman, Bank Negara

Chapter 20: How are Takaful companies rated?
Timour Boudkeev, Moody’s

Author Biography

About the editor
 
Sohail E Jaffer is a Managing Director of Premium Select Lux SA, an asset management subsidiary of the FWU Group. The company is based in Luxembourg and specialises in Multimanager and Quant based investments. He is also a Partner and the Head of International Sales and Distribution for ‘white label’ bancassurance, bancatakaful  and asset management  services within the FWU Group, an independent financial services group headquartered in Munich. The Group’s main activities include asset management, bancassurance and individual pension plans. He successfully concluded several major bank distribution deals. The Group’s branch network includes Luxembourg, Italy, UAE and Malaysia.

Mr Jaffer is currently a Council member of the Alternative Investment Management Association (AIMA). He also served as Chairman of the Association for two consecutive terms for the period 1997 to 2000. He has written extensively on alternative investments, including editing Alternative Investment Strategies, Funds of Hedge Funds: For Professional Investors and Managers, Hedge Funds: Crossing the Institutional Frontier and contributing a chapter each to Evaluating and Implementing Hedge Fund Strategies (third edition), and The New Generation of Risk Management for Hedge Funds and Private Equity Investments all published by Euromoney books.  He recently also edited the new Euromoney publication on Multi-manager Funds: Long-only strategies for Managers and Investors and three publications on Islamic Asset Management, Islamic Retail Banking and Finance and Islamic Insurance (Takaful).

Sohail is also a member of ALFI’s Asset Management Advisory Committee and of ALFI’s Hedge Fund Committee. ALFI is the Association of the Luxembourg Funds Industry. 

Foreword

By Susan Dingwall, Partner, Norton Rose

In line with other types of Islamic finance products, the Islamic insurance market has experienced significant growth since the establishment of the first takaful operator in 1979.  Research from Moody’s rating agency has indicated that there are currently over 250 takaful companies in existence globally and projections show that total takaful premiums are likely to reach over US$7 bn by 2015.

As an introduction to the subject, this book explores the growth and global market for takaful and the factors driving such growth. Although Islamic jurisdictions have traditionally had one of the lowest insurance penetration rates in the world, this book examines how the growing demand for Islamic financial services can be harnessed to develop a profitable takaful market for the future.  It will also consider the corresponding development of the re-takaful industry, which is key to the growth of the direct takaful market. The first re-takaful company was established in 1985 and, although there has been a steady growth in the number of re-takaful operators over the past 20 years, it has not yet been able to match the surge in the number of direct providers over the same period.  This has resulted in many takaful operators having to resort to conventional reinsurers in order to manage their risk profile. Although a number of well-known international reinsurers are obtaining licences to establish Islamic-compliant reinsurance operations around the globe, the need for Shari’a compliant reinsurance capacity remains vital.

Against this background, this book considers the different takaful models and mechanisms in existence. This encompasses an examination of the development of comprehensive life and non-life takaful products, the use of takaful as a wealth management vehicle as well as the common misconceptions and concerns which arise in the provision of takaful. 

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