Category Archives: Takaful

World’s largest re-takaful firm set up

World’s largest re-takaful firm set up

Dubai Banking Group (DBG) will join hands with Malaysia’s investment arm Khazanah Nasional and Asian Capital Reinsurance (ACR) to create the world’s largest re-takaful (Islamic reinsurance) company with a total capital of $300 million (Dh1.1bn).

Dubai Banking Group and Khazanah will each hold 40 per cent stake, while ACR will own the remaining 20 per cent in the new company, which is called ACR ReTakaful Holdings, said a statement by Khazanah.

Khazanah owns 32 per cent of ACR and accordingly it will be the largest effective shareholder in ACR ReTakaful. The new firms will have two operating companies to be based in Kuala Lumpur and the Middle East.

Minister for Cabinet Affairs and Chairman of Dubai Holding Mohammed Al Gergawi signed the deal in Dubai yesterday with Khazanah’s Managing Director Dato’ Azman Mokhtar.

Azman said the establishment of a re-takaful operator is the latest in a series of initiatives undertaken by Khazanah to support the development of Islamic financial services in which Malaysia has been at the forefront.

“We believe ACR ReTakaful is poised to become a major player in the global re-takaful business, not least due to the extensive pan-Asian business networks of Khazanah and DBG, as well as the expertise provided by ACR,” he said.

Dubai Banking Group was formed on Tuesday through a consolidation of Dubai Islamic Investment Group and Dubai Bank with combined assets of more than $10bn.

The group operates as a global Shariah-compliant investment company, focusing on investing in Shariah-compliant assets in the Islamic sector, which is expected to continue to grow at a very high rate. Dubai Banking Group has investments in Islamic financial institutions in the UAE, including Dubai Bank, and in Kuwaiti-based Al Fajer Re-Takaful, as well as Malaysia’s Bank Islam.

Emirates Business contacted Dubai Banking Group officials, but no comment was available.

However, recent studies showed a need for re-takaful companies to fill the gap in the insurance sector, especially in the Islamic world. Statistics showed the current takaful industry reached around $2.6bn, increasing by 20 per cent annually.

The takaful and re-takaful sectors continued to show rapid growth momentum, and is being recognised as one of the major components of the overall Islamic financial system, indicating high growth potential in years to come due to the present low rate of Islamic insurance market penetration.

There are an increasing number of takaful companies around the world trying to benefit from the booming industry. There are more than 110 takaful companies around the world, including 23 companies in the GCC. The re-takaful industry is still in its early stages, especially in the Middle East region.

Experts believe the ongoing infrastructure developments and trade activities in the Gulf will lead to high demand for re-takaful services.

Experts said the dramatic growth of the global sukuk market could potentially become a key supporting factor for strong growth of re-takaful industry. Currently, the global sukuk market, denominated in international currencies, is estimated to have exceeded $80bn.

Although the size of the market is modest by global standards, the sukuk market is experiencing remarkable growth, increasing at an average rate of growth of 40 per cent per annum. Issuance of sukuk with longer tenure will match investment and risk management needs of re-takaful industry with long-term liability. This, in particular, will greatly spur the growth potential of investment-linked products.

George Oommen, Executive Director of Insurance at Dubai International Financial Centre, expects the total takaful market will surge to $7.5bn by 2015. He said the takaful and re-takaful market has started gathering momentum and looks set to continue as more and more Islamic finance instruments become available.

Al-Baraka Bank and Takaful Pakistan sign MoU for Shariah complaint insurance services

Al-Baraka Bank and Takaful Pakistan sign MoU for Shariah complaint insurance services

Al Barka Islamic Bank and Takaful Pakistan Limited signed a Memorandum of Understanding (MoU) here on Friday to provide all kinds of Shariah complaint insurance services or to the Al- Barka Islamic Bank and its consumers..

The Chief Executive Officer of Takaful Pakistan Limited Jamil Akhter and Country Head Al Barka Islamic Bank Mr Shafqat Ahmed singed the documents on behalf of their respective organizations.

The MoU is considered as an important step for the financial sector to promote Islamic banking and industries, said Takaful Pakistan Limited CEO Jamil Akhtar addressing the audiences. He said that Takaful Pakistan Limited would play an important roll in growth of Islamic banking and economic sector. Besides operating in Muslim countries, there are more than 108 Takaful (Islamic Insurance) companies operating successfully in the non-Muslim countries such as USA, England, India, Srilanka, and Japan, Mr. Akhtar added.

Qatar Islamic Bank extending its network to Pakistan

Qatar Islamic Bank extending its network to Pakistan

Qatar Islamic Bank is set to kick-off its operations in Pakistan in 2008. A consortium of Qatar International Islamic Bank, Qatar Islamic Bank, Qatar National Bank, Amwal Group, etc., is behind the establishment of Qatar Islamic Bank in Pakistan. Choudhry Mohammed Wasi, Asst General Manager, Projects Department of Qatar Islamic Bank, disclosed this upcoming venture of his group in Pakistan, to Money Plus in an interview in Karachi. Mr Choudhry had been nominated by the QIB as the President of the bank in Pakistan. He arrived from Qatar to attend the board meeting of Pak-Qatar Takaful Insurance in Karachi and to discuss his group’s plan with State Bank of Pakistan to get licence to start operations in this country.

Q: What would be the amount of paid-up capital of the QIB in Pakistan?

A: Initially, we would start the operations of Qatar Islamic Bank with paid up capital of 100 million dollars and increase it at a later stage.

Q: When the bank is being launched?

A: In principle the State Bank of Pakistan has given its consent for the establishment of the QIB. In 2008 we are planning to start operations of the bank in Pakistan. At present we are fulfilling the legal requirements of the State Bank of Pakistan which are mandatory for the issuance of a licence. The consortium has proposed my name as President, Qatar Islamic Bank, Pakistan.

Q: What fascinated your group to set up QIB in Pakistan?

A: It is part of global expansion plan of our group. We are increasing the presence of our group. We are also extending the network of our group to Malaysia, Lebanon, Bahrain and the United Kingdom. Our consortium wants to extend its business operations to 16 countries in the world, including the Middle East, Europe and Pakistan.

In fact, the financial sector here is growing rapidly. The analysts believe that the share of Islamic banks in the overall banking sector would grow to 10-14 per cent by the year 2012-2013, from existing share of 3 per cent, because of immense potential of growth in this sector in the years to come.

Q: How do you see the scope of Islamic banking here?

A: With a population of over 160 million, Pakistan offers plenty of opportunities for investment and growth in the financial sector. The economy of the country was also showing impressive improvement during the past few years that was luring the foreign investors to develop their stake in Pakistan. At present five full-fledged Islamic banks are operating in Pakistan while the existing commercial banks have also established special windows/operations to capture the Islamic banking business that shows that this segment of banking offers more potential of growth in future.

Q: What is the background of the consortium?

A: The consortium of Qatar International Islamic Bank, Qatar Islamic Bank, Qatar National Bank, Amwal Group, Qatar Insurance Company are listed at Doha Securities Market. The assets of the consortium stand around 55 billion dollars and its equity amounts to 20 billion dollars. Qatar International Bank is one of the fifth largest Islamic financial entity in the world. The QIB is the first Islamic Bank in Qatar. It has 10 per cent share in the Qatari banking market and 57 per cent share in the Qatari Islamic banking market. It also has international investment operations in Asia, Middle East, Europe and North Africa. Qatar Islamic Bank will be the sixth full-fledged in Pakistan.

Q: What would be the strategy of QIB to capture business?

A: During the first two to three years of operations of the QIB we will target corporate sector financing and also invest in Sukuk. Later on we will enhance the scope of operations of the bank to meet maximum local requirements.

Q: What would be the next venture of the consortium in Pakistan?

A: After launching the Qatar Islamic Bank we will also set up Real Estate and other Funds to promote investment in Pakistan. Like financial sector, the real estate and some other sectors have immense potential of growth in future.

Q: Any existing venture of the consortium in Pakistan?

A: The said consortium had already established Pak-Qatar Takaful Insurance in Pakistan to offer Shariah-oriented family and general insurance services. The paid up capital of Pak-Qatar Family Insurance amounts to Rs 500 million while Pak-Qatar General Takaful had been set up with Rs 300 million capital. It is the first private sector investment from Qatar in financial sector in this country. The general insurance has started its operations recently, while family takaful would begin its soft opening by end-February 2008.

New UAE Islamic insurance (takaful) company to capitalise on 30 per cent annual growth

New UAE Islamic insurance (takaful) company to capitalise on 30 per cent annual growth

Mithaq Lil-Takful, a new Islamic insurance company has been launched in Abu Dhabi with a paid up capital of Dh150 million to capitalise on business growing by 30 per cent annually.

The Shariah-compliant company has got the approval of the Abu Dhabi Executive Council (ADEC) to start its operations in the country.

“The ADEC has given its approval for the establishment of the Abu Dhabi-based Islamic insurance company with an initial capital of Dh150 million. The company’s 45 per cent shares have been subscribed by the founding members, well-known businessmen, while the remaining will be floated to through an IPO,” said Abdullah Saeed Al Qubaisi, chairman of the founding committee of Mithaq Liability Insurance Company.

Al Qubaisi said: “Getting the approval of the Abu Dhabi Executive Council after similar approval from the Emirates Securities and Commodities Authority is another very important step in the incorporation process of the company, which will be followed by an IPO.

This development is happening at a time when the UAE is witnessing a very rapid economic growth which gave birth to a sharp growth of the insurance market, particularly Shariah-compliant liability insurance products. This has created the need for more new liability insurance companies to meet the growing demand for this type of insurance product.

He pointed out that the UAE insurance market is witnessing a rapid growth rate currently at about 30 per cent per annum, while the annual premiums of insurance firms in the UAE is estimated at about Dh480 million, according to the feasibility study.

He said: “Mithaq” will be offering a comprehensive, high quality and Shariah-compliant insurance services. It will provide a low-risk investment opportunity and would be supervised by a committee of competent Islamic scholars of high reputation to strictly follow the principles of Islamic finance. Mithaq Liability Insurance Company will offer its IPO in early 2008.

FWU Group receives award for Best Takaful Operator 2007

FWU Group receives award for Best Takaful Operator 2007

FWU Group has been awarded Best Takaful Operator at The Islamic Business and Finance Awards 2007 Ceremony held recently by CPI Financial.

Munich-based company received the Award for its excellence in providing its technology solutions, product expertise and global experience in administering the distribution of Takaful products through various local, regional, and international business partnerships.

The prestigious event, which took place at The Godolphin Ballroom at The Emirates Towers in Dubai, was attended by a host of highly influential guests representing the most prominent Islamic banking, finance, and investment institutions from around the world. Dr. Manfred J. Dirrheimer, CEO and Founder of FWU Group, accepted the Award for the Group.

Mr. Abdul Hadi Shayif, Chairman of the International Advisory Board for FWU Group, was also present during the ceremony, as well as a number of senior guests representing some of the Group’s partner companies from across the industry.

‘We are very proud of the Award for Best Takaful Operator. It is truly gratifying and represents another milestone achievement for the Group,’ said Dr. Dirrheimer, who flew in from Munich to attend the evening. He added, ‘We would like to thank our partners, both Takaful companies and distributors, who have contributed immensely to our success with their dedication and cooperation in the rapidly growing Islamic finance industry.’

The Group has registered phenomenal growth in the region, securing a multitude of agreements with leading financial and Takaful insurance establishments in the UAE, Saudi Arabia, Kuwait, Malaysia and Pakistan. Through these agreements, FWU’s banking partners would be able to offer Unit-Linked Family Takaful and Savings plans and related products to their customers.

‘Our teams have made admirable efforts to ensure that FWU Group provides its partner companies and establishments with the most professional and experienced service and knowledge to offer their customers a truly profitable investment within the guidelines of Islamic Shari’ah,’ said Mr. Nicholas Owen, Partner & Member of the FWU International Executive Board, who is based in the Group’s Regional Headquarters office in Dubai Internet City.

FWU Group has also received 3 other prestigious awards in 2007, including the EUROMONEY 2007 Islamic Finance Awards in the category ‘Best Life Takaful Provider’, the World Finance 2007 Award in the category ‘Takaful Life and General’, and the Globexa Communications 2007 ‘Financial Bridges Award for Best Islamic Finance Organization.’ The Islamic Business and Finance Award is yet another recognition of the Group’s exceptional performance in the industry.

The Islamic Business & Finance Awards 2007 are administered by CPI Financial, which publishes a number of authoritative magazines on the global finance industry, such as Banker Middle East, Private Equity & Hedge Funds and Islamic Business & Finance. The IB&F Awards recognize exceptional performers in various sectors of the Islamic Business and Finance industry around the world. Winners are voted for by the readers of Islamic Business & Finance Magazine from a list of nominations by a panel of rating and consulting firms, based on their performance over the last twelve months.

Globally, Takaful – insurance that is compliant with key Islamic Shari’ah tenants and based on the concept of collective insurance – is currently estimated to be a US$2.3 billion market, with the Middle East region accounting for 46 percent of total sales, according to the Bahrain Insurance Association.

Re-Takaful (Islamic Re-Insurance)

Concept and Nature of Re-Takaful

Re-takaful has a close relationship with takaful operations where retakaful is a form of takaful and the competitiveness of retakaful market is depend on the competitiveness of the direct takaful market. Actually Retakaful is a form of insurance whereby the Takaful operator pays an agreed upon premium from the Takaful fund to the reinsurance company or Retakaful operator, and in return, the Reinsurance company or the Retakaful operator will provides security for the risk reinsured. Reinsurance is best thought of as “insurances for insurance companies”. Or we also can say that Retakaful is a “takaful for takaful operators”. It is a way for a primary insurer to protect against unforeseen or extraordinary losses.

From the above diagram, takaful holders are individuals or companies that buy the Takaful products either General Takaful products or Family Takaful products and pay an agreed upon premium to the Takaful operator to protect them from unforeseen risk and also extraordinary losses. Then, the Takaful operator will take a portion of money from Takaful fund and pays premium to the Retakaful operator to get reinsurance protection to spread its risks. Reinsurance contracts may cover a specific risk or a broad class of business.

Retakaful or Islamic reinsurance is essentially about handling risk. It is a risk aversion method in which the Takaful ceding company resorts to either a conventional reinsurer or a Retakaful operator to reinsure original insured risks against an undesirable future situation if the risk insured were above the normal underwriting or claim. Thus, a Takaful ceding company may, based on limited financial resources, hedge against possible incapability to meet all Takaful reinsurance protection from a financially capable reinsurer, which will take over the coverage of the large proportion of the risk.

Fathi Lashin, a member of the Shariah Supervisory Board of the Dubai Islamic Bank stated that Retakaful does not, in principle, differ from Takaful operations. The Shariah principles applying to Takaful apply to Retakaful operations as well. The difference, if any, is that in the Retakaful operations, the participants are Takaful operators instead of individual participants. It is argued that the current practice of insurance business has shown that a Takaful ceding company cannot do without Retakaful facility. Therefore, there is a need for Takaful operators to split risks by way of establishing Retakaful operators. By doing so, they share their risks with Retakaful companies. The Retakaful operator, on the other hand, assumes the responsibility of managing and investing the premiums of Takaful operators on the basis of Profit Loss Sharing.

Differences between Re-Takaful and Re-Insurance