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.