Takaful update saarc 2014

PERVAIZ AHMED

SAARC Conference

16th April, 2014, Karachi

T A K A F U L Shari’ah Compliant Alternative

to Conventional Insurance

Development of Modern Takaful- Global

19th Century- Western socio-economic, political, and legal orders

overshadowed Islamic and traditional local norms

1950- Muslim Revival and Renaissance began around the world on

multiple fronts after getting out of colonialism.

1970- development of Islamic Banking framework started

1975- The first commercial Islamic bank, was established in UAE

1979- First Takaful company was established in Sudan as need for a practical

risk mitigation mechanism grew with the growth of Islamic banking

1987- Central Bank of Malaysia issued first ever Takaful Rules

1990- Formation of AAOIFI

1990- Rapid development of Islamic Banking all over the world

2000- Many Takaful companies were launched in Malaysia and GCC

2010- Regulator issued Takaful rules in many territories

Development of Modern Takaful-Pakistan

2000- SECP repealed Insurance Act 1938 and issued insurance Ordinance

which has the mention of word “Takaful”

2002- SBP issued license to First Commercial Islamic Bank in Pakistan

2003- Ijtimah of scholars in Darul Uloom Karachi to review current Takaful

modals all over the word and suggest modal which is suitable for the

Pakistan market. Wakalah Modal was adopted with addition of Waqf

2004- Incorporation of First General Takaful company in Pakistan

2005- SECP issued Takaful Rules for dedicated Takaful companies. Windows

were not allowed

2007- Incorporation of First Family Takaful company. Total number of Takaful

operators reached to Five

2012- SECP issued Takaful rules 2012, allowing conventional companies to open

Takaful windows

Takaful Operational Models

Mudarbah Practiced earlier, it is no longer in use.

Wakalah This is the most prevalent model

Wakalah+Waqf This model was suggested by Shari’ah Scholars in Pakistan.

Cooperative Modal

This modal is used only in Saudi Arabia and many scholars around the glob question it acceptability as Shariah compliant.

• Takaful operational modals have been a source of debate since

inception of Takaful which is still going-on with recent introduction

of Saudi Cooperative Model

(USD) BILLON

187 # of Takaful

Operators in

2012

Approx.

48 Window

Operators

15 Irani

Operators

>18 Re-Takaful Operators Global Market Size of Takaful

Source E&Y Report 2013

Worldwide Takaful Developments & Growth

4.2

5.4

7.1

8.3

9.4

10.9

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012

Geographical Distribution of Global Takaful

Volumes

51%

25%

16%

2% 5%

1%

Saudi Arabia

ASEAN

GCC

South Asia

Africa

Levant

Source E&Y Report 2013

2012- Total Industry Size

US$ 11 Billion

Gross Premium of Private sector Life Insurers/

Family Takaful operators - Pakistan

EFU, 34%

NJI, 35%

ALICO, 12%

East West,

1%

ADAMJEE,

7%

PQFT, 10%

DFT, 2%

EFU

NJI

ALICO

East West

ADAMJEE

PQFT

DFT

Company Market Share

2012

JLI 35%

EFU 34%

ALICO 12%

East West 1%

ADAMJEE 7%

PQFT 10%

DFT 2%

2012- Total Industry Size

RS. 34 Billion

Financial Performance- Average ROE

Source: E&Y Global Takaful insight 2013

SWOT Analysis- Takaful Industry in Pakistan

Source: E&Y Global Takaful insight 2013

Strengths Weaknesses

• Boom in Life insurance, double digit rise in

premium

Limited number of player in the market

Higher acceptability of Takaful in general

public as Shariah complaint alternate to

insurance

• Under developed Life and General

Insurance Market

Intense competition in many General

Insurance lines.

Financial performance of most of the

current Takaful operators is not upto the

expectations

Opportunities Threats

180 Million predominantly Muslim

population

Very low insurance penetration. Over 90%

population is uninsured

Rapid growth of Islamic Banking and

Government’s willingness to grow this

sector further

Overall business environment is not

conducive for the growth or to attract

international players

Competition from Window Takaful

Insurance penetration is unlikely to

increase substantially in near future

Some Shariah scholars are still not

convinced with current Takaful modal

Like Islamic Banking, Takaful is a reality

which is here to stay

FUTURE

Takaful has the tremendous potential to grow

exponentially in highly underinsured Muslim population

provided it is done with its true sprit and whole heartedly

supported by all the stakeholder

Jazaakum Allahu Khairan