ReTakaful by Rohail Ali Khan
RETAKAFUL
Opportunities & Constraint
A Pre
Roh
Outline of Presentation
• Introduction
• ReTakaful worldwide
• Industry Statistics
• Recent Development
• ReTakaful Prospects in Pakistan
• Issues
• The way forward
• Takaful Windows
Introduction
• Preferred type is proportional
share or surplus).
• Non proportional permissible.
• If ReTakaful is unavailable, the
permissible to use a conve
reinsurer.
ReTakaful Worldwide
• Sudan (1979) National Reinsurance.
• Sudan (1983) Sheikhan Takaful Compan
• Bahamas (1983) Saudi Islamic Takaful a
ReTakaful Company.
• Bahrain/Saudi Arabia (1985) Islamic Ins
and Reinsurance Company.
• Tunisia (1985) B.E.S.T. Re
• Malaysia (1997) ASEAN ReTakaful
International.
• Dubai (2005) TakafulRe.
ReTakaful World
• Some conventional reinsurance compa
recognizing the active demand for cap
from Takaful companies have formed
ReTakaful Pools/Arms/Divisions. Som
these are:
• Swiss Re
• Mitsui Sumitomo
• Hannover Re
• Kuwait Re
• Trust Re
• Labuan Re
Industry Statistics
S. No. Name of Company Paid-up Established in Count
Capital
1 Takaful Re USD 2005 Duba
125
million
2 B.E.S.T. Re USD 55 1985 Tunis
million
3 ASEAN ReTakaful USD 14 1997 Malay
International million
Note : Data of other ReTakaful companies is not available
Recent Developments
• Salama has established a Re
Syndicate with Creechurch at Lloy
is expected to start operations in 20
• Tokio Marine ReTakaful also t
writing business in 2007.
• The above are expected to have ‘A’
ReTakaful Prospects in Pak
• Proliferation of Takaful companies.
• Strategic location.
• Professional expertise.
• PRCL – ReTakaful Pool.
Issues
• Only few globally active companies
• Capacity constraints.
• Large initial capital required.
• Need for strong and committed spo
Meetak Re failure a major blow.
• Reliance on Retrocession.
• Different Models.
The way forward
• IPOs.
• Retrocession Pools.
• Securitization/ART.
• Reconciliation of Different Models.
• Collaboration with Takaful Assoc
ICMIF/Asian Takaful Group.
Takaful Windows
• Background.
• Malaysian Example.
• Conflict of Concept.
• Low Paid‐up Capital.
• Dearth of Experienced Professional
• Regulatory issues.
• Transparency.
• Foreign Investment.
Takaful Windows
•Background.
Takaful Rules 2005 were notified last year after protracted deli
the issue of allowing window operations to the conventio
Despite considerable pressure from certain vested interests, co
logical arguments against window operations prevailed and
Ministry of Commerce notified the said rules specifically
window operations. Of late, however, the issue of allowi
operations is being raised again on the pretext that it will ‘give
to the Takaful industry. This, apart from being to the co
seriously undermine the Takaful concept in the country and
public will be misled and confused.
Takaful Windows
•Malaysian Example.
Malaysia, being the market leader, is looked upon as the ro
Islamic Banking and Takaful. Their regulators are on re
admitted their ‘mistake’ in allowing window Islamic Bankin
some 15 years back. They subsequently rectified the situation
issued directive to all banks to convert their Islamic windows i
subsidiary companies/banks. Even when the allowed Islamic
banks, they still did not allow Takaful windows to conventiona
they strongly felt, and still do, that it would be detrimental to
Takaful itself.
Takaful Windows
•Conflict of Concept.
Unlike banks, there is a clear conflict in the concept of
insurance viz‐a‐viz the Takaful insurance. Conventional insura
transfer mechanism. This means, that the risk is transferr
individual/policy holder to the insurance company. This, acco
Shariah scholars, is not permissible in Islam. Takaful, on the o
risk sharing mechanism, which is in conformity with the S
these two conflicting concepts cannot be reconciled within th
single company.
Takaful Windows
•Low Paid‐up Capital.
Whereas the minimum paid‐up‐capital required for setting‐up
has already been enhanced to Rs.6 billion, the capital required
up a new Takaful/Insurance company is far too low i.e. Rs.8
general and Rs.150 million for Life/Family business. Although,
considering to increase these figures progressively to Rs.500 m
year 2011, it still very low compared to the banks. Hence, e
stand justified to be allowed window operations instead
subsidiaries, the same cannot be held as justifiable for Takaful o
Takaful Windows
•Dearth of Experienced Professionals?
This excuse put forward by the conventional insurance co
myth. There are a large number of young, competent a
professionals within the insurance industry who are not ge
exposure and respectable salaries. In fact, there is an enormo
between the salaries and perks enjoyed by the top‐most hier
insurance companies and those of their junior and middle
level employees. Due to such tendency of exploitation, a signifi
of such insurance professionals have moved to the Middle Ea
right incentives, they shall return and will be a valuable a
emerging Takaful companies due to their enriched experience.
in this area can be drawn from the banks which faced a similar
over the last ten years several Pakistani banking profess
returned from abroad and are currently serving in Pakistan.
Takaful Windows
•Regulatory issues.
In contrast with the banks in Pakistan which are very well re
monitored by the State Bank of Pakistan that itself incorporate
professionals to ensure that their stringent requirements are fu
with, the insurance regulatory regime has undergone several ch
recent past. First, the role of regulator was switched from the
office under the Ministry of Commerce to the Insurance Div
SECP just a few years back. Then in the year 2000 the age old I
1938 was repealed and replaced by the Insurance Ordinance 2
areas thereof still need correct interpretation and clarificatio
there are several loopholes that are being exploited by the
insurance industry. Several malpractices have also cropped
years within the conventional insurance circles who have co
these as ‘marketing techniques’ rather than malpractices. If su
are allowed to open up Islamic windows with the same minds
malpractices will be introduced in Takaful as well.
Takaful Windows
•Transparency.
It is argued that by the very reason of Life Assurance m
separate Policy Holders’ Fund, it stands to qualify to o
windows. If this argument is taken, then their next logical step
ask for Takaful windows in General Insurance on the plea of
separate Takaful Fund. Since the intentions would only be not
clientele who would prefer to switch over to Takaful, they
setting‐up a separate fund would be able to hoodwink the
introduce malpractices in Takaful as well. Furthermore, it
possible to clearly segregate the expense allocation between
and Takaful operations within the same company as just
percentage allocation of expense is not an ideal solution. Thus
an inevitable mix between the ‘right’ and the ‘wrong’ which
even to the Quranic injunction: “And mix not, the Right with
and hide not the Truth when you know it” (Al Baqara, verse 42).
Takaful Windows
•Foreign Investment.
There are currently a number of foreign investment groups
companies who are actively contemplating and are in touch
local groups in Pakistan to jointly set up new Takaful c
windows are allowed to the local insurance companies, s
investors shall be discouraged.
End of Presentation
Jazakalllah al khair
