Daniel Staib, Economic Research & Consulting Mutual insurance and takaful conference, Istanbul, 13...
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Transcript of Daniel Staib, Economic Research & Consulting Mutual insurance and takaful conference, Istanbul, 13...
Daniel Staib, Economic Research & ConsultingMutual insurance and takaful conference, Istanbul, 13 November 2012
Retakaful
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Table of contents
1. Market potential & outlook2. Retakaful at Swiss Re
Operating model (Wakalah-Waqf)3. Challenges in retakaful
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2 Market potential & outlook
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2 Market potential & outlook
25% of world population is Muslim (1.5 bn people). In addition, Takaful is also an attractive solution to non-Muslims.
Market premium written in Muslim countries (2010): USD 73bn.
Islamic insurance premium (2010): USD 3.2 bn (takaful) + USD 4.0bn (cooperative model – KSA) + USD 5.1bn (conventional insurance within Islamic financial system): Total: USD 12.3bn.
Low level of insurance penetration compared to other emerging markets.
Population of Muslim countries are rapidly growing; favourable demographics.
Increasing Islamic consciousness.
Growth of Takaful has been exceptional over past four years (almost 30% p.a.), but is expected to slow in 2012
Until 2015 Takaful contribution could surpass USD 7bn.
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2 Takaful contributions by country2010: USD 3.2 bn
Malaysia31%
Saudi Arabia12%
Sudan9%
Other South East Asia8%
Indonesia13%
United Arab Emirates13%
Bahrain3%
Other Middle East12%
Malaysia
Saudi Arabia
Sudan
Other South East Asia
Indonesia
United Arab Emirates
Bahrain
Other Middle East
Source: Swiss Re Economic Research & Consulting
Malaysia is leading in terms of size and development of its takaful markets
Assumptions:
Muslim countries only
Business only included if written on the basis of wakalah, mudarabah or hybrid models
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3 Retakaful at Swiss Re
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Slide 7
Fund Participants (e.g. AIA Takaful)
Contributions
(unconditional
donation)
Claims/surplusdistribution
Tabarru part: Mutual Pool for collection of
contributions, payments and claims &
setting up of stabilisation reserves(Re)takaful Operator
Investment Income
Profit Sharing Basis
Qard
Cash Waqf Initial Donation
Wakalah Fees
Operating Model: Wakala-Waqf
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3 Characteristics of the Wakalah-Waqf Model
Initial donation to set up fund: USD 5’500/MYR 20’000
Swiss Re has set up various funds based on geographical location and lines of business covered.
Waqf agreement:
1. Application to become member of fund
2. Acceptance as member of fund
3. Fund rules (same for all members)
4. Applicable wording (Retakaful Agreement): General/Special Conditions
Swiss Re’s commitment to the fund:
1. To ensure that overall results are not influenced by large individual negative results
2. In case there are insufficient funds to pay claims, Swiss Re will provide an interest free loan (Qard)
Swiss Re’s Wakalah-Waqf model has been accepted by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the National Shari’a Advisory Council (SAC) of Bank Negara Malaysia, and National Syariah Council, Indonesia.
Wakalah-Waqf model is used in Pakistan, South Africa and the Middle East
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3 Characteristics of the Wakalah-Waqf Model
Investment of fund in Shari'a compliant relatively liquid assets investment income will remain part of fund: SR does not get share of investment income
Operator is paid a fee (Wakalah fee) out of the Waqf fund
All contracts ending in the same financial year of the Operator are pooled together to calculate the surplus
Surplus given back to participant is apportioned between participants in relation to their surplus contribution (i.e. based on technical result)
No incentive fee for the Operator
Same operating model used worldwide.
Swiss Re Retakaful ensures complete Shari’a compliance through:
– No conventional retrocession
– Only Takaful business ceded into the funds
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4 Challenges in retakaful
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Challenges in retakaful
No global regulatory framework
Diversity of industry practises
Recent lack of growth of business
Price pressure from cedent companies
How to handle large commercial risks
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Thank you