March 20, 2010
SINGAPORE: The Islamic insurance or takaful market is expected to see strong growth this year.
Still, challenges remain including low market penetration and a lack of Shariah-compliant investment opportunities for takaful players.
Industry executives said they want to see more Islamic bond, or sukuk, issuances in order to help them balance their portfolios away from equities and reduce risk.
The multi-billion dollar purchase of AIA last week was a massive vote of confidence in Asia’s insurance sector and Prudential is not alone in being bullish about the outlook.
At a conference on Islamic insurance or takaful, industry executives said they were optimistic about growth prospects.
Total takaful contributions only account for just one percent of the global insurance market.
But this is expected to increase significantly, thanks to growing interest among Muslims and non-Muslims alike in shariah-compliant investment and insurance products.
Daud Vicary Abdullah, global leader, Global Islamic Finance Group, Deloitte, said: “We’ll see more growth in the Gulf. I think it’s occurring here in Singapore, Malaysia and Indoneisa. I think the growth is positive. But to put a figure on it on a global basis, the numbers of 10 to 15 per cent in terms of growth of market are not unrealistic.”
According to an estimate by Ernst & Young, total takaful contributions can reach US$7.7 billion by 2012.
That’s compared with just US$1.4 billion in 2004.
Despite the growth prospects, there appears to be a lack of shariah-compliant bonds or sukuks.
And some central bankers say they are working to address the shortage.
Azleena Idris, Deputy Director, Islamic Banking & Takaful Dept, Bank Negara Malaysia, said: “Malaysia regularly issues shariah-compliant money market instruments so that it will facilitate the liquidity aspect of things. Now when it comes to the takaful space, the longer term instruments are something we’re aggressively promoting under the MIFC banner.”
Industry players also said they’re severely lacking in talent and the industry will likely see more consolidation as the smaller takaful players strive to become more competitive.
Revtwt News Headline Animator
Sunday, August 22, 2010
Takaful firms search for suitable long term assets
March 23, 2010
The Islamic insurance industry, or takaful, is struggling to find suitable long term investment opportunities, executives at the Reuters Islamic Banking and Finance Summit said.
The takaful – or sharia compliant – insurance industry has grown at double or three digit growth rates so far as the Gulf Arab region is underpenetrated with insurance products in general, and has also attracted business from conventional peers.
But issues like the absence of long term sukuk, or Islamic bonds, to compliment some of the products are hampering the process of asset deployment.
Speaking at the summit in Bahrain, Abdul Rahman Tolefat, chief executive, Allianz Takaful, said: “As an insurer, if I want to offer annuity products I need to have long term assets to match my liabilities which are still not available.”
Tolefat said the firm was in talks with a regional financial institution, urging them to issue a bond earmarked for the industry.
Islamic insurance works like mutual insurance, but there is a clear segregation of the assets owned by members and those owned by the insurer.
Unlike conventional insurance, investments made using the pool of funds have to adhere to sharia law and shun sectors such as alcohol and gambling.
Islamic insurers also keep away from investments in risky assets and prefer fixed income products for parking their funds.
Global takaful premiums total about $2 billion to $3 billion and are expected to reach more than $7 billion by 2015, industry figures show.
While medium term sukuk are available in the market, takaful firms in this space have to compete with big banks who absorb a major chunk of issues, leaving little for takaful firms.
Tolefat said: “The credit rating of corporates who issue sukuk is just not there. I prefer an issue which has an ‘A’ rating and above. Even if they provide low yields, we don’t mind.”
The Islamic insurance industry, or takaful, is struggling to find suitable long term investment opportunities, executives at the Reuters Islamic Banking and Finance Summit said.
The takaful – or sharia compliant – insurance industry has grown at double or three digit growth rates so far as the Gulf Arab region is underpenetrated with insurance products in general, and has also attracted business from conventional peers.
But issues like the absence of long term sukuk, or Islamic bonds, to compliment some of the products are hampering the process of asset deployment.
Speaking at the summit in Bahrain, Abdul Rahman Tolefat, chief executive, Allianz Takaful, said: “As an insurer, if I want to offer annuity products I need to have long term assets to match my liabilities which are still not available.”
Tolefat said the firm was in talks with a regional financial institution, urging them to issue a bond earmarked for the industry.
Islamic insurance works like mutual insurance, but there is a clear segregation of the assets owned by members and those owned by the insurer.
Unlike conventional insurance, investments made using the pool of funds have to adhere to sharia law and shun sectors such as alcohol and gambling.
Islamic insurers also keep away from investments in risky assets and prefer fixed income products for parking their funds.
Global takaful premiums total about $2 billion to $3 billion and are expected to reach more than $7 billion by 2015, industry figures show.
While medium term sukuk are available in the market, takaful firms in this space have to compete with big banks who absorb a major chunk of issues, leaving little for takaful firms.
Tolefat said: “The credit rating of corporates who issue sukuk is just not there. I prefer an issue which has an ‘A’ rating and above. Even if they provide low yields, we don’t mind.”
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