Lloyd's of London is setting up an Islamic re-insurance syndicate with a capacity of up to 200 million pounds to write Islamic compliant reinsurance globally, a PriceWaterhouseCoopers executive said on Tuesday.
Mohammad Khan, director for Islamic insurance, or takaful, at PwC, said the Lloyd's syndicate would include mainly financial institutions and to a lesser extent individual investors. It would become operational between the end of 2009 and the beginning of next year.
Financial consultant and accounting firm PwC is advising the financial group on the syndicate, he said at the Reuters Islamic Banking and Finance Summit in London.
Lloyd's of London was not immediately available to comment.
Islamic insurance is a tiny industry in Europe despite a 20-million strong Muslim population. Its development, and the growth of takaful more widely, will rely to a large extent on the strengthening of Islamic compliant re-insurance, Khan said.
Khan said the first Lloyd's syndicate would inevitably pave the way for more, bringing liquidity to the market for insurance which complies with Sharia law.
"Once you get one syndicate you get others, that is not a problem. The Lloyd's model is about sharing (risks and rewards). If you think about it, the model lends itself quite neatly to Sharia because it is mutual," he said.Lloyd's has been here before. In 2006 Lloyd's insurer Creechurch Underwriting Limited announced the formation of a syndicate to be managed in accordance with Islamic principles, but Khan said no business was written, because the insurer was subsequently taken over.
Khan said the new syndicate would raise between 50 million and 200 million pounds.
"I do not think Lloyd's is just looking at one (syndicate), it would not make sense... Lloyd's is quite serious about this," he said.
Under takaful, the risk and reward are shared between the customer and insurer, while in conventional insurance the insurer takes on all the risk for a premium.
Takaful investment strategies must also abide by Sharia law, which excludes sectors like alcohol as well as instruments such as interest bearing investments or over-leveraged companies.
At the session of the Reuters Islamic Finance Summit in Dubai, Noor Takaful's managing director Ahmed al-Jana said the emerging industry could grow at 30-40 percent annually in the next three to five years as more people switch from conventional to Islamic insurance.
Noor Takaful is a unit of Dubai's Noor Islamic Bank.--LONDON (Reuters)