Pakistan to host an International Conference on Islamic Funds

Islamic Finance and Funds gaining popularity in the backdrop of current global financial crisis: Zubair Mughal

23 February 2012 (Lahore) The Financial world is banking upon the Islamic Finance and Shariah Compliant Investment Funds, in the backdrop of the current global financial crisis, which in turn is bringing a boost to the Islamic Funds and Sukuks. Considering the healthy global growth in this sector, an International Conference is being organized on April 23, 2012 in Karachi in order to strengthen the Islamic finance sector in Pakistan. Research papers will be presented and productive discussions will be undertaken to highlight the role of Pakistan in the global Islamic finance market. Islamic finance is making healthy growth in Pakistan which now stands over 1000 Islamic banking branches from 05 Islamic Banks and 13 Conventional Banks with Islamic finance operations. In addition, we have good support from 05 Takaful Companies, Mudarabah Companies, 20 Islamic Microfinance Institutions, over 30 Sukuk issues and 15 fund managers have launched their Islamic Funds, which have made prominent role of Pakistan in the global Islamic finance canvas.

The organizer of this International Conference and Chief Executive Officer, AlHUda-Centre of Islamic Banking and Economics, Mr Zubair Mughal while declaring the objectives behind this conference, highlighted the valuable contribution by Pakistanis in research, shariah and skilled professionals bringing strong alternative in a difficult financial situation faced by the world.

Mr Zubair added that Islamic funds are rapidly gaining popularity in US$1.3 Trillion worth of global Islamic finance market gaining 6.1% share from over 650 funds spread all over the world, of which the highest 230 is in Saudi Arabia while Malaysia has 172, Cayman Island 59, Bahrain 46, Luxemburg 29, Dubai 16, Singapore 11 are the prominent players in the world.

Zubair Mughl further informed the media that a healthy number of participants from different countries will be attending in this conference which will be followed by a Two Days Specialized Workshop on the Shariah and Regulatory Framework for Islamic Funds on 24^th and 25^th of April, 2012 to be conducted in Karachi, Pakistan.

Islamic insurance firm sees opportunity after Egypt crisis

DUBAI: Tokio Marine Middle East, an Islamic insurance services provider, sees an opportunity to expand its business in Egypt following the recent political turmoil, the company’s chief executive told Reuters.


Islamic insurance, or takaful, is already seeing demand in Egypt and the recent demonstrations will highlight the need for financial protection, said Ajmal Bhatty, president and chief executive of Tokio Marine Middle East, a unit of Tokio Marine Holdings.


“The awareness for insurance, especially personal insurance is generally low in regional markets including Egypt,” Bhatty said in an interview last week.


“Events such as the recent ones generally result in increasing the awareness in people that they need to do more about protection of their livelihood and assets.”


The unprecedented demonstrations captivated the world and led to the ouster of President Hosni Mubarak after a 30-year reign.


Tokio Marine launched two takaful companies in Egypt in January 2010. There are eight Islamic insurance providers in the country.


Bhatty said the industry expects to pay claims resulting from the turmoil.


The Japanese insurer said last year that it expected the two sharia-compliant units to generate about $3.5 million in annual premium income in the first financial year, which closes in June. That figure should increase to $136.4 million within 10 years, giving the Egyptian operations more than a one-fifth share of the takaful market in the country.



Islamic insurance, or takaful, is similar to mutual insurance but with a clear segregation of the assets owned by policy holders and those owned by the insurer.


The industry is expected to be a clear growth driver within the nearly $1 trillion Islamic finance industry over the next five years.


Tokio Marine is also considering launching micro-takaful operations in Egypt to complement microfinance programs already available.


Micro-takaful is an Islamic insurance scheme for people on low incomes who cannot afford insurance premiums. As part of a micro-credit scheme, a small amount goes to cover areas such as life, disability and accident insurance, as well as livestock cover or crop insurance against hazards of severe weather or flooding.


Bhatty said the company has already successfully provided conventional micro-insurance in India through a joint venture with a Japanese fertilizer company.


“We would like to explore microtakaful possibilities for Egypt as a good proportion of the society would benefit from it,” Bhatty said.

Courtesy by: Reuters

Pakistan Funds Push for More Sukuk Sales to Invest Cash: Islamic Finance

Fund managers in Pakistan are urging the government to increase offerings of Islamic debt, saying a 13-fold rise in sukuk sales this year isn’t enough for them to invest inflows of cash.

The central bank plans to auction 45 billion rupees ($525 million) of three-year sukuk in the domestic market on March 1 and another 55 billion rupees in the three months ending June 30. The sales will take the total for the fiscal year to 189 billion rupees, compared with 14.4 billion rupees in the previous 12 months.

Pakistan’s Islamic banking assets climbed an average 30 percent annually in the past four years to 411 billion rupees as of June 2010, 6 percent of the financial industry’s total, according to a central bank estimate in October. Pakistan aims to double that share to 12 percent by 2012 and plans to issue two more Shariah banking licenses that will take the total to seven, the monetary authority said in October.

“The government has relied too much on the conventional debt market without realizing how much liquidity is in the Shariah-compliant industry,” Sajjad Anwar, who helps manage the equivalent of $187 million at NBP Fullerton Asset Management Ltd., a unit of the nation’s biggest lender National Bank of Pakistan, said in a Jan. 11 interview from Karachi. “Islamic funds and banks are just waiting.”

Banking Licenses

Pakistan needs to finance a budget deficit that may reach 6 percent of gross domestic product, or 1 trillion rupees this fiscal year, exceeding the government’s target of 4 percent, according to a report from the State Bank of Pakistan on Oct. 25. The shortfall was 6.3 percent last year, according to data on the Finance Ministry’s website.

The yield on the three-year debt will rise to 13.89 percent from 13.39 percent at the prior offering on Dec. 13 as the central bank may increase interest rates to temper inflation, said Karachi-based Abdullah Ahmed, treasurer at Meezan Bank Ltd., the nation’s biggest Shariah-compliant lender.

“In an environment when everyone is expecting a hike in interest rates, the demand for such paper will remain high,” Ahmed said in an interview on Jan. 12. “Islamic banks are desperate to deploy their funds.”

Inflation stayed above 15 percent for a fourth month in December after unprecedented floods in August destroyed roads and damaged crops worth $3.3 billion.

Inflation to Slow

“The inflation rate will start falling from next fiscal year to average 13 percent as the government aims to reduce borrowing and impose additional tax measures,” Mohammed Sohail, chief executive officer at Topline Securities Ltd., said in an interview yesterday from Karachi.

The State Bank of Pakistan increased its discount rate by half a percentage point to 14 percent on Nov. 29, the third policy tightening since July. The central bank has raised borrowing costs from a record low 7.5 percent in 2005. Policy makers will increase the rate by 50 basis points to 14.5 percent at the Jan. 29 meeting, according to Meezan Bank’s Ahmed, who said he will buy sukuk at the next auction.

Pakistan’s central bank uses the yield on its six-month non-Islamic treasury bills as a benchmark for pricing debt. The yield rose to 13.55 percent at a sale on Jan. 12, nine basis points more than the previous offering. The rate was 12.05 percent a year ago, Bloomberg data shows.

Global sales of sukuk, which pay asset returns to comply with the religion’s ban on interest, fell 15 percent to $17.1 billion in 2010, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

Islamic Debt Returns

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in developing markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The difference between the average yield for emerging- market sukuk and the London interbank offered rate shrank eight basis points this month to 281, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Average yields dropped 13 basis points to 4.61 percent.

The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 rose two basis points to 2.8 percent today, according to prices from Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed one basis point to 330 today, Bloomberg data show.

Government Debt Sale

The government sold 37.2 billion rupees of Islamic securities on Dec. 13 and got orders for 57.7 billion rupees. At the previous sale on Nov. 8, it raised 51.8 billion rupees after receiving offers of 64.7 billion rupees. Pakistan had local- currency debt of 5.35 trillion rupees outstanding, including 94 billion rupees of sukuk as of November 2010, according to the central bank’s website.

Pakistan is attracting investors even as the country battles an eight-year insurgency with militants in its border region with Afghanistan. The U.S., a major financial donor, is pushing President Asif Ali Zardari to intensify that crackdown. A policeman assassinated secular politician Salman Taseer on Jan. 4 for opposing an Islamic blasphemy law.

Albaraka Banking Group BSC, Bahrain’s biggest publicly traded Islamic lender, boosted its branch network to 90 after acquiring Pakistan’s Emirates Global Islamic Bank Ltd. in 2010. Meezan Bank, controlled by Kuwait’s Noor Financial Investment Co., plans to open 225 new outlets in the next four years.

The central bank predicts the economy will expand 2.5 percent this fiscal year, faster than last year’s 1.2 percent. The Karachi Stock Exchange KSE100 share index reached a 2 1/2- year high today. The gauge rallied 28 percent last year after soaring 60 percent in 2009.

“For Islamic banks, sukuk will remain attractive because the sovereign notes offer the least risk and high returns,” Pervez Said, chief executive officer of Dawood Islamic Bank, 35 percent owned by Bahrain’s Unicorn Investment Bank BSC., said in an interview yesterday from Karachi. “Political and security problems have always been associated with Pakistan. The issue is where do we invest?”

Courtesy by: Bloomberg

In 2011, shall we see the emergence of Islamic Banking?

Recent reports have indicated that the central bank will soon move to regulate an Islamic commercial bank. What exactly is involved in Islamic banking?

Globally, the assets of Islamic banks have been expanding at double-digit rates for a decade and Islamic banking is increasingly becoming a visible alternative to conventional banks in Islamic countries and countries with many muslims.
Islamic banks serve muslim customers, but are not religious institutions. They are profit-maximising intermediaries between savers and investors and offer custodial and other traditional banking services. The constraints they face are, however, different and are based on Shariah law. There are four main features that differentiate Islamic banking from the conventional banks.

Prohibition against interest (Riba) is the major difference between Islamic and traditional banking. Islam prohibits Riba on the grounds that interest is a form of exploitation and is inconsistent with the notion of fairness. This implies that fixing in advance a positive return on a loan as a reward for the use of one’s money is not allowed.

Prohibition against games of chance (Maysir) and chance (gharar): Islamic banking bars speculation - increasing wealth by chance rather than productive effort. Maysir refers to avoidable uncertainty; for example, gambling at a casino. An example of gharar is undertaking a business venture without sufficient information.

Prohibition against forbidden (Haram) activities: Islamic banks may finance only permissible (Halal) activities. Banks are not supposed to lend to companies or individuals involved in activities deemed to harm society (for example, gambling) or prohibited under Islamic law (for example, financing construction of a plant to make alcoholic beverages).

Payment of some of the bank’s profits to benefit society (Zakat): Muslims believe in justice and equality in opportunity (not outcome). One way they do this is to redistribute income to provide a minimum standard of living for the poor. Zakat is one of the five tenets of Islam. Where Zakat is not collected by the state; Islamic banks donate directly to Islamic religious institutions.
In countries with significant muslim communities like Uganda, many large segments of muslims do not have access to adequate banking services-often because devout muslims are unwilling to put their savings into a traditional financial system that runs counter to their religious principles. Islamic banks seek to provide financial services in a way that is compatible with Islamic teaching, and if Islamic banks can tap that potential clientele, that could hasten economic development in these countries.

There is evidence of close correlation between financial sector development and growth. Countries whose financial systems offer a variety of services tend to grow faster. Banks, whether Islamic or traditional, play a fundamental economic role as financial intermediaries and as facilitators of payments.
The rise of Islamic banking has contributed to economic development in two main ways. One key benefit is increased financial intermediation. In Islamic countries and regions, large segments of the population do not use banks. The Islamic world, as a whole, has a lower level of financial development than other regions—in part because conventional banks do not satisfy the needs of devout Muslims.

Moreover, because Islamic banking requires borrowers and lenders to share the risk of failure, it provides a shock-absorbing mechanism that is essential in developing economies. A mechanism that allows the sharing of business risk in return for a stake in the profits encourages investment in such an uncertain environment and satisfies Islam’s core tenet of social justice. If Islamic banking can emerge, Muslim businesses stand to benefit.

Insurers can end sukuk compliance woes, experts say

Islamic insurers can help rid the Islamic bonds market of crippling concerns over the compliance of structures with Islamic law, or sharia, industry experts and executives said.

Global issuance of sukuk fell 56 percent year-on-year to $14.9 billion in 2008, according to Standard & Poor's, as the market was caught up in the global liquidity freeze but also due to a debate on whether the majority of Islamic bonds, or sukuk, were sharia-compliant.

Prominent scholar Sheikh Muhammad Tariq Usmani said in late 2007 that most Islamic bonds were not compliant with sharia as their guarantee to pay out bondholders at maturity contradicts the principle of sharing risk and returns.

Peter Hodgins, a lawyer specialising in Islamic insurance at law firm Clyde & Co said Islamic insurance, or takaful, products could help reconcile the need for sukuk to comply with these requirements and investors' need to insure against risks.

"Takaful can be a solution to help out the sukuk market."

Takaful firms could provide insurance for sukuk investors that takes over notional annual payments to bondholders if they fall below an agreed amount, he said, adding that there were discussions in the industry on such a product.

In Islamic insurance, customers contribute to a pool of funds which is used to indemnify participants who suffer a loss, while in conventional insurance the insurer takes on the risk for a premium.

"As the sukuk market evolves, there could be room for such a product," said Nick Frei, chief executive of Bahrain-based Islamic insurer t'azur.

But he said pricing these products could be a challenge for takaful companies as the risk of sukuk was difficult to assess.

-- Reuters

Insurance deal signed for Eskan Bank staff

Takaful International has signed a contract with Eskan Bank to provide health insurance for the bank's employees and their families for one year.

The contract has been awarded through the Tender Board, which is recognised for its highly-transparent policy in managing tenders.

"Eskan Bank's management is pleased that Takaful International has met all the terms and conditions of the tender," said bank general manager Sabah K Almoayyed

"This agreement is a confirmation of the bank's dedication to care for our professional staff, who are an essential element for the success of any financial institutions, as we are always keen to provide convenience and safety for them."

She said this insurance coverage is an important and a necessary incentive to the bank's staff to improve their morale and overall job satisfaction.

"We are glad to co-operate with Eskan Bank, through providing a comprehensive health insurance coverage for their employees and their families, with no doubt this coverage provides security, comfort and reassurance," said Takaful International chief executive officer Younis Jamal Al Sayed.

"Such coverages are considered an urgent requirement for all institutions to ensure their success and to keep pace with growth in light of the changes in the professional sector."

Mr Al Sayed added that the company continues to develop its insurance services, products and health insurance policies.

It seeks to attract more hospitals and clinics in the Middle East and include them within the network of their own health care providers.

-- Gulf Daily News

Methaq Takaful changes board of directors

Ali bin Za’al Al Mansouri replaced Dr Abdul Latif Al Shamsi as the chairman of Methaq Takaful Insurance Company, after the latter resigned recently.

Samer Mohammed Kanan was also elected as the managing director, and he will manage the company’s administrative staff.

“The change in the board of directors aims at developing the company and supporting its continuous progress and expansion plans,” said Samer Kanan.

Methaq Takaful Insurance Company is a registered and licensed General Takaful company in the UAE, with a capital of Dh150 million ($40.8 million).

The company offers individuals and corporations a complete range of high quality, flexible, integrated, Shariah-compliant insurance products and services.

Established on March 11, 2008, Methaq Takaful Company was listed on Abu Dhabi Securities Exchange on May 11, 2008 and its activities are clearly segregated between Takaful Fund, which belongs to its policyholders, and Methaq Takaful Operation, which belongs to the shareholders and from which all claims are reimbursed.

--TradeArabia News Service

Islamic business insurance from Salaam Halal

Muslim CEOs running UK-based companies will soon be able to opt for takaful risk management solutions from stand-alone Islamic insurer, Salaam Halal.

According to a report by Reuters, the move represents a branching out by Salaam Halal, which has so far focused on providing takaful motor and home insurance.

Takaful, a form of insurance legal under Islamic law, adheres to strict guidelines on investments.

Insurance funds cannot be invested in alcohol or gambling and there is clear segregation between assets owned by members and those owned by the insurer.

The new business will target Muslim-owned small and medium sized businesses with less than £1m annual turnover, including lawyers, doctors, retailers, and accountants.

“It was always our intention to look at these markets,” said Salaam Halal CEO Bradley Brandon-Cross.

“We will be very much focusing on this project in 2010,” he added.

There are an estimated 140,000 Muslim-owned SMEs in the UK.

--Insurance Daily

IGI Investment Bank, Pak-Qatar sign MoU

IGI Investment Bank, a part of the IGI Financial Services, recently signed a bancatakaful agreement with Pak-Qatar Family Takaful aiming to further strengthen its portfolio by adding Family (Life) Takaful Insurance to its insurance advisory services. Under this agreement, clients will be able to secure their own and their family’s future the Islamic way through a host of Shariah compliant Takafu—Islamic insurance—products offered to the bank. IGI Investment Bank will, therefore, be able to cater to all those clients who are seeking a Halal alternative to conventional insurance

--Daily Times

UK's only Islamic insurer targets entrepreneurs

* Eyes Muslim-owned SMEs with less than 1 mln stg turnover

* Mulls life insurance partnership, Europe expansion

LONDON, July 24 (Reuters) - Salaam Halal, the UK's only stand-alone Islamic insurer, will expand next year to offer insurance -- or takaful -- to companies run by Muslim businesses, the company's CEO said on Friday.

Bradley Brandon-Cross told Reuters the company, which launched in 2008, wants to launch the first takaful product range for Muslim-owned small and medium-sized business in Britain, which he estimated number around 140,000.

Major European insurers have been considering a move into the European takaful market, seeking to tap demand from the millions of Muslims on the continent [ID:nLE729394], but the market is still in its infancy and growth is hard to predict.

Salaam Halal -- which has so far focused on car and home insurance -- will particularly target businessmen with less than 1 million pounds ($1.65 million) annual turnover, typically lawyers, accountants, doctors and retailers.

"It was always our intention to look at these markets. We will be very much focusing on this project in 2010," Brandon-Cross said.

Takaful works like mutual-insurance but there is a clear segregation of the assets owned by members and those owned by the insurer. Members contribute to a common pool to fund claims and members benefit if the pool is left in surplus.

Investments made using the pool of funds adhere to sharia law and shun sectors such as alcohol and gambling.

Ernst & Young has estimated the global takaful contributions will reach $7.7 billion in 2012, double the volume in 2007, at the conservative end of estimates.

Salaam Halal is considering offering life savings products in partnership with other insurers in the UK and outside the UK, which Brandon-Cross declined to name. The company may also move into European countries with large Muslim populations, such as France, Germany and the Netherlands.

--Thomson Reuters

Takaful Malaysia confident of outperforming sector's growth target

SYARIKAT Takaful Malaysia Bhd (STMB), the pioneer Islamic insurer in Malaysia, expects to outperform the industry's 25 per cent growth target for 2009, says group managing director Datuk Hassan Kamil.

Recovery in the general and family insurance portfolio and improved equity market in the past four months has improved the company's outlook, he said.

STMB has added professional financial advisers to its distribution channels and hopes to expand its customer base to include the middle-upper Malaysian market.

"We want to elevate the company to the next level, targeting more cash from the demand of customers in this income bracket (with higher contributions or premium size)," Hassan said, after the signing ceremony between STMB and Standard Financial Planner (SFP) in Kuala Lumpur yesterday SFP will market STMB's products through its network of more than 300 representatives, who include Bank Negara Malaysia-licensed financial advisers.

The tie-up would improve the company's bottom line by 10 per cent, he added.

For the third quarter ended March 31 2009, the insurer posted a pre-tax loss of RM11.46 million down from a pre-tax profit of RM11.07 million in the same quarter last year.

Revenue also declined to RM187.67 million from RM280.67 million previously.

Hassan also said that STMB is on track to regain its number one position in the market in two years, when it secures more than 50 per cent of RM11 billion assets in the industry, from its current RM4 billion or 40 per cent.

--Business Times

STMB teams up with Standard Financial Planner

Syarikat Takaful Malaysia Bhd (STMB) has entered into a distribution agreement with Standard Financial Planner Sdn Bhd (SFP) to enhance the penetration rate of STMB’s family and general products into the middle-upper Malaysian market.

The agreement signed yesterday makes STMB the first takaful player to add professional financial advisers to its existing portfolio of distribution channels.

SFP is to market STMB products through its nationwide network of more than 300 representatives, of whom 75 are licensed financial advisers.

STMB group managing director Datuk Mohamad Hassan Kamil said SFP’s financial advisers would play an instrumental role in reaching out to potential customers in the middle-upper income bracket.

“STMB will also work closely with the financial advisers to offer comprehensive insurance, investment and saving options to satisfy the holistic demand of these customers,” he said in a statement yesterday.

The engagement of SFP is part of STMB’s strategy to gain more customers with higher contributions or premium size.

SFP is the market leader and the largest independent financial advisory group in Malaysia.

--The Star online

Takaful Malaysia Eyes Over 50 Per Cent Mart Share

Syarikat Takaful Malaysia Bhd aims to capture more than half of the takaful industry's total asset market share within the next two years amid the current economic slowdown.

Group managing director, Datuk Mohamad Hassan Kamil, said the industry's total assets amounted to between RM11 billion and RM12 billion while the company's share currently was RM4.05 billion.

"We will grow slightly above the current takaful market rate, which is between 20 and 25 percent per annum," he told a media briefing after signing an agreement with Standard Financial Planner Sdn Bhd (SFP) here Wednesday.

SFP, which was set up in 1999, is one of only ten licensed financial advisors in Malaysia.

It is a member of the Australian-based Professional Investment Group of Companies that operates across seven countries.

Hassan said under the agreement, SFP would market Takaful Malaysia's products through its nationwide network of more than 300 representatives, of which 75 percent were licensed financial advisors with Bank Negara Malaysia.

He said the addition of SFP to its existing portfolio of distribution channels would boost the company's revenue by 10 percent.

"This will enhance the penetration rate of our family and general products into the middle-upper Malaysian market as well as making them more accessible wider customer base.

"We will work closely with SFP's financial advisors to offer comprehensive insurance, investment and saving options to satisfy the holistic demand from customers," he said.

Takaful Malaysia posted a pre-tax loss of RM11.461 million for the third quarter ended March 31, 2009 compared to a pre-tax profit of RM11.07 million in the same quarter last year.

Revenue declined to RM187.667 million from RM280.678 million previously.

Hassan said Takaful Malaysia planned to undertake a rebranding exercise to reflect its fresh characteristics in conjunction with its 25th year anniversary in December.

-- BERNAMA

Etiqa bags Best Banca Takaful award

ETIQA Takaful Bhd has won the Best Banca Takaful award at the International Takaful Award 2009 held in conjunction with the Third International Takaful Summit 2009 in London recently.

Etiqa Takaful was the only Malaysian takaful company to win in the global 17-category event, it said in a statement.

Etiqa Takaful was hailed for its performance despite the economic environment and innovative yet simple products in Banca Takaful.

“Etiqa Takaful’s growth in the banca takaful business does indeed exhibit its capabilities to provide appropriate financial solutions together with its Banca partners” said Mohamed Abdullah, director of the Middle East Business Forum.

--Business Times

Insurance Stands Tall

These are testing times for any financial institution. But if there is a Middle Eastern industry relatively well-placed to weather the pressures of the international downturn, it may be insurance, writes Paul Melly...

Having been a relatively slow developer in the past - by comparison with the region's dynamic banking scene - the insurance business is probably less exposed to the pressures of the credit crunch. And in extending its reach among consumers, it may have room for expansion even at a time of cutbacks elsewhere in the economy. Indeed, the recent underlying trend has been strikingly vigorous.

In 2007, the industry grew by 27 per cent in the UAE and, before the credit crunch, analysts were suggesting that, across the region as a whole, future growth rates could be in the 18-20 per cent range before long. The Saudi insurance sector was already worth SR7 billion ($1.87 billion) and analysts suggested it could double or even triple in size within a relatively short timescale.

While the most bullish growth projections may have to be revised downwards, in light of global economic trends and the softening of the oil price in 2008, the overall pattern appears to be solidly established: the gradually extending reach of an industry that has yet to get to many of the potential personal or small business customers that the Middle Eastern market offers.

Moreover, it already has a solid base on which to build in key economies. In the UAE, for example, expatriates must now be able to show evidence of health insurance cover before they can secure a visa for work or even a visit. To cater for their needs, 30 different health underwriters are now active in Abu Dhabi alone.

Greater take-up
In Saudi Arabia, the authorities have been phasing in a mandatory requirement for the use of nine types of insurance, including employer liability, health and motor cover. That represents a major regulatory change for a country where only 10 per cent of cars used to be insured.

The Saudi industry used to be dominated by the parastatal National Company for Co-operative Insurance; competition was limited and was largely provided by foreign companies represented by agents. Tougher regulatory requirements for the use of insurance have been coupled with the liberalisation of the market, under a 2003 sector framework law, to allow room for a wider range of providers. Banks in the Kingdom have already started to respond by buying stakes in new local underwriters, while foreign players are now able to get directly involved, through joint ventures with local partners.

A significant feature of the reform is that it allows companies to offer both conventional insurance and the Islamic equivalent, 'takaful' - although they have to be able to account for both lines of business separately, so that auditors can clearly see that the Islamic services have been provided on the basis of sharia-compliant financing and security. But this is a small price to pay for insurers keen to move into what is a particularly dynamic segment of the industry across the Middle East. Because so many potential consumers are Muslims, takaful has huge scope for growth - emulating the expansion already enjoyed by Islamic banking.

By early 2008, the Saudi regulators had licensed a score of new takaful companies. In Egypt, the pioneering provider of takaful, Egyptian Saudi Insurance House, founded in 2002, saw its premium income quintuple
over the first five years of its operation.

Other investors - Egypt Kuwait Holding (EKH) in partnership with Tokio Marine & Nichido Fire Insurance, Bahrain's Ithmaar/Solidarity Group and a UAE consortium of Amlak, Arab Orient Insurance Company and Abu Dhabi Islamic Bank - are also moving into the Egyptian takaful business.

Fewer than 1 per cent of Egyptians use insurance at present. But the provision of sharia-compliant products is seen as a major tool for overcoming consumer resistance. "EKH sees great opportunities for profitable growth in Egypt, where insurance products have not yet reached the levels of acceptance that could be expected. The offering of the takaful scheme will remove one of the important barriers to the acceptance of insurance products by a large segment of the market," explained the chairman, Nasser al-Kharafi.

Growing volumes
The sheer size and untapped potential of the Saudi and Egyptian markets is a particularly strong attraction for investors seeking to develop new takaful activity, because they can hope to spread the costs of developing business models to comply with local requirements across a large volume of activity. But even in smaller markets, there are signs that takaful - and retakaful (Islamic reinsurance) - is on an upward trend.

February 2008 saw the launch of Al Fajer Retakaful, Kuwait's first such entity, but the third to be established in the Gulf, with Dubai Group holding a 51 per cent stake. With paid-up capital of $178.5 million, and building on Kuwait's strong base in Islamic finance, it aims to be the largest retakaful company in the world. "Given the clearly evident growth in the takaful industry, there are excellent opportunities ahead for a new, strongly capitalised retakaful company," explained Sameer al-Gharaballi, vice-chairman and managing director.

--Global Arab Network

T'azur launches Takaful products

T’azur Company, a regional Takaful firm based in Bahrain, today announced the launch of its extensive range of family and general Takaful products.

Addressing a press conference in Bahrain, Sheikh Dr Abdul Aziz Bin Naif Al Orayer, t'azur chairman, said: “The team has created an unparalleled range of Takaful products. Be it for your possessions, your family or your business - t’azur has a high quality and good value Takaful solution. t’azur is now open for business.”

Created by Unicorn Investment Bank, t’azur was established in November 2007 with an authorised capital of $500 million to capitalise on untapped opportunities and immense growth potential across the international insurance sector.

The company will initially offer 20 products – eight in Family Takaful and 12 in General Takaful categories.

T’azur’s products cover all aspects of people’s lives, possessions and well-being. The Family Takaful range of products includes advanced savings plans combined with life insurance, enabling families to plan for their future regardless of unforeseen circumstances.

The General Takaful products address not only the insurance needs of individuals (e.g., motor or home insurance), but also the needs of the business community of Bahrain, through its broad range of Shari’a compliant corporate products.

Sheikh Dr Abdul Aziz said the company has been late to enter the market and hence was able to avoid some of the repercussions of the financial crisis. “We have been able to learn from the mistakes of others,” he said.

The region is a fast growing and dynamic insurance market and we are entering it at the right time with the right products, he said.

“We are a regional company and plan to launch our products in Saudi Arabia, Kuwait and Qatar shortly.”

Nikolaus Frei, t’azur CEO, added: “Insurance in general and our Takaful products in particular, ultimately benefit the whole community.”

Bahrain is a largely untapped insurance market and provides a great opportunity for Takaful products. While the insurance market as a whole saw a 34 per cent growth in the kingdom last year, the Takaful market grew a massive 300 per cent growth, he said.

The challenge for Takaful firms is to create awareness and attract the vast majority of uninsured people to benefit from the products on offer, he said.

T’azur’s range of Family and General Takaful products are available either directly from t’azur, or through all leading insurance intermediaries in Bahrain.

--TradeArabia News Service

CreditWatch Negative - Kuwait-Based Wethaq Takaful Insurance Ratings Lowered

Standard & Poor's Ratings Services said today that it has lowered its counterparty credit and insurer financial strength ratings on Wethaq Takaful Insurance Co. K.S.C. (Closed) to 'BB+' from 'BBB-'.

The ratings remain on CreditWatch with negative implications, where they were placed on May 27, 2009.

"The downgrade reflects our increasing concerns regarding the impact on Wethaq's financial strength of the situation at TID," said Standard & Poor's credit analyst Lotfi Elbarhdadi.

TID (The Investment Dar; not rated) has a 67% shareholding in Wethaq.

The negative CreditWatch status means that we may further lower the ratings, depending on the development of TID's financial situation. The ratings were originally placed on CreditWatch negative on May 27, 2009, following an announced default by TID on one of its sukuk issues.

Among the key features underlying our opinion on Wethaq's financial strength ratings, as a Takaful (Islamic insurance) player in Kuwait, was an implicit benefit of being part of a large Sharia-compliant shareholder.

We expect to resolve the CreditWatch status or update it within three months.

"The resolution timing will depend upon the outcome of TID's debt restructuring, and on obtaining more clarity on its financial situation and strategic positioning," said Mr. Elbarhdadi.

We will then focus on evaluating the impact of TID's ownership on Wethaq's financial flexibility (defined as its level of access to capital relative to its needs), competitive position, and investments. If the outcome of the review is negative, we may lower the ratings, but we expect the ratings to remain in the 'BB' category.

--Global Arab Network

Takaful IKHLAS Helps Noridawati Buy Prosthetic Leg

Takaful IKHLAS Sdn Bhd, provider of products and services in syariah-based financial protection, has contributed RM15,000 to help Noridawati Husin buy a prosthetic leg.

In a statement here Friday, its executive vice president/chief operating officer, Wan Mohd Fadzlullah Wan Abdullah, said the contribution was part of the company's corporate social responsibility.

"We hope that with this contribution, it will help change the life of Noridawati's family.

"The prosthetic leg will help ease Noridawati's burden who needs help in her movements as she has to take care of her children who are still small and to earn a living," he said.

Takaful IKHLAS, which started operations in July 2003, is a subsidiary of MNRB Holdings Bhd.

MNRB is listed on main board of Bursa Malaysia and its major shareholder is Permodalan Nasional Bhd.

-- BERNAMA

Allianz Takaful to launch Islamic pensions in 2010

Allianz will launch its first Islamic annuity product next year, the head of its Takaful unit said, tapping into a growing number of clients in the Middle East keen to add to their state pensions.

It has long been hard for takaful -- or sharia-compliant -- insurers to sell such products, because of the lack of long-term Islamic bonds with which to match pension liabilities, Abdul Rahman Tolefat told Reuters on Wednesday.

The German insurer's unit had lobbied banks to issue long term debt and unnamed banks had now issued 25-year to 30-year sukuk, Tolefat said at a conference.

"This is really a promising industry, especially in the GCC (Gulf Cooperation Council) -- people are looking for private pensions because state pension are not high enough," he told Reuters on the sidelines of the conference.

Allianz was one of the first Western insurance companies to venture into takaful, in which members contribute to a pool of funds which is used to indemnify participants who suffer a loss, much in the same way as with a mutual insurer.

Allianz Takaful already has a pension product which pays out over a pre-agreed number of years, but annuities that guarantee income until death are still an untapped market.

Allianz Takaful is also lobbying for more access to short- to medium term debt and is asking the Bahraini Central Bank to earmark part of any sukuk issuance to takaful companies, who don't have the clout to compete with large banks.

Earlier this year, the Bahraini Government issued a $750 million sukuk and said last month it will issue a further $530 million of sukuk in local currency.

Takaful companies could still buy these sovereign sukuk on the secondary market but they tend to be too expensive, he told the conference delegates.

Among its projects, Allianz is also pursuing a partnership by the end of the third quarter with a network of distributors. Tolefat declined to say who they are.

--Reuters

Badr Al Islami announces first Takaful Savings & Investment Programme

Badr Al Islami has announced the launch of Badr Takaful Savings & Investment Programme, the sharia'h compliant savings and protection scheme, available for the first time to Badr Al Islami and Mashreq.

The new scheme addresses the financial needs of customers looking for sharia'h compliant long term savings or investment plans, such as child education fees planning and retirement planning, with takaful benefits. Customers have the choice to build up their savings by either contributing on a regular basis or as a lumpsum amount, which then gets invested into some of the world's best performing Sharia'h compliant funds.

The programme also provides Takaful benefits, ensuring that savings and investments goals are achieved, even in the event of loss of life of the customer. Customers can choose to protect 60% or 100% of their intention. The product is completely Sharia'h compliant and is approved by the Shariah Board, headed by Sheikh Abdalla Ben Suliman Al-Manei, Chairman of the Shariah Board of Badr Al Islami.

Mubashar Khokhar, CEO of Badr Al Islami said: "Badr Takaful Savings & Investment Programme is an innovative product, bridging the gap of sharia'h compliant solutions in the bancassurance department's product offerings. With the established foundations of Mashreq and the specialized expertise of Badr Al Islami this new scheme allows us to reach out to even more customers who are looking for the most convenient way to save for their needs in future."

In line with other products and services offered through Mashreq and Badr Islami, the scheme is both convenient and affordable. Customers can begin by contributing with a minimal amount of AED 500 per month, and can be obtain policy documents over the counter at Mashreq branches.

--zawya