Niger insurance urges public to buy Takaful insurance products

The management of Niger Insurance plc has enjoined members of the insuring public to buy Takaful insurance products as part of efforts to imbibe savings culture.

The company’s Managing Director, Clinton Uranta, made this call during a chat with correspondents in Lagos.

Unlike the conventional insurance which majority of the Shariah scholars believe is unlawful due to involvement of Riba (interest), Maisir (gambling) and Gharar (uncertainty), Takaful, the Islamic alternative to insurance, is based on the concept of social solidarity, cooperation and mutual indemnification of losses of members.

It is a pact among a group of persons who agree to jointly indemnify the loss or damage that may be inflicted upon any of them, out of the fund they donate collectively. The Takaful contract so agreed usually involves the concepts of Mudarabah, Tabarru´ (to donate for benefit of others) and mutual sharing of losses with the overall objective of eliminating the element of uncertainty.

Uranta said the people should not see the takaful products as religious products especially as the bottom line is savings, which can either be savings for school fees, pilgrimage, house rent or any other thing.

While pointing out that takaful is not new to insurance industry globally as it is also being offered by many insurance companies globally, he said the product has been doing very well since it was introduced by Niger Insurance.

A large number of Takaful companies exist in the Middle East, Far East, Iran, Turkey, and Sudan and even in some non-Islamic countries. There are over 60 companies offering Takaful services in 23 countries around the world.

“In our own unique way, we have expanded the product in such a way that even non Muslims embrace it. But the bottom line is savings. Savings for school fees pilgrimage, house rent and what have you. That was how we modified it to suit our people in Nigeria. So you asked me whether it is doing well, it is doing well and we will continue to bring innovation into it to make it more attractive to the insuring public,” he stated.

Uranta also spoke on the branch expansion and restructuring programmes embarked upon by the company, saying the firm now has two additional regional offices in Sokoto and Yola to increase its total outlets to 45, while efforts are ongoing to open more new branches in the nearest future.

He also hinted that the insurance outfit has set a premium income target of N 12 billion for itself in 2011 based on the fact that the economy is on the recovery path, coupled with the fact that the company recently made new appointments and embarked on internal restructuring.

Niger Insurance Plc is a public quoted composite insurance company. The management team of the company is made up of trained, experienced and competent professionals with extensive management and technical skill.

Niger Insurance is fully computerised with the most advanced software technology. The computer network is capable of expansion and upgrading to meet with present and future increases in the volume of business.

The company has also put in place sound reinsurance treaties with local and foreign first class reinsurance companies led by Swiss Re. These comprehensive securities ensure financial stability and exude confidence in its service to both present and prospective customers.

Courtesy by; Vanguard

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

Takaful: The Cinderella of the Islamic finance industry

Takaful (Islamic mutual insurance), the Cinderella of the Islamic finance industry, received potentially a major boost with the entry at the end of January 2011 of US insurance giant AIG (American Insurance Group) into the Malaysian market through a RM100-million joint venture, AIA AFG Takaful Berhad, between its flagship Asian entity, American International Assurance Berhad (70 percent equity) and Alliance Bank Malaysia Berhad (30 percent equity), a member of the Alliance Financial Group Berhad of Malaysia.

In fact, two further international-local Takaful joint ventures are scheduled to come to enter the market in 2011 following the approval last year by Malaysian Finance Minister and Prime Minister Mohd Najib Abdul Razak of the four new joint-venture family Takaful licenses under the Takaful Act of 1984. This was part of Malaysia’s ongoing financial liberalization of its Islamic finance sector which was announced by Prime Minister Najib in April 2009.

These included AIA AFG Takaful Berhad; the joint venture between AMMB Holdings Berhad (70 percent) and Friends Provident Group PLC, UK (30 percent); one between ING Management Holdings (Malaysia) Sdn Bhd (60 percent), Public Bank Berhad (20 percent) and Public Islamic Bank Berhad (20 percent); and one between The Great Eastern Life Assurance Company Ltd. (70 percent) and Koperasi Angkatan Tentera Malaysia Berhad (30 percent).

This brings the number of Takaful operators in Malaysia to 12. The other Takaful operators include CIMB Aviva Takaful Berhad, Etiqa Takaful Berhad, Hong Leong Tokio Marine Takaful Berhad, HSBC Amanah Takaful (Malaysia) Sdn Bhd, MAA Takaful Berhad, Prudential BSN Takaful Berhad, Syarikat Takaful Malaysia Berhad and Takaful Ikhlas Sdn. Bhd. Further international interest in Malaysia’s Takaful market is the 35 percent equity stake being finalized by Japan’s Mitsui Sumitomo in Hong Leong Tokio Marine Takaful Berhad.

In addition, Malaysia also has four Retakaful Operators, namely, ACR Retakaful SEA Berhad, MNRB Retakaful Berhad, Munchener Ruckversicherungs-Gesellschaft (Munich Re Retakaful) and Swiss Reinsurance Company Ltd. (Swiss Re Retakaful); and one International Takaful Operator in AIA Takaful International Bhd. In addition, there is also strong presence of the Takaful industry in the Labuan International Business and Financial Centre, where there are 14 Retakaful operators incorporated.

“The launching of AIA AFG Takaful Bhd. is another important milestone in our strategy toward developing a progressive Takaful industry that is resilient and is better able to meet the increasingly challenging and competitive business environment,” explained Mohd Razif bin Abd Kadir, deputy governor of Bank Negara Malaysia, the central bank and Takaful regulator, at the launch of the company in Kuala Lumpur.

However milestones in the Takaful sector should to be put in perspective. Ernst & Young estimates Global Takaful contributions at a mere $5.3 billion in 2008, even though the year-on-year growth was 28 percent. However, the base relatively to the global insurance market is extremely low as such any increase looks impressive. The growth by end 2010 was projected to reach a mere $9 billion.

Bank Negara Malaysia estimates that the Takaful industry is expected to grow by up to 20 percent annually (compared to up to 40 percent for the Islamic banking industry) and is estimated to reach $14.4 billion by end 2010.

Malaysia has the single largest Takaful market in the world with an estimated 26 percent of global Takaful assets which according to Bank Negara Malaysia totaled RM12,445.4 million — and not the second largest as one FT publication maintains because for some curious reason it includes the Iranian insurance market which is not Shariah-compliant per se. Iranian insurance companies confirm that the insurance market in Iran is not Shariah-compliant per se. The same applies to the Iranian banking sector.

Bank Negara Malaysia’s Quarterly Bulletin for Q3 2010 stressed that the insurance and Takaful sector remained resilient, supported by strong capitalization and improved profitability with a capital adequacy ratio of 222.7 percent with excess capital of RM19.2 billion. What a pity the data for the insurance and Takaful sectors are co-mingled making it impossible to analyze which of the two was better performing on a quarterly basis.

Takaful Fund Assets, according to Bank Negara Malaysia, comprised only 8 percent of the total assets of the Malaysian insurance and Takaful industry in 2009 — up from 5.7 percent in 2005 and 7.5 percent in 2008.

Total Takaful Funds, however, have more than doubled in this same period from RM5,878.4 million in 2005 to RM10,569.4 in 2008 and RM12,445.4 million in 2009. Similarly, Takaful net contributions income increased from RM1,333.7 million in 2005 to RM3,025.1 million in 2008 to RM3,521.8 million in 2009.

Where Razif is spot on is the growing diversity of the sector-product offerings by Takaful operators have further broadened to cater to the differentiated needs of customers, with family Takaful products (equivalent to life insurance) now dominating the market with a share of 78 percent of net contribution, as compared to general Takaful products (equivalent to general insurance such as fire, car etc) that dominated a share of 63 percent back in 1984.

"Similarly, the Takaful industry,” explained Razif, “exhibits high potential, as demonstrated by its robust expansion with annual growth rate of total assets and contributions averaging between 20 percent and 26 percent over the period of 2004 to 2009.”

Robust expansion may be a slight exaggeration, but Bank Negara Malaysia is rightly confident of the “strong growth prospect for the Takaful sector, in view of the large untapped potential, where out of the 53.5 percent market penetration rate for both Takaful and insurance, the market penetration rate for Takaful was merely 10.9 percent in September 2010.” The untapped areas of business within the family Takaful industry, accounting for 50.3 percent of contributions in September 2010, says the central bank, are micro-Takaful, medical and retirement products.

The Malaysian government can help leverage this growth potential by giving the Takaful sector the same policy and structural support which it has given the banking and capital markets (Sukuk) sectors over the last three decades. This support could take the form of various initiatives including increasing the provision of Shariah-compliant retirement and pension products of both government employees (those who opt for such a scheme) and individuals in general; and the greater use of Takaful products by government-linked companies (GLCs) and the two sovereign wealth funds, Khazanah Nasional and 1 Malaysia Development Berhad (1MDB) in their business.

Malaysia has the most advanced Takaful industry regulatory and legal infrastructure in the world, the same as for its Islamic banking and capital markets architecture. Given its role in providing risk protection, the Takaful industry offers a suite of financial products and services that complement the existing range available for consumers. In recognizing its importance, stressed Deputy Governor Mohd Razif, “focus has been given in developing a dynamic and vibrant Takaful industry within our Islamic financial system. Where the industry is today has been an outcome of an accumulation of efforts in instituting a comprehensive Islamic financial landscape in Malaysia's financial system. A strong institutional infrastructure and effective legal, regulatory and Shariah governance framework are the underpinnings of our Islamic financial industry. In our pursuit to develop Islamic finance, the recent enhancement to the Central Banking Act has accorded formal recognition to the existence of Islamic finance as an arm of the dual financial system, thereby giving significance and due prominence to Islamic finance.”

Moving forward, the new Shariah Governance Framework, which became effective on Jan. 1, aims at enhancing “the role of the board, the Shariah Committee and the management in relation to Shariah matters, including enhancing the relevant key organs having the responsibility to execute the Shariah compliance and research functions aimed at the attainment of a Shariah-based operating environment” of Malaysian Islamic financial institutions including Takaful and Retakaful operators.

Bank Negara Malaysia recently also issued Guidelines on Takaful Operational Framework, which establishes principles governing the operational processes of Takaful business to ensure that business activities and innovations are within the Takaful operator's risk management capacity. “With effective discharge of Takaful operators' duties, the interests of Takaful stakeholders will be safeguarded as the guidelines place emphasis on sound management to ensure sustainability of Takaful operators,” added Razif.

AIA AFG Takaful Bhd., which has a paid-up capital of RM100 million, will concentrate on bancatakaful to further enhance the development of the family Takaful industry in Malaysia, including micro-Takaful, medical and retirement products

Courtesy by: Arab News

Amana Takaful awarded ISO system certification

Amana Takaful was recently awarded the ISO 9001:2008 certification for both its General and Life Takaful businesses as part of its endeavour to continuously provide higher service standards to its discerning customers. ISO 9001:2008 is a system certification that the company intends will improve its Quality Management through continual improvement.

Mr. Zaid Aboobucker, General Manager Operations and Medical Takaful of Amana Takaful PLC highlighted the importance of being ISO certified adding that it was a team effort that made it possible which will also the secret of its continuation. "We embarked on obtaining the ISO certification as part of our continuing efforts to improve our service delivery. It is our belief that this will provide us a good platform through which we can develop better service standards for the future," he said.

ISO 9001:2008 certification is awarded to companies that meet with the highest Quality Management Standards stipulated by the International Standards Organisation. The Accreditation Auditors, Det Norske Veritas (DNV, Netherlands), assessed Amana Takaful's overall operations covering General Takaful, Medical Takaful and Life Takaful. A customer centric approach was the key focus for assessing quality management to ensure that service is provided to the best of standards in terms of customer satisfaction and speedy service.

The ISO standards are based on 8 Quality Management Principles, which are aligned with the philosophy and objectives of most quality award programmes. These principles are customer focus, leadership, involvement of people, a process approach, a systems approach to management, continual improvement, a factual approach to decision making, and mutually beneficial supplier relationships.

Amana Takaful PLC is the Sri Lankan pioneer and flag bearer of the Takaful way of insurance that redefines how insurance is carried out. Takaful is a refreshingly new concept of risk management that is based on mutual and collective efforts of customers to safeguard their individual and combined risks that makes them owners of the fund and the underwriting profit that is made. Amana Takaful PLC has been operating for over a decade in Sri Lanka and has a fully-fledged operation in the Maldives since 2003.

Courtesy by: Daily Mirror

Takaful Insurans Islam Taib Benefits Presented To Fire & Rescue Dept Personnel

Bandar Seri Begawan - The Acting Minister of Home Affairs, Pehin Datu Lailaraja Major General (Rtd) Dato Paduka Seri Awang Haji Halbi bin Haji Mohd Yusof, yesterday witnessed the presentation of Takaful Insurans Islam Tail) benefits for the Fire and Rescue Department's personnel. It was held at the surau of the Ministry of Home Affairs, according to a press release.
The ceremony also saw the presentation of a Takaful benefit facility for deaths and death compensation benefits for the beneficiary of a Fire and Rescue Department personnel who passed away on January 19 this year.

It was presented by Dato Paduka Sa Bali Abas, Permanent Secretary at the Ministry of Home Affairs, and Hj Osman Hj Md Jair, the Managing Director of Insurans Islam TAIB Sdn Bhd.

The Government of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam, through the Ministry of Home. Affairs and the Fire and Rescue Department,
has a big responsibility to provide safety, security and harmony for all employees. In relation to this, all officers and personnel from the Fire and Rescue Department have been provided with a life insurance coverage package since October 1, 2009, funded by the government.

The coverage called "PelanTakaful Berkelompok" will help protect interests and lessen the burden on financial difficulties should the unexpected happen to an insured employee.

It also serves as a show of appreciation for the sincere, excellent and professional services provided to the country, taking into account the sacrifices made to perform duties given such high-risk job and tasks for the sake of the people.

Yesterday's programme began with a tahlil and Surah Yassi in recitation by Ustaz Hj Adanan Hj Ahmad, the Fire and Rescue Department's Head of Religious Teachers.

It was also attended by the Acting Permanent Secretary and Deputy Permanent Secretary at the Ministry of Home Affairs. Also present were other senior officers and staff members from the ministry, Fire and Rescue Department, as well as the National Disaster Management Centre.

Courtesy by: Borneo Bulletin

AIG, Mitsui expand in Malaysia

Malaysia is attracting global companies such as American International Group Inc and Mitsui Sumitomo Insurance Co seeking to tap growth in the country’s US$4 billion Islamic insurance market.

Mitsui Sumitomo said on Jan. 28 it’s in talks to buy a stake in a local operator offering takaful, or Shariah-compliant insurance. New York-based American International formed a joint venture with Alliance Bank Malaysia Bhd in January, four months after winning a licence from the central bank.

The entrance of more insurance firms will increase the pool of funds looking for longer-maturity debt in Malaysia as the government embarks on a 10-year, US$444 billion development program. Malaysia is giving tax incentives to foreign companies setting up takaful businesses and has eased ownership rules in domestic institutions to aid growth in the industry.

“Insurers are in the best market because of its depth and liquidity,” Mohd. Farid Kamarudin, who helps manage RM1.3 billion (US$428 million) of Islamic assets at Kuala Lumpur-based AmInvestment Management Sdn Bhd, a unit of the fourth-biggest underwriter of sukuk last year, said in a Feb. 7 interview. “This is the only market where you can buy sukuk with maturities of up to 20 years or 30 years.”




Ownership limits

Takaful accounted for 10.9 per cent of Malaysia’s total insurance market as of September, central bank Deputy Governor Mohd Razif Abd Kadir said in Kuala Lumpur on Jan. 28. In contrast, Islamic banking makes up 20 percent of the total banking industry.

Takaful is based on the Shariah principle of mutual assistance, where two parties agree to pay into a fund that will be used to assist each other in times of need.

Assets held by operators of Shariah-compliant insurance in Malaysia reached RM12.4 billion at the end of 2009, with RM3.52 billion raised in premiums, central bank data show.

Courtesy by: Business Times

Amana Takaful plans going public in Maldives

The Maldivian subsidiary of Sri Lanka's Amana Takaful Insuracne Plc, Amana Takaful (Maldives) Private Limited has applied to be listed in the Maldives Stock Exchange (MSE).

According to the MSE website (www.mse.com.mv) the company has submitted its application and it will be the first foreign owned company and Shariah compliant company that has applied for a listing in MSE.

Once the listing is completed Amana Takaful will become the fifth company listed on the MSE.

Amana Takaful (Maldives) Private Limited started its operations in Maldives in 2004 after receiving a license from the Maldivian Insurance Authority to engage in General Insurance in 2004.

Today the company has grown as one of the largest players in the Maldives providing insurance solutions to key sectors of the government and also non-government organizations.

In collaboration with one of the largest Takaful operators in the world, Malaysia Takaful, Amana Takaful started its Sri Lankan operation in 1998 by offering both General and Family Takaful solutions.

They are the first and only insurance company in Sri Lanka to pioneer the process of refunding surplus at the end of each policy term. The company has a very competitive customer base and has operations throughout Sri Lanka.

Recently a subsidiary company of Amana Group, Amana Bank Limited obtained the license from the Sri Lanka's Central Bank and the Finance Ministry to conduct commercial banking in the country.

The Maldives Stock Exchange first established on 14th April 2002 was operated by the Capital Market Development Authority (CMDA) as part of the regulator.


However to separate the Exchange operation, Maldives Stock Exchange (MSE) was licensed as a private sector exchange by Capital Market Development Authority (CMDA) on 23rd January 2008 under the Maldives Securities Act.

As such the MSE is operated by the Maldives Stock Exchange Company Pvt Ltd, effective from 24th January 2008.

The primary function of MSE is to facilitate companies raising capital through the issue of new securities. The secondary function of the MSE is to provide a regulated market for the trading of existing stocks between investors. The MSE is also the centre for trading, reporting and pricing of the stocks. The trading information is released to the public by the MSE ensuring transparency in market dealings.

The four companies that are already listed on the MSE include the Maldives Transport and Contracting Company Plc (MTCC), Bank of Maldives Plc (BML), State Trading Organization Plc (STO), and the Maldives Tourism Development Corporation.

Courtesy by: Daily mirror

Takaful Brunei Raises Awareness On Products That Offer Protection

Bandar Seri Begawan - About 80 personnel comprising representatives of RBAF, the Royal Brunei Air Forces and Royal Brunei Navy, as well as civilian personnel from the Ministry of Defence attended a product presentation conducted by Takaful Brunei Am Sdn Bhd (TBA) and Takaful Brunei Keluarga Sdn Bhd (TBK).
In attendance were Deputy Commander, Administration Division, other commanding and senior officers from different divisions, Major Hj Mohd Sheikh Hj Bagol, as well as TBK's General Manager Hj Mohd Shahrildin PD Hj Jaya.

Senior officers from TBA and TBK were also present at the programme that served as part of a road show to raise awareness of Takaful products offered by TBA and TBK as well as fulfilling the government's aspiration to educate the public in becoming a society that saves for its future.

To date this year, TBK and TBA have conducted many road shows for various government agencies and corporate institutions on the importance and benefits of available Takaful products that offer protection and the overall response has been very positive.

Courtesy by: Borneo Bulletin

Al Khaleej Takaful 2010 net profit rises to QR73mn

Al Khaleej Takaful Insurance and Reinsurance has reported a 7% growth in its 2010 net profit to QR72.84mn as total income grew much faster than expenses.

The company, which is proposing to change its name to Alkhaleej Takaful Group, has suggested 30% cash dividend; which will have to be approved by shareholders at the annual general assembly scheduled on February 21.

Total investment and other income shot up 58% to QR117.40mn while total expenses rose 11% to QR43.95mn, according to its financial statement filed with the Qatar Exchange.

Wakala income jumped almost five-fold to QR50.83mn; net realised gains on sale of available-for-sale investments rose 11% to QR30.87mn; rental income by 31% to QR8.04mn and other income by 71% to QR1.83mn; even as dividend income plunged 12% to QR24.93mn.


The company has reported a QR0.61mn shareholders’ deficit from takaful operations compared with QR33.31mn surplus in the previous year. Total takaful revenues stood at QR44.85mn and expenses at QR45.47mn.

However, for the policyholders, the insurer’s surplus from takaful operations jumped more than three-fold to QR44.02mn. Total takaful revenues were QR105.76mn and expenses were QR61.75mn.

Total assets were valued at QR976.54mn, comprising policyholders’ assets of QR275.65mn and shareholders assets of QR700.89mn.

Total shareholders’ equity stood at QR575.97mn on a capital base of QR142.30mn and earnings-per-share was QR5.12 at the end of December 31, 2010.

Courtesy by: Gulf Times

Japan's Mitsui says eyes stake in Malaysian Islamic insurer

Tokio Marine is expected to sell its stake in Hong Leong Tokio Marine to the Malaysian shareholder which would then sell it on to Mitsui Sumitomo, both pending regulatory approval, a source said.

Japan's Nikkei newspaper had earlier reported that Tokio Marine was planning to exit its partnership in Hong Leong Tokio Marine due to differences in business strategy. While Tokio Marine wants to sell a broad lineup of life and non-life insurance, Hong Leong is keen to focus on savings-type policies, the paper said.

Mitsui Sumitomo has been looking to expand its overseas operations by forging tie-ups with peers in emerging markets as Japan's non-life insurance market shrinks.

Mitsui Sumitomo Insurance managing executive officer Masaaki Nishikata told Reuters in September that MS&AD Insurance was in talks to buy into several life insurers in Asia as it aims to tap the region's growing economies.

A unit of Tokio Marine halted talks with Malaysia's PacificMas to buy medical insurance provider Pacific Insurance Bhd last July.

The market for Islamic insurance, or takaful, is expected to grow in tandem with rising demand for ethical investments. Total takaful contributions could reach $7.7 billion a year by 2012, Ernst & Young has forecast. But global takaful contributions are less than 1 percent of the total insurance premium spend annually, industry lawyers Clyde & Co have said. ($1 = 81.335 Japanese Yen) (Click on for more Islamic finance stories and for a speed guide) (Reporting by Taiga Uranaka; writing by Liau Y-Sing; editing by Lincoln Feast)

Courtesy by: Reuters

Pak-Qatar Family Takaful business grows

KARACHI: Pak-Qatar Family Takaful (PQFTL) has recorded 120 percent growth in its Takaful business in 2010 to Rs1.04 billion as compared with previous year’s Rs466 million.

PQFTL recorded 66 percent growth in its branch network to 44 branches in 21 cities of the country.

Pak-Qatar Family Takaful (PQFTL) was the first Takaful company in Pakistan to declare a surplus of 15 percent for its individual customers for 2009.

The company has registered tremendous growth despite economic recession which speaks highly about the acceptance of Takaful by the masses. The company began its operations in 2007.

Courtesy by: The International News

Malaysia AIA AFG Takaful seeks new hires, eyes growth

The insurer, is owned by the Malaysian unit of AIA and Alliance Bank , will add to its current headcount of 25 as it looks to become among Malaysia's top three family takaful providers within three years, its chief executive Wan Azman Wan Mamat said.

"The potential is that immediately a start-up company like AIA AFG Takaful will have access to a very strong distribution and that will be the differentiator for the company in terms of the growth potential," AIA Bhd chief executive Khor Hock Seng told reporters after officially launching the company.

Wan Azman said Etiqa Takaful, which is owned by Mayban Fortis, a joint-venture between Malaysia's largest lender Malayan Banking and financial group Fortis , is Malaysia's biggest Islamic family insurer with about 25 percent market share. Prudential is second with about 16-18 percent share.

"Increasingly bancassurance is going to play a major part of our business," said Alliance Financial Group's group chief executive Sng Seow Wah.

"With this tie-up, I hope to be able to extend beyond the takaful business with AIA to do other bancassurance products which will extend to businesses."

The Islamic insurance industry's growth has been held back by a shortage of sharia-compliant instruments that insurers can invest in and some doubts about whether takaful really complies with Islamic guidelines.

The takaful penetration rate in mostly Muslim Malaysia was only 10.9 percent in September 2010. The Southeast Asian country has the world's second-largest takaful market and its total assets of $3.2 billion accounted for 26 percent of total global takaful assets in 2009, according to central bank estimates.

AIA AFG Takaful is one of four takaful companies that received licences from the Malaysian central bank late last year as the authorities look to accelerate the industry's growth.

Total takaful contributions could reach $7.7 billion a year by 2012, Ernst & Young has forecast. But global takaful contributions are less than 1 percent of the total insurance premium spend annually, industry lawyers Clyde & Co have said.

Courtesy by: Reuters

TOP REGIONAL AWARD FOR TAKAFUL COMPANY

MANAMA: Solidarity General Takaful company has won a top regional award at a ceremony held in Dubai. It was named Bahrain Insurer of the Year and for the second time running was named the best Takaful Insurer of the Year at the MENA Insurance Awards Ceremony.

Solidarity General Takaful is a subsidiary of one of the largest Takaful groups in the world, Solidarity Group Holding.

The MENA Insurance Awards are hosted by MENA Insurance Review magazine, an authoritative and highly-regarded business title that has become a key feature in the region's insurance event calendar.

The awards recognise Solidarity's commitment to its customers, as well as the company's innovation and quality in its product offering, its strong financial positioning in its core insurance business and its success in building a solid platform for further growth.

"We are delighted to have been named Bahrain Insurer of the Year and for the second consecutive year the best Takaful Insurer," said Solidarity chief executive Ashraf Bseisu.

"The awards serve to further reinforce our long-standing commitment and drive to better serve our clients, to whom we owe these awards in the first place," he said.

"The awards are a reflection of the high level of recognition that Solidarity has attained, amongst both its peers and its clients, as both a leading insurer in Bahrain and a leading Takaful insurer in the region," said Mr Bseisu.

"The fact that we have been singled out for these two prestigious industry awards is something we can all be justifiably proud of," he said.

"The awards are all the more significant because it is based in large part on our ability to demonstrate a strong commitment to our customers," said Mr Bseisu.

"This ability is a direct consequence of the devotion, dedication and world-class expertise of every member of the Solidarity team," he said.

Courtesy by: Gulf Daily News

Islamic banking, shariah compliance hallmark in business: Naved Khan

KARACHI - With the highly encouraging response world-wide in Islamic Banking, Faysal Bank has the history to be one of distinguished institutions having Sharia compliant banking and it has received tremendous response from the investors, depositors and businessmen taking interest in the specially designed “window on Islamic Banking” of the bank.

In an interview with Naved A. Khan, President and Chief Executive Officer of Faysal Bank with The Daily Mail, he explained the strategic growth and development of Islamic banking with Faysal Bank Ltd in Pakistan. Now the Faysal Bank with acquisition of RBS (Royal Bank of Scotland) its operations and financial strength has further improved.

Faysal Bank Limited and its key stake holders have history in Islamic Finance that leads to committed entry in Islamic Banking in Pakistan with its brand Faysal Barkat Islamic Banking. Barkat Islamic Banking will be one of the key areas of focused growth in the next 5 years for Faysal Bank Limited. We are fully engaged and committed in development of Islamic Banking in Pakistan with a dedicated division having its own product group and distribution set-up equipped with well trained human capital, supervised by Shariah Advisor and supported by Shariah Consultant to ensure Shariah Compliant business in line with vision and directives of State Bank of Pakistan.

Naved A. Khan, President of Faysal Bank said, Islamic Banking Business (IBB) has proven its potential globally as well as in Pakistan. There are huge growth opportunities in Pakistan. Over the past decade, Islamic banking has grown at double digit rate resulting in 6% share in the total banking industry. The following are the key drivers of growth:

Large Islamic Population: Pakistan comprises of over 95% Muslim population; hence the significance of having a foothold in such a huge target audience cannot be ignored. The large Muslim population and the strong faith towards religion will keep on fuelling Islamic banking growth in double digits. We could expect Islamic Banking business in Pakistan to capture 25 -30% market share in this decade.

Spiritual Attraction: Besides the economic factors, the emergence of Islamic finance is related to revival of Islam and desire of Muslims to live all aspects of their lives in accordance with the teachings of Islamic law or Shariah.

Government & Regulatory Support: Government and SBP have been supportive of the development of a strong Islamic financial sector alongside conventional banking system.

Increase in the distribution outlets of existing Islamic financial institutions and the entrance of conventional banks in this business is clear indication that Islamic Banking will keep on growing in line with SBP 2012 vision.

Faysal Bank has launched its Islamic banking in September 2009 with first branch in Karachi under the brand of Barkat Islamic Banking.

Total number of dedicated Islamic banking branches is 13 covering 6 cities across Pakistan. Acquisition of RBS has complemented growth of Islamic banking business at FBL. Within a short span of one year Barkat Islamic banking has captured a sizeable number of customers by offering major Islamic banking products and services. Faysal Bank has always been customer centric and has provided products and solutions which are tailor made to address its target market. Our focus and challenge has always been to exceed the expectations of our existing and potential customers consistently. Barkat Islamic Banking will continue this with further growth in distribution and product lines.

Conventional banking is in business for over 3 centuries. They have clear edge over systems, infrastructure, experienced human resource and vintage. Simultaneously, key challenges that Islamic Banking faces like Shariah interpretations, scarcity of Shariah experts, greater time required in product development and execution, short-term liquidity & risk management typical of an evolving industry.

However, Islamic banking institutions in Pakistan as well as in other parts of the world have introduced new and advanced Islamic products and structures which are at par with conventional banking business; whilst full fill the financial solutions of its customers. Sukuks on Ijarah and Diminishing Musharakah financial models are being used to replace TFCs and bonds and are receiving very good response from the market. Government of Pakistan has introduced billions of rupees of Sukkuks in recent months that have been oversubscribed.

Courtesy By: pakistan daily Mail

HSBC in tie-up with Allianz Takaful

HSBC and Allianz Takaful, a major player in the Takaful insurance, have jointly announced a Bancassurance partnership to promote Islamic insurance products in Qatar.
Javed Akhtar, HSBC senior area sales manager said: “We developed this strategic partnership with a leading and established Takaful product provider in recognition of our customers’ need to have access to quality Takaful products. We are very confident that this tie-up will enable us to better serve the needs of our customers.”
Through qualified financial planning managers located in a network of branches around Qatar, the bank will promote and sell ‘family Takaful products’ comprising plans for protection, savings, investment and children’s education. The products are denominated in dollars and riyals and are available to both conventional and Islamic banking customers.
Commenting on the partnership, Abdulrahman Khalil Tolefat, Allianz Takaful chairman said: “HSBC is a global partner for Allianz and we are one of the bank’s preferred services providers. We are very proud to have formed this partnership here in Qatar and to be able to offer our products to HSBC and Amanah customers. HSBC customers will now get access to Allianz’ state-of-the-art Shariah-compliant products and services through HSBC relationship managers in their branches.”

Courtesy by: Gulf Time

Sharia-compliant Insurance company launched

A new Sharia compliant insurance company which will offer group mutual guarantee insurance services for individuals against losses or damages has been launched.

Takaful Insurance of Africa (TIA) will provide a platform for Kenyans to insure themselves under mutual guarantee whereby every participant will contribute a sum of money to a common fund.

Chief executive officer, Hassan Bashir said Takaful was a fully fledged insurance company that would ensure Kenyans put their money in a pool and bear the risks together.

"Takaful intends to introduce an innovative range of products and services that will cater for both the fortunate and less fortunate in the society through risk funds that shall be contributed by members and shall again be fully owned by the same members," said Bashir.

He said Takaful insurance followed Africa's business model based on Sharia principles and was meant to serve all Kenyans regardless of their religious background. The products will be availed in Islamic banks and other designated brokers across the country.

CIC insurance chief financial officer Peter Mwaura who attended the launch Wednesday said the relationship among members of TIA would be that of co-operation for mutual benefit.

"The individual members contribute to an organized and well managed fund whose core objective will be for the welfare of the entire group. Thus the relationship is one of establishing strength through togetherness," said Mwaura.

However, Mwaura recognized the greatest challenge for the company emerging from harmonization of the regulatory environment which will be needed for mitigation of financial risks ethically, a dimension that has never been there before.


Courtesy By: Kenya Broadcasting Corporation

Takaful International goes online

MANAMA: Bahrain-based Takaful International, the pioneering takaful company in the region, on Sunday embarked on a new journey by introducing first of its kind service in Bahrain called e-takaful.

Being the first takaful company to offer on-line services at its portal www.etakaful.bh will immediately benefit both individual and corporate clients.

Announcing the innovative step, Essam Al-Ansari, general manager, during a press conference held at Takaful House in Seef District, said the company would continue to lead the way in takaful segment.

“We are just days away to kick start company’s branch operations in Doha, thanks to the company’s leadership and vision of the management to reach out all potential markets in the GCC,” Al-Ansari said.

“Everything is put in place for Doha operations and we just awaiting the license to open the first-ever Takaful International’s branch outside Bahrain,” he added.

“We have noticed the markets need for technologically advanced services that provides an effective, safe and easy insurance service process,” said Al-Ansari, who was joined by A. Aziz Al-Othman, deputy general manager and Ali Ebrahim M. Noor, deputy general manager family Takaful, healthcare and Takaful centers.

“The company continues to innovate and improve all its insurance products and services in order to ease all procedures for customers and keep pace with the current era” he added.

Abdul Aziz Al-Othman, deputy general manager of the company, said that the clients can obtain quotations for various services such as car, travel, home, domestic and marine insurance and other insurance services.

“It is also possible to obtain the documents electronically for renewal of all policies; with the possibility of reporting of claims as well as customer suggestions are welcome. Further features allow review of policies and claims and for updating personal data,” he added.

In addition, the customers can retrieve policy quotes in few minutes, by filling the form of the insurance service, and paying the premium through a protected Web page; after completing the form all data will be sent and the policy will be delivered to the insured in no time by express mail service (private) in any place within Bahrain.

“The Kingdom of Bahrain is at the top of the ladder of in terms of Internet penetration in the Middle East and the study indicates that percentage of Internet users have exceeded 32 per cent which is around 435,000 users. We strive to continue to provide the best services to our customers and this website is developed to serve them promptly and effectively, in addition to saving time and effort,” he added.

“As a lot of salvage coming out in many areas of takaful services, the customers can also benefit from out e-bidding portal by using online services and get the information of bidding even through SMS,” added Ali Ebrahim Noor.

Takaful International Company founded in 1989 offers variety of insurance coverage which is in line with the foundations of the Shariah and meets the requirements of this age. The company has received BBB rating with a long-term stable outlook from the Standard & Poor’s.

Courtesy by: Arab News

PQFTL, HBL Islamic Banking sign accord

KARACHI: Pak-Qatar Family Takaful Ltd (PQFTL) and HBL Islamic Banking inked an accord to provide family (Life) Takaful coverage to HBL-Islamic Banking Al-Ziarat Account (Hajj and Umrah Savings Plan) holders. The contribution for Life Takaful coverage will be made by HBL. P Ahmed CEO PQFTL and Muhammad Aslam head of Islamic Banking HBL said HBL Al-Ziarat Account is a scheme where the plan holders could save for Hajj and Umrah to undertake the journey at the time of their choice. As an incentive HBL Al-Ziarat Account will have higher weightage than PLS account in addition to free life cover. In case of death of an account holder, PQFTL will pay the remaining contribution towards the scheme and the nominee of the plan holder will get lump sum amount to perform Hajj-e-Badal or Umrah in place of the deceased. HBL will initially offer this product from 19 stand-alone dedicated Islamic Banking branches and 206 Islamic Banking windows throughout Pakistan.

ourtesy by: Daily Times

BNP’s Dalmau Discusses Challenges in Islamic Product Innovation

Rafael Dalmau, head of Shariah- compliant portfolio management at BNP Paribas in Singapore, discusses product innovation in an e-mailed response to Bloomberg questions.

On the drive for new products:

“The Islamic banking and financial sectors continue to evolve and part of that growth path involves the need to create new products. It is not always a lack of investment alternatives that motivate institutions to offer structured products. Many times, it is simply the need to keep pace with the demands of a more sophisticated client. Many of the traditional and basic definitions of Islamic financial transactions can be viewed already as structured products under conventional rules.

On setting standards for derivatives:

“The need to achieve global standards is not as urgent as thought of a few years ago. That is not to say, that it would not be useful and practical. There are still many challenges ahead of us before we can standardize Islamic derivatives. We, the market, need to define what it really means to have a derivatives market and whether or not, these transactions comply both in letter and spirit with Shariah principles.

“All market participants need to make clear what are the objectives behind the creation of Islamic derivative transactions? Are they going to be used simply to leverage or speculate on other Islamic markets, or are they going to be used for purposes of risk management? They can be abused as we saw in the recent times in the conventional markets.”

On the role of Islamic scholars:

“The scholars are going to be, and should be, the main drivers in the evolution of the Islamic derivatives markets. If there is ever an Islamic derivatives market that may allow more efficient risk management, it is likely to help in the growth of the Islamic capital markets. We are still far away from that point.”

Courtesy by: Bloomberg

Bourse charts rise and fall of Takaful shares

What a difference a day makes with the rise and fall of Takaful Emarat Insurance the story on the bourses this morning.

Shares of the insurance firm, listed in Dubai, declined by more than three per cent to 78 fils at 10:40amm this was a reverse on yesterday when Takaful gained 7.8 per cent.

"The price is good considering the past period," said Rami Awwad, operations manager at Al Awael Securities in Abu Dhabi. Shares have fallen by 12 per cent in the last 3 months. "The chances are it will recover, it is a well liked stock among local investors, but volumes are not as high as leading firms," he said.

EmiratesNBD, which has the second biggest weighting on its emirate's index, lost 2 per cent to Dh2.94 a share. Emaar Properties, dropped 0.2 per cent to Dh3.52.

The Dubai Financial Market General Index declined by 0.4 per cent to 1657.98.

In Abu Dhabi, losses were led by Abu Dhabi National Energy, also known as Taqa, which fell 2 per cent to Dh1.45. Property firms fell, after The National reported yesterday that rents in Abu Dhabi fell as much as 16 per cent in the last three months of last year. Aldar Properties lost 1.6 per cent to Dh2.41 a share. Sorouh Real Estate lost 1.7 per cent to Dh1.66 a share.

Crude climbed 1 per cent to $88.93 a barrel.

Elsewhere in the region, Kuwait's measure lost 0.3 per cent to 6939.60. Bahrain's measure remained unchanged at 1428.55. Oman's index and Qatar's index also remained flat at 6949.36 and 9019.71 respectively. The Saudi Tadawul All-share Index was unchanged at 6723.31.


Courtesy By: The National

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

Bahrain receives key recognition to be member of IAIS

The Central Bank of Bahrain (CBB) is pleased to announce that the Kingdom of Bahrain has been selected to be a member of the Executive committee of the International Association of Insurance Supervisions -IAIS; a key recognition for CBB's regulatory initiatives in the area of insurance and takaful.
This announcement was made during the recent IAIS meeting and recognized Bahrain's efforts amongst 17 Mena different regulators in the formulation or enforcement of insurance standards as a regulator/supervisor.

This membership was granted to Bahrain for a period of two years and names the Kingdom of Bahrain as the representative for the Middle East & North Africa (MENA) region among the other members of the IAIS.

"We are delighted to receive this recognition on behalf of Bahrain, which is a demonstration of international recognition for the pioneering work being undertaken by the CBB in the area of insurance regulation," said Mr. AbdulRahman Al Baker - Executive Director of Financial Institutions Supervision at the CBB.

"The CBB is committed to the development and advancement of the conventional and Islamic insurance sector and to reinforce Bahrain's status as the leading centre for insurance in the MENA region," Mr. Al Baker added.

Recent initiatives by the CBB have included the development of the sales representative Insurance certificate, which enables the industry to develop their human resources and better facilitate the growth in specialized areas of insurance.

The CBB Insurance Rulebook also contains the region's first comprehensive regulatory framework specific to Islamic insurance and reinsurance (takaful and retakaful) companies.

International Association Insurance Supervisors (IAIS) Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers.

"The CBB is committed to maintaining its international reputation for sound yet market friendly regulation and supervision and we look forward to continuing to work with market players in providing an environment conducive to the growth and advancement of the financial services industry," said Mr. AbdulRahman Al Baker.

Courtesy by: Ame Info

U.K. Cancels Sukuk, Focus on Economic Growth: Islamic Finance

The U.K., Europe’s largest market for Shariah-compliant financial products and services, canceled what would have been the first sale of sovereign Islamic bonds by a Western federal government as issues fell 15 percent in 2010.

“The U.K. government has decided not to issue sovereign sukuk because it is judged not to provide value for money,” a spokesman for the U.K. Treasury in London, said in an e-mailed response to questions Jan. 13. “It will keep the situation under review.” The Treasury has been mulling the sale of Islamic bonds denominated in pounds since at least April 2007.

Growth in Europe’s Islamic financial hub has been hampered by slowing economic expansion and the government’s attempt to plug a budget deficit, according to Moody’s Investors Service. The German state of Saxony-Anhalt became the first European borrower to sell bonds adhering to Islamic law in August 2004 with 100 million euros ($134 million) of five-year sukuk, according to data compiled by Bloomberg.

“This will discourage other governments from selling sukuk,” John A. Sandwick, a Geneva-based Islamic wealth and asset management consultant who advises companies and governments in Asia, Europe and the Middle East, said in a telephone interview Jan. 13. “If the U.K. says that sukuk aren’t value for money, it’s likely other governments may reassess their positions, and the number of sovereign issuers new to Islamic finance may drop.”

‘Costs Outweigh’

Global sales of Shariah-compliant bonds, which are based on the exchange of asset flows rather than interest, dropped to $17.1 billion last year. Issuance reached a record $31 billion in 2007. Kazakhstan, the former Soviet republic that last sold international debt in 2000, delayed plans to offer sovereign Islamic bonds because the government doesn’t need the funds, Deputy Prime Minister Aset Issekeshev said at a conference in Abu Dhabi yesterday. Luxembourg may sell sukuk, central bank Governor Yves Mersch said in Bahrain in May.

The U.K. Treasury ordered a study in April 2007 into the possibility of issuing Islamic bonds. The government introduced tax concessions for the debt in its annual budget in 2007 and authorities extended tax breaks to Islamic mortgages in 2003. The Treasury last July reiterated the previous government’s 2008 position that a sovereign sukuk sale, which would provide a benchmark for issuance, didn’t offer “value for money.”

“The government recognizes the benefits of the product for the Islamic banking sector, but believes that the costs outweigh the benefits relative to the issuance of gilts,” the Treasury spokesman said.

Cheaper Borrowing

Britain is currently borrowing at a rate that is lower than the London interbank offered rate, or Libor, according to Bloomberg asset swap calculation. If investors swap the fixed- rate offered by 10-year gilts into a floating rate, the security yields 2.9 basis points below Libor, the data show.

The yield on Dubai’s 6.396 percent sukuk maturing in November 2014 dropped 2 basis points to 6.16 percent on Jan. 14, according to Bloomberg data. The extra yield investors demand to hold Dubai’s government debt rather than Malaysia’s narrowed eight basis points, or 0.08 percentage point, to 330 this month, the data show.

“The U.K.’s initial drive to issue sukuk was more politically and socially driven versus economic given the significant Muslim minorities in the country,” Khalid Howladar, a Dubai-based senior credit officer at Moody’s, said in an e- mailed response to questions Jan. 12. “Given recent stresses on the economy and government finances, such motives are now secondary to the need to raise funds efficiently.”

About 2.9 million people in the U.K. are Muslim, the Washington-based Pew Research Center’s Forum on Religion & Public Life said in a report this month. It has a total population of 62.3 million, according to 2010 estimates from the U.S. Census Bureau on Dec. 28.

Slowing Growth

U.K. economic growth slowed more than initially estimated in the third quarter. Gross domestic product rose 0.7 percent from the previous three months, the Office for National Statistics said Dec. 22 in London. That compares with an initial estimate of 0.8 percent and second-quarter growth of 1.1 percent. The Bank of England on Jan. 13 maintained emergency stimulus for the economy.

“The U.K. government is in retrenchment mode and is not looking to expand the sphere of its activities,” Frances Hudson, who helps oversee about $220 billion as head of global thematic strategy at Standard Life Investments in Edinburgh, said in an e-mailed response on Jan. 13.

Corporate Sales

European companies may still turn to the Middle East. The region has more than 400,000 millionaires, Cap Gemini SA and Bank of America Corp.’s Merrill Lynch unit said in a world wealth report last June. Their combined wealth grew 5.1 percent in 2009 to $1.5 trillion, the report said.

The Bank of London and The Middle East Plc, a Shariah- compliant bank, is in discussions with two U.K.-based companies to sell as much as 200 million pounds of Islamic bonds in the next six months, Nigel Denison, director and head of markets at the London-based bank, said in an interview in Manama, Bahrain Nov. 24.

“It’s disappointing that they’re not looking at it more actively because we feel it would provide value for money,” Denison said in a telephone interview from London Jan. 14. “The fact that it’s still under review is encouraging.”

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

Gatehouse Bank Plc, a London-based Islamic investment bank, will help two companies sell as much as 200 million pounds of sukuk in the first quarter of this year, Chief Executive Officer Richard Thomas said in Manama Nov. 23. International Innovative Technologies Ltd., a clean energy company in Gateshead, sold a $10 million, four-year convertible sukuk in July, the country’s first corporate Islamic bond.

“A lot of dithering, dithering, dithering, then nothing,” Sandwick said. “The sukuk market would’ve been deeply enriched and rewarded with a U.K .sovereign or a government municipal issuance. It’s a sad day for everyone.”


Courtesy by: Bloomberg

Malaysia Insurers Hindered by Lack of Sukuk: Islamic Finance

The lack of long-term investment products is undermining growth in Malaysia’s Islamic insurance industry, spurring calls for more sukuk maturing beyond 10 years in the world’s biggest market for the debt.

The country’s 13.9 billion ringgit ($4.5 billion) of insurance assets that comply with Shariah law made up 9 percent of the 154 billion ringgit total as of July 2010, according to central bank data. Malaysia has 293.2 billion ringgit of outstanding Islamic bonds, with 41.5 billion ringgit maturing in 10 years and more, according to data compiled by Bloomberg.

Institutions offering services known as takaful need to match long-term liabilities and a greater availability of sukuk would help firms expand their range of insurance, according to Kuala Lumpur-based HSBC Amanah Takaful Malaysia) Sdn Bhd. The industry also lags behind banking in the United Arab Emirates, said Ahmed Aljanahi at Dubai-based Noor Takaful.

“We need long-term sukuk because we can’t be aggressive in equities or park most of our funds in deposit accounts or just short-term paper,” Hafidz Hamzah, who helps manage 12 million ringgit as head of investment at Kuala Lumpur-based Great Eastern Takaful Sdn. Bhd., which received its license last year, said in an interview Jan. 5. “That’s hampering returns and too much exposure to equities can be very volatile for our funds.”

New Licenses

Takaful is based on the Koranic principle of mutual assistance, whereby policy holders contribute a sum of money to a common pool managed by the company. The funds are used to pay for claims and any excess is returned to customers.

Malaysia’s Islamic insurance assets grew 20 percent in the first seven months of 2010 from a year earlier, according to central bank data. Bank Negara Malaysia issued four new Shariah- compliant life-insurance licenses last year, bringing the number of takaful firms to 12.

Global takaful contributions increased 29 percent to an estimated $5.3 billion in 2008 from a year earlier, according to a report published in April 2010 by Ernst & Young LLP. Takaful contributions in the six-nation Gulf Cooperation Council rose 31 percent to an estimated $3.7 billion the same year, the report said.

‘Chicken & Egg’

“It’s a chicken and egg situation, if you have more long- dated sukuk then there are more assets for takaful operators to invest in,” Rafe Haneef, managing director of global markets at HSBC Amanah, whose parent was the second-largest underwriter of Islamic bonds last year, said in an interview Jan. 5. “Growth in takaful and the sukuk industry will mutually enrich both sectors.”

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

Malaysia’s 10-year development plan will increase sales of longer-maturity debt as companies need to spread out their financing, according to RAM Rating Services Bhd., the biggest of the nation’s credit rating firms. The government has identified $444 billion of private-sector led projects including the building of an underground rail system, a nuclear power plant and the expansion of the road network.

“With more infrastructure projects, that’s going to accelerate the growth of long-term sukuk,” Zakariya Othman, head of Islamic finance at RAM Rating, said in an interview in Kuala Lumpur yesterday.

Returns Declined

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows, compared with 19.8 percent the previous year. Debt in emerging markets gained 12.2 percent, from 29.8 percent in 2009, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The difference between the average yield for sukuk in developing nations and the London interbank offered rate widened two basis points to 292 since Dec. 31, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The spread narrowed 178 basis points, or 1.78 percentage points, last year.

The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 declined three basis points to 2.87 percent yesterday, according to prices from Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s widened two basis points to 336, Bloomberg data show.

Noor Takaful, the holding company of Noor Takaful General PJSC and Noor Takaful Family PJSC, in Dubai is talking with investment banks in the Persian Gulf to come up with new products for the Islamic insurance industry, Ahmed Aljanahi, the managing director, said in an interview Jan. 6.

“We are expecting the more well-established investment banks to come up with the right product for the medium to long- term to cater for the takaful industry worldwide, not just for the U.A.E.,” said Aljanahi. “That would take, I would say, four to five years.”

Malaysia Sukuk Sales

Sales of Islamic bonds from the GCC, which includes U.A.E. and Saudi Arabia, dropped 32 percent last year to $4.5 billion, Bloomberg data show. Issuance of ringgit-denominated sukuk in Malaysia fell 11 percent to 28.5 billion ringgit.

Takaful companies are seeking more investments in order to roll out products that provide longer-term coverage such as retirement plans, said Leonardo Zanolini, chief operating officer at HSBC Amanah Takaful Malaysia Sdn. Bhd., a joint venture between HSBC Insurance (Asia Pacific) Holdings Ltd., Jerneh Asia Bhd. and the Employees Provident Fund.

“As the market grows, you would expect the relevance of takaful operators participating in the sukuk market to grow because they need long-term assets to match their long-term liabilities,” Zanolini said Dec. 30 in a telephone interview.

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.

Capital Standards Rating (CSR) assigns BB to Al Safat Takaful Company

Kuwait: Capital Standards Rating Co. (CSR) has assigned an Insurer Financial Strength Rating (IFSR) of 'BB' and a National rating of 'BBBkw' to Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
Company K.S.C. (closed). The outlook is stable. This is the first time that CSR rates Al Safat. The rating is based on the consolidated financial statements until June 2010.

The ratings reflect Al Safat's adequate capitalization, improving operating performance and relatively sufficient liquidity position. The company implements a conservative reserve accumulation strategy and relies heavily on reinsurance for its marine & aviation and general accident segments. Al Safat is expanding its insurance business and the company's underwriting performance indicators are improving. The company's rating is however constrained by its small market share of the Gross Premiums Written (GPW) and concentration in the Kuwaiti market. The investment in equities and unlisted funds further adds to the volatility of the company's financial profile. The outlook reflects CSR's view of the continued improvement in the company's insurance underwriting performance.

Al Safat Takaful Insurance CompanyAl Safat Takaful Insurance Company was established in 2005 according to Islamic Sharia and offers takaful insurance services in Kuwait. The company provides Islamic insurance in various segments such as marine & aviation, motor vehicles, fire and general accident, life and health. The major shareholders (not less than 10% stake) of the company are; Al Safat Group (28.9%), Al Ghanim Group (12.5%), Al Kharafi Group (10%), Commercial Bank of Kuwait (10%), Investors Group Holding (10%), Kuwait Finance & Investment Company (10%), and Commercial Real Estate Company (10%). This diverse group of prominent investors supports the company's insurance business.

Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
is aiming to improve its market position in the Kuwaiti market which is becoming increasingly competitive with the presence and entrance of takaful insurers. The company's started underwriting in 2005 and by the end of FY2007, the company's Gross Premiums Written (GPW) has increased to KWD 3.09 mn. In FY2008, the GPW increased to KWD 3.86 mn registering 19% YoY growth. As of 2008, the takaful market in Kuwait represents only 16.7% of the overall insurance industry and this percentage continues to increase along with an increase in new Takaful Insurance companies joining the market. This indicates an increasing competition in the Takaful market. In FY2009, the GPW witnessed a 31.4% decline which was mainly due to a significant decline (91.2%) in Marine & Aviation premiums.

Al Safat's underwriting quality measured by the loss ratio has not changed significantly over the last 3 years. The majority of the claims have been incurred by the motor vehicle segment, whichis in line with the insurance industry norms. The expense ratio significantly improved in 2009 mainly driven by the increase in Net Premiums. We expect any improvement in the expense ratio in the near future would largely be driven by the increase in premium written.

For Takaul companies, shareholders' account's revenue is solely driven by investment income. Such heavy reliance on investment income is not sustainable during economic downturns, as investment income tends to be highly volatile. However, relying on investment income on the shareholders' accounts is common in the takaful industry due to the fact that the sole purpose of the shareholders' account is to support policyholders and to protect the value of shareholders.

The principal methodology used in rating Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
Company is "Insurance Methodology", and it can be found at www.capstandards.com in the 'methodologies brief' sub-directory under the Rating tab.

In a continuous effort to benefit both local and regional issuers, CSR has developed rating scales that reflect issuers' scale and focus, whether global or regional. CSR developed a National Rating Scale along with its International Rating Scale to give maximum benefit for issuers when dealing with stakeholders (banks, investors, regulatory bodies, etc.). Small and regional issuers with only local and regional operations might be interested in knowing their creditworthiness when compared to their local peers only. While larger, internationally focused issuers would be more interested in knowing their position compared to global players. In all CSR's Ratings, an International Rating is assigned along with an equivalent National Rating.