1st East and Central Africa Islamic Banking ConferenceIntroduction to Islamic Insurance (Takaful)29 April 2009
1st East and Central AfricaIslamic Banking Conference                              Table of Contents                      ...
1st East and Central AfricaIslamic Banking Conference                              Section 1                              ...
1st East and Central Africa     CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                         ...
1st East and Central Africa   CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                           ...
1st East and Central Africa       CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                       ...
1st East and Central Africa    CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                          ...
1st East and Central Africa    CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                          ...
1st East and Central Africa       CONTEXT OF ISLAMIC INSURANCE IN KENYA  Islamic Banking Conference                       ...
1st East and Central Africa   CONTEXT OF ISLAMIC INSURANCE IN KENYAIslamic Banking Conference                             ...
1st East and Central AfricaIslamic Banking Conference                              Section 2                              ...
1st East and Central Africa   ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference                              Ov...
1st East and Central Africa      ISLAMIC INSURANCE: AN INTRODUCTION  Islamic Banking Conference                           ...
1st East and Central Africa   ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference                              Ta...
1st East and Central Africa   ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference                              Ta...
1st East and Central Africa   ISLAMIC INSURANCE: AN INTRODUCTION  Islamic Banking Conference                              ...
1st East and Central Africa    ISLAMIC INSURANCE: AN INTRODUCTION  Islamic Banking Conference                             ...
1st East and Central Africa              ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference                     ...
1st East and Central AfricaIslamic Banking Conference                              Section 3                              ...
1st East and Central Africa        GLOBAL TAKAFUL MARKETS  Islamic Banking Conference                                     ...
1st East and Central Africa   GLOBAL TAKAFUL MARKETSIslamic Banking Conference                              Low Insurance ...
1st East and Central Africa     GLOBAL TAKAFUL MARKETSIslamic Banking Conference                                US$2 Bn Gl...
1st East and Central Africa       GLOBAL TAKAFUL MARKETS  Islamic Banking Conference                                    Gl...
1st East and Central Africa        GLOBAL TAKAFUL MARKETS  Islamic Banking Conference                                     ...
1st East and Central Africa   GLOBAL TAKAFUL MARKETSIslamic Banking Conference                              Growth in Taka...
1st East and Central Africa     GLOBAL TAKAFUL MARKETS  Islamic Banking Conference                                  Capita...
1st East and Central AfricaIslamic Banking Conference                              Section 4                              ...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              Takaful Bu...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              General Ta...
1st East and Central Africa           TYPES OF ISLAMIC INSURANCE  Islamic Banking Conference                              ...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCE  Islamic Banking Conference                                Proper...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCE  Islamic Banking Conference                                Marine...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              Family and...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              Protection...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              Savings Pl...
1st East and Central Africa   TYPES OF ISLAMIC INSURANCEIslamic Banking Conference                              Comparison...
1st East and Central AfricaIslamic Banking Conference                              Section 5                              ...
1st East and Central Africa   KEY REGULATORY AND LEGAL ISSUESIslamic Banking Conference                              Key R...
1st East and Central AfricaIslamic Banking Conference                              Section 6                              ...
1st East and Central Africa      MORGAN STANLEY ISLAMIC FINANCE WINDOW  Islamic Banking Conference                        ...
Intro to islamic_insurance__yavar_moini
Intro to islamic_insurance__yavar_moini
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Intro to islamic_insurance__yavar_moini

  1. 1. 1st East and Central Africa Islamic Banking ConferenceIntroduction to Islamic Insurance (Takaful)29 April 2009
  2. 2. 1st East and Central AfricaIslamic Banking Conference Table of Contents Section 1 Context of Islamic Insurance in Kenya Section 2 Islamic Insurance: An Introduction Section 3 Global Takaful Markets Section 4 Types of Islamic Insurance Section 5 Key Regulatory and Legal Issues Section 6 Morgan Stanley Islamic Finance Window 2
  3. 3. 1st East and Central AfricaIslamic Banking Conference Section 1 Context of Islamic Insurance in Kenya 3
  4. 4. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Insurance Penetration and Density Comparison• Low insurance penetration and Insurance Penetration in 2007 Insurance Density in 2007 density in Kenya suggest strong growth potential % $ South Africa 15.3 North America 3,984 Japan 9.6 Japan 3,320 North America 8.7 Europe 1,962 Namibia 8.1 South Africa 879 Europe 8.0 Namibia 290 India 4.7 Botswana 222 Botswana 3.9 China 70 Morocco 3.4 Morocco 69 China 2.9 Tunisia 67 Kenya(1) 2.6 India 47 Tunisia 2.0 Kenya(1) 19 0.0 5.0 10.0 15.0 20.0 0 1,000 2,000 3,000 4,000 5,000 Source Swiss Re—World Insurance 2007, Islamic Capital Partners (ICP) Source Swiss Re—World Insurance 2007, Islamic Capital Partners (ICP) Notes 1. Data from Kenya Insurance Regulatory Authority 4
  5. 5. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Insurance Premiums and General Insurance Breakdown• General insurance more Gross Insurance Premiums General Insurance Breakdown in 2007 predominant in Kenya with a market share of 64% in 2007 US$ MM 700 1% =1 602 600 0 07 % –2 1 9 03 = 2 0 007 fe o nli 03–2 520 RN 20 C AG Life Marine Aviation and Others 500 GR 214 9% CA 455 165 Liabilities 408 7% Motor 400 43% 359 142 126 300 107 200 388 355 Property and Casualty 313 41% 282 252 100 0 2003 2004 2005 2006 2007 Nonlife Life Source Kenya Insurance Regulatory Authority, ICP Analysis Source Kenya Insurance Regulatory Authority, ICP Analysis 5
  6. 6. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Insurance Companies—Classification and Competitive Landscape• Large number of players with Insurance Industry Market Structure in 2007 General Insurance Cos Market Share in 2007 (1) low capitalisation facing tough competition % 70.0 Total Companies 44 59.0 60.0 Nonlife Composites Life 31 17 7 50.0 40.0 38.0 Brokers • 190 Insurance Brokers 30.0 and • 3,085 Insurance Agents Agents • 24 Medical Insurance Providers 20.0 9.5 10.0 7.5 7.3 7.2 6.3 Reinsurers • Two locally incorporated Reinsurers 0.0 es e l d ia es A ia le el AP nd nc ni ni bi i Sh pa pa ni vi Ju Ke o om om ue Pr Bl C C AP 5 10 U p To p To Source Kenyan Insurance Regulatory Authority, ICP Source Kenyan Insurance Regulatory Authority, ICP Notes 1. Based on Gross Premiums 6
  7. 7. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Performance Analysis• Fragmented market with tough RoE of Top 5 Kenyan Insurance Companies No. of Cos. Total No.of Making % of Cos. competition 2007 General Insurance Cos. In the Underwriting Making % Companies Segment Profits Profits 40.0 Motor—Commercial 36 23 64 25.0 20.0 16.0 18.0 Motor—Private 35 7 20 9.2 6.0 Fire—Domestic 35 27 77 0.0 Fire—Industrial 35 23 66 Engineering 35 25 71 (20.0) Personal Accident 37 23 62 Theft 35 23 66 (40.0) Workmen’s Comp. 35 16 46 (60.0) Other Liabilities 35 23 66 Marine 35 21 60 (80.0) (79.0) Aviation 6 4 67 Miscellaneous 35 25 71 (100.0) Kenindia APA Blue Jubilee UAP Industry Total 38 22 58 Shield RoE Source Kenya Insurance Regulatory Authority, ICP Analysis 7
  8. 8. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Projected Gross Insurance Premiums• Gross premiums projected Forecasted Nominal GDP Gross Premiums as a % of GDP Gross Premiums between US$1.3 Bn– US$1.7 Bn in 2014 based on US$ Bn % US$ Bn 60.0 10.0 2.0 GDP forecast of US$49.3 Bn and insurance penetration of 8.9 9.0 2.6% and 3.4% 1.7 49.3 50.0 8.0 7.5 44.5 1.5 7.0 40.0 1.3 40.0 6.0 36.1 32.5 5.0 29.3 4.3 1.0 30.0 4.0 3.4 3.0 2.6 20.0 2.0 0.5 1.0 10.0 0.0 14 14 07 07 07 20 20 20 20 20 0.0 w h e S e ig ag ag U Lo 0.0 H er er 14 14 Av Av 20 20 09 10 11 12 13 14 a ld w h ric 20 20 20 20 20 20 or ig Lo Af W H Source Global Insight, ICP Analysis Source Global Insight, ICP Analysis Source ICP Analysis 8
  9. 9. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYA Islamic Banking Conference Potential Takaful Size by 2014• Takaful industry in Kenya could Projected Share of Takaful Premiums in 2014 be potentially $250 MM in 2014 US$ MM 700 602 600 500 400 300 251 192 168 200 128 100 84 64 0 Insurance Premiums 2007 Low Penetration High Penetration 5% 10% 15% Source Kenya Insurance Regulatory Authority, ICP Analysis 9
  10. 10. 1st East and Central Africa CONTEXT OF ISLAMIC INSURANCE IN KENYAIslamic Banking Conference Summary • Industry competitive with 44 insurance players, yet insurance penetration and density very low at 2.6% and $19 respectively • General insurance dominates the market with a market share of 64% • Only a handful companies generating growth with profitability, most operators either dormant, generalists or serving captive markets • Companies making significant underwriting losses in private motor and workmen’s compensation • Industry RoE averaging at 9.2% • Low capitalisation of companies resulting in a lack of innovative products and tough competition • Islamic Insurance in Kenya could potentially be $250 MM by 2014 10
  11. 11. 1st East and Central AfricaIslamic Banking Conference Section 2 Islamic Insurance: An Introduction 11
  12. 12. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference Overview • Takaful is a US$2 Bn industry (2006) growing by at least 20%–30% p.a. (against global insurance premium of $3.7 Tn) • These premiums are projected to increase to at least US$10 Bn by 2015 • More than 250 takaful companies globally • Takaful concept is similar to conventional cooperative insurance and involves increased emphasis on transparency and corporate governance • Takaful model is double compliant: incorporates industry best practices in underwriting, customer service, reserving, etc., while being in conformity with Shari’a principles • Industry is emerging as an important source of attracting foreign direct investment • Existence of Islamic banking and takaful industry is an important catalyst for infrastructure and developmental projects in many markets 12
  13. 13. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTION Islamic Banking Conference Current Industry Dynamics• The Takaful industry is poised for significant growth as Demand Supply demand increases and industry enablers are further aligned • Economic growth • Fragmented landscape • Increase in GDP per capita • Undercapitalised • Youthful demography • Limited retakaful capacity • Increasing awareness of Islamic • Problematic asset banking and takaful management • Greater desire for Shari’a Global Takaful • Local solution offerings compliant offerings Industry • Local distribution channels • Increase in Shari’a compliant financing (Two Islamic banks in Kenya) • Compulsory protection • Licensing and competition • Better regulation • Greater role for private sector • Increased market-led initiatives Facilitation 13
  14. 14. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference Takaful Concept Explained Conventional • Company accepts premiums from the insured at a level which it anticipates will cover Insurance claims and result in a profit (Nonmutual) • This process of anticipation is akin to maysir (speculation) • Insured pays premiums to the Company in exchange for indemnity against risks that may not occur • This process of ambiguity is akin to gharar (uncertainty) • Company engages in investments that derive their income from interest and/or prohibited industries • This process is akin to riba (usury) and/or relates to haram (prohibited) activities Takaful • Based on principal of Ta’awun (mutual assistance) that is Tabarru (voluntarily) provided • Similar to conventional cooperative insurance whereby participants pool their funds together to insure one another 14
  15. 15. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference Takaful Concept Explained (cont’d) Five Key • Mutual Guarantee—Basic objective of Takaful is to pay a defined loss from a defined Elements fund. Loss is borne by a fund created by the donations of policyholders. Liability is spread amongst the policyholders and all losses divided between them • Ownership of Fund—Donating their contributions to the Takaful fund, policyholders are owners of the fund and entitled to its profits • Elimination of Uncertainty—Donations, causing transfer of ownership to the fund, are voluntary to mutually help in the case of a policyholder’s loss without any predetermined monetary benefit • Management of Takaful Fund—Management is by operator who, depending on the adopted model, utilises either (or a combination) of two Shari’a compliant contracts • Investment Condition—All investments must be Shari’a compliant, which prohibits investment in haram industries and requires use of instruments that are free of riba 15
  16. 16. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTION Islamic Banking Conference Comparison of Takaful and Conventional Insurance• Takaful can be considered a Shari’a compliant form of Takaful Cooperative Insurance Proprietary Insurance conventional cooperative insurance Contracts Utilised Donation and mutual Mutual contract Exchange contract contract Company Pay claims with Responsibility Pay claims from underwriting fund and Pay claims with underwriting funds and interest free loan in case underwriting funds shareholder equity of shortfall Participant’s Responsibility Pay contributions Pay contributions Pay premiums Capital Utilised Participant’s funds Participating capital Share capital Investment Considerations No restrictions except No restrictions except Shari’a compliant prudential prudential 16
  17. 17. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTION Islamic Banking Conference Timeline in Perspective• Contemporary execution of • World’s first full Takaful has existed for less • First Takaful company fledged Islamic bank is established in than three decades is established — Malaysia—Takaful Dubai Islamic Bank • Worldwide Malaysia reinsurance • “Charter of • Sudanese Islamic operators enter Medina” Insurance Company is the ReTakaful – Al-diyah/ established as the world’s • ASEAN ReTakaful market: Hannover Al-aqila 1st Takaful company by International Limited ReTakaful, Faisal Islamic Bank of (“ARIL”) the first Bahrain; Munich – Fidyah Sudan active Islamic insurer Re, Malaysia – Cooperatives 622 1963 1975 1977 1979 1984 1997 2006 • First Islamic • Arab Islamic • Malaysian Takaful • Fiqh Council of the bank Insurance Act comes into effect OIC (1) approves the established in Company (“AIIC”) Takaful system in Egypt is established in 1985 as the correct Dubai by the Dubai alternative to • National Company for Islamic Bank conventional • Fatwa issued by the Fiqh Cooperative Insurance is insurance in full council of Muslim World established in Saudi Arabia compliance with League in favor of by royal decree and is Shari’a Islamic insurance 100% owned by the government Source Factiva, Company Websites, IICP Notes 1. The Organisation for the Islamic Conference 17
  18. 18. 1st East and Central Africa ISLAMIC INSURANCE: AN INTRODUCTIONIslamic Banking Conference Takaful Business Model…More Transparency 1. Wakala Model 2. Mudaraba Model A principal-agent relationship is used between the A principal-manager relationship is used between the policyholders and the Takaful operator for both underwriting policyholders (capital providers) and the Takaful operator and investment activities (entrepreneur) for both underwriting and investment activities Policyholders Contributions Underwriting Policyholders Contributions Policyholders’ (Participants) Surplus (Participants) Fund Underwriting fee and investment fee are Wakala fee Policyholders’ Fund specified percentages of underwriting surplus and investment profits, respectively Takaful Operator Investment Takaful Operator Underwriting Surplus (Company) Income (Company) and Investment Investment Income fee ReTakaful ReTakaful Operator Operator 3. Combined Model The combined model utilises both contracts. The Wakala contract is used for underwriting activities, while the Mudaraba contract is used for investment activities. This model is recommended by certain financial services regulators (including the Central Bank of Bahrain) and international organisations 18
  19. 19. 1st East and Central AfricaIslamic Banking Conference Section 3 Global Takaful Markets 19
  20. 20. 1st East and Central Africa GLOBAL TAKAFUL MARKETS Islamic Banking Conference Low Insurance Penetration in Important Growth Regions• Insurance penetration is visibly Premiums as % of Nominal GDP in 2006 Premiums per Capita in 2006 lower in developing countries and those with sizeable Muslim US$ MM US$ Tomorrow… Today… population Possible future Growth markets North Western Japan and NI growth markets for for Takaful America Europe Asia (1) 12 Takaful 11 1,486 1,746 3,033 10 9 8 World = 7.52% 8 6 South and Middle East Africa 5 East Asia and Central Asia 4 3 41 63 54 2 ) (1 1 0 North Western Japan South Middle Africa America Europe and NI and East East and Asia Asia Central Asia Source Swiss Re Sigma No. 4 (2007), E&Y Analysis, ICP Source Swiss Re Sigma No. 4 (2007), E&Y Analysis, ICP Notes 1. Newly industrialised Asian economies 20
  21. 21. 1st East and Central Africa GLOBAL TAKAFUL MARKETSIslamic Banking Conference Low Insurance Penetration Can Be Attributed to a Number of Factors Takaful…A Viable Alternative Religious • Shari’a sensitivities led to injunctions against conventional insurance. Severely restricting demand, particularly for personal and life products Cultural • Extended family system historically acted as the primary source of financial support to the dependent population, particularly the elderly Regulatory and • Insurance sector historically lacked regulation (and in some instances been closed) Fiscal discouraging insurance operators from writing business and subsequently leading to reduced customer awareness • Lack of fiscal incentives aimed at encouraging savings, together with a high level of state support, have annulled the creation of corporate pension plans and reduced the demand for private sector annuity and savings products Demographic • Legislation aimed at increasing private sector savings is a response to ageing populations where retirement is outpacing taxable workforce expansion. Countries with a youthful population and rapidly expanding workforce do not yet face these problems 21
  22. 22. 1st East and Central Africa GLOBAL TAKAFUL MARKETSIslamic Banking Conference US$2 Bn Global Takaful Industry … And Growing by 20%–30% p.a. Global Gross Takaful Contributions by Year [(2)] US$ MM 5,000 CAGR = 17.9% CAGR 2004–2006 (%) 4,500 70 48 4,000 676 Indian 44.0 3,500 Subcontinent 3,000 Levant 31.2 1,446 2,500 20.4% Africa 33.3 = CAGR 2,000 24 11 215 20 Far East 20.4 8 181 1,500 14 5 688 121 552 GCC 17.9 1,000 474 2,065 500 1,070 929 770 0 (1) 2004 2005 2006 2010 Source Takaful Re Limited and Middle East Insurance Review (2008), E&Y Analysis, ICP Notes 1. Estimated 2. [Forecasted] 22
  23. 23. 1st East and Central Africa GLOBAL TAKAFUL MARKETS Islamic Banking Conference Global Takaful Markets• The takaful industry is rapidly UK —facilitative regulatory Indian subcontinent —region Malaysia—an established expanding beyond its home initiatives and mature characterised by large Muslim Islamic financial services markets insurance market, populations and low insurance density. industry with a high considered a gateway to India will become attractive once the density of life business. Muslim populations in Islamic finance framework is defined. continental Europe. Indonesia—large Muslim population with very low insurance density. North Africa —future growth Sudan —facilitative Middle East —majority Muslim market with majority Muslim regulatory environment that population with rapid economic populations; however, lacks has allowed the Takaful growth. KSA and Kuwait the facilitative regulatory framework. industry to flourish. two largest GCC markets in terms of Takaful premiums. Current Growth Markets Future Growth Markets Source Takaful Re Limited and Middle East Insurance Review (2008), Factiva, E&Y Analysis, ICP 23
  24. 24. 1st East and Central Africa GLOBAL TAKAFUL MARKETS Islamic Banking Conference Some 250 Takaful Operators Already Operational (133 in 2006)• Tremendous growth in number of takaful operators with global Indian names like Swiss Re, AIG, etc., subcontinent — Levant — 9 Takaful entering the market Other regions — 21 Takaful 4 Takaful operators. operators; operators. however, none yet exist in India. Far East — 22 Takaful operators. Africa —21 Takaful The GCC — 59 Takaful operators, the majority operators, the majority of of which are found in which are found in Iran —17 Takaful operators. Sudan. Saudi Arabia. Source Takaful Re Limited and Middle East Insurance Review (2008), E&Y Analysis, ICP 24
  25. 25. 1st East and Central Africa GLOBAL TAKAFUL MARKETSIslamic Banking Conference Growth in Takaful Far Outpaces Conventional Segment Growth of the Insurance Sector and Takaful Sector by Country CAGR 2004–2006 % 69 70 60 51 50 45 42 40 36 30 31 30 27 22 22 21 19 19 20 20 17 16 16 13 14 13 11 8 10 7 6 3 3 0 ) (1n an a nd h a n t a ar t AE A ai yp no si si ai es k KS at w an rd la ne ay Eg hr U ad ba Q Ku ai Jo iL Ba al do Th l Le ng M Sr In Ba Conventional Insurance Takaful Source Swiss Re—Sigma No. 4 (2007) and Business Monitor for International Insurance, Takaful Re Limited and Middle East Insurance Review (2008) for Takaful, E&Y Analysis, ICP Notes 1. Bahrain’s insurance sector growth and Lebanon’s Takaful sector growth are both for 2005–2006 only 25
  26. 26. 1st East and Central Africa GLOBAL TAKAFUL MARKETS Islamic Banking Conference Capital Surplus GCC Region Is Leading This Growth Momentum• GCC is the single largest Global Gross Takaful Contributions in the GCC takaful market with $1 Bn in premiums (2006); US$ MM 1,200 CAGR = 17.9% CAGR 2004–2006 (%)• GCC is also an active takaful investor in other regions 17.9% 34 R= CAG 50 65 15 900 34 42 90 Bahrain 52.5 83 15 25 31 54 Qatar 42.3 600 UAE 45.7 831 756 647 Kuwait 29.6 300 Saudi Arabia 13.4 0 2004 2005 2006 (Estimated) Source Takaful Re Limited and Middle East Insurance Review (2008), E&Y Analysis, ICP 26
  27. 27. 1st East and Central AfricaIslamic Banking Conference Section 4 Types of Islamic Insurance 27
  28. 28. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference Takaful Business Broadly Categorised as General and Family General • Protection against specific contingencies, e.g., fire, theft and accident Family and Long- • Insurance contract for payment of a stated amount of money to Term the beneficiary on the death or total or partial disability of the insured • Long-term savings plans to take care of investment needs of the client Health • Protection against loss by illness or bodily injury, providing coverage for medical treatment • Various practices are followed in the market for classification of health takaful, i.e., under general or family or independently 28
  29. 29. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference General Takaful General Takaful Motor Property and Casualty Marine, Aviation and Transit • Comprehensive • Property All Risks • Marine Cargo Motor • Fire and Allied Perils • Inland Transit • Third-Party Liability • Homeowners and • Marine Hull • Fleet Takaful Households • Business Interruption • Deterioration of Stock • Engineering • General Accident • Liability 29
  30. 30. 1st East and Central Africa TYPES OF ISLAMIC INSURANCE Islamic Banking Conference Motor Takaful Key Considerations• Visibility arm in the retail sector• Risk assessment is relatively Comprehensive Coverage against losses due to accident, fire, theft and simpler policyholder’s liability for personal injury or property damage to• Higher retention ratio third parties arising from the use of the insured vehicle Third-Party Indemnity against legal liability to third parties arising from the use Liability of the insured vehicle in respect of death or bodily injury to third- party and damages to materials and property owned by third-party Fleet Takaful Covers all the vehicles belonging to an organisation in a single takaful certificate 30
  31. 31. 1st East and Central Africa TYPES OF ISLAMIC INSURANCE Islamic Banking Conference Property and Casualty Takaful Key Considerations• Higher uncertainty in catastrophe risk profiles Property • Coverage against losses and damages due to a wide range of• Higher exposures causes such as fire, lightning, explosions, riots and burglary. Protection against damage to stock and business interruptions General Accident • Coverage against risks inherent in human society including plans such as money protection, fidelity guarantee, travel plan, burglary effects, event cancellation and personal accident (individual and group) Liability • Coverage against third-party liabilities including those towards employees including plans like general third-party liability, product liability, employers liability, workmen’s compensation, professional liability, ship repairers’ liability, airport operators’ and haulers’ liability 31
  32. 32. 1st East and Central Africa TYPES OF ISLAMIC INSURANCE Islamic Banking Conference Marine, Aviation and Transit Takaful Key Considerations• Trade sensitive Cargo Coverage for goods whilst in transit by sea or air—Individual plans• Complex risk assessment provide coverage for a single shipment while open cover/annual process plans cover all shipments during the takaful period Inland Transit Coverage for goods whilst in transit by road or rail—Individual plans provide coverage for a single transit while open cover/annual plans provide coverage for all transits during the takaful period Marine Hull Coverage for ship owners/ship managers against various maritime perils 32
  33. 33. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference Family and Long-Term Takaful Family and Long-Term Takaful Protection Plans Savings Plans • Family Protection Plans • Children Education Plans • Mortgage Shield • Retirement Plans • Credit Shield • Investment Plans • Group Plans • Health Plans 33
  34. 34. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference Protection Plans Individual Plans Products offering protection against death and disability. Priced and underwritten generally in the name of a single person, although may have more than one life assured Mortgage Shield Product generally designed for financial institutions providing mortgage—outstanding loan balance paid from the plan in case of customer’s death during term of the loan Credit Shield Cover to credit card holders by protecting the outstanding credit card balance in the event of an untimely death of a card holder Group Plans Single insurance policy that protects a specific group of people e.g., employees of a company, members of a professional organisation, or alumni of a college Health Plans Coverage for medicine, visits to clinics or emergency room, hospitalisation and other medical expenses—many options are offered with varied coverage 34
  35. 35. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference Savings Plans Children Education Ensures that the child’s education continues unhampered, in case Plan of the unfortunate event of the death of a parent (life insured) Retirement Plan Ensures regular payments to the policyholder from retirement till death Investment Plan Generally a flexible policy that combines savings with life cover 35
  36. 36. 1st East and Central Africa TYPES OF ISLAMIC INSURANCEIslamic Banking Conference Comparison of General and Family Takaful Comparison of General and Family Takaful Criteria General Family Technical Knowledge Higher Lower HR Intensive Lower Higher Infrastructure Lower Higher (Health) Regulatory Jurisdiction Dependent Jurisdiction Dependent Competition Jurisdiction Dependent Jurisdiction Dependent Gestation Period Lower Higher Capital Intensive Higher Lower 36
  37. 37. 1st East and Central AfricaIslamic Banking Conference Section 5 Key Regulatory and Legal Issues 37
  38. 38. 1st East and Central Africa KEY REGULATORY AND LEGAL ISSUESIslamic Banking Conference Key Regulatory and Legal Issues • New concept for regulators • Financial reporting different from conventional insurance • Separate disclosure for policyholders funds and shareholders funds • Family takaful has no guarantees with no defined benefit whereas conventional insurance has defined benefits, thus requiring more regulatory supervision • Different companies are following different policies in respect of distribution of surplus • Asset profile of takaful companies will be different from conventional insurance companies due to prohibition of investing in interest-bearing instruments and certain types of equities 38
  39. 39. 1st East and Central AfricaIslamic Banking Conference Section 6 Morgan Stanley Islamic Finance Window 39
  40. 40. 1st East and Central Africa MORGAN STANLEY ISLAMIC FINANCE WINDOW Islamic Banking Conference Morgan Stanley Islamic Finance Islamic Financing Transactions – Full Service Offering• The Morgan Stanley Islamic Capital Market & Bank Financing Transactions (as Bookrunner/MLA) Finance Window provides a full • First international Islamic mandatory convertible for Tabreed service offering• The team has Sukuk – Upsized from initial AED1.1 Bn to AED1.7 Bn (AED1.5 Bn plus AED200 MM increase option) structuring, and execution • First true-sale securitization in the GCC region creating Islamic RMBS capabilities, as well as asset – Tamweel $220 MM mortgage backed security offering management and structured product structuring expertise – First time tranching in a Sukuk product was allowed• Also a member of the Islamic – Awarded “Best Structured Deal 2007” by Islamic Finance News Financial Experts Group • First real estate project financing in the MENA region advising the UK Government on their inaugural Sukuk issue – Aldar $2.1 Bn syndicated credit facility and Islamic Finance strategy Fund Related Products – Al-Futtaim MENA Real Estate Shari’a Development Fund. $500MM first closing in May ’08. Sole Shari’a Structuring Advisor and Placement Agent – $300MM Pearl Qatar Real Estate Development Fund. Closed in Jan ’08 and was over subscribed. Sole Shari’a Structuring Advisor and Placement Agent – Saudi Spanish Infrastructure Fund. $680MM first closing in December 2007. Sole Shari’a Structuring Advisor and Placement Agent Structured Products – A US$10 Bn structured notes programme has been established to issue a broad range of Islamic structured products – Developed innovative Islamic short-medium term products for financial institutions that improve upon traditional commodity murabaha related instruments 40

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