Syariah compliant General

Takaful products
A tailor-made service for
Muslim community

Sami GUELLOUZ

Jakarta 6th, April, 2006

Overview
Back to the roots of Takaful
Takaful customers profile
Emerging markets development
trends
General Takaful products
landscape
Conclusion
Jakarta 6th,

Insurance not permissible

Uncertainty (Gharar)
Gambling (Maisir)
Interest (Riba)

Jakarta 6th,

Syariah relevant concepts

Takaful
Tabarru
Dharoura

Fortune sharing
Jakarta 6th,

Takaful concept
1985 Grand Council of scholars
approved Takaful
Method and means left to scholars and
practitioners
Must have :

Permanent Syariah Advisory Board

Syariah compliant investment strategy
Operating model based on Syariah concepts

Jakarta 6th,

Operating models
Pure mudharabah
(Sudan)
Modified
mudharabah
(Malaysia)
Wakala (Bahrain)

Jakarta 6th,

General Takaful
Family Takaful

Re-Takaful concept
Preferred reinsurance is proportional
(quota share or surplus)
Non proportional permissible
If Re-takaful is unavailable, then it is
permissible to use a conventional
reinsurer
Jakarta 6th,

Overview
Back to the roots of Takaful
Takaful customers profile
Emerging markets development
trends
General Takaful products
landscape
Conclusion
Jakarta 6th,

General Takaful contract

A customers needs driven
product

Sami GUELLOUZ

Jakarta 6th, April, 2006

Takaful industry in the

World
World Premiums 2003

USD 2.6 trillions

Takaful contributions 2002

USD 2.1billions

Takaful contributions / Ww premiums

Jakarta 6th,

1 per mil

10

Takaful in Emerging
markets
Takaful contributions 2002

USD 2 billions

Ww Takaful contributions 2002

USD 2.1billions

Emerging markets contrib. / Ww

contributions

Jakarta 6th,

99%

11

Takaful industry in Emerging

markets
Takaful contributions 2002

USD 2 billions

EM Total Premiums in 2002

USD 217 billions

EM Takaful cont. / EM Total Prem.

Jakarta 6th,

~1%

12

Main current Takaful

Markets
GCC
Malaysia
Other Arab countries
Other South & East Asia
Emerging markets
Jakarta 6th,

13

Muslim

Jakarta 6th,
Citizen of
emerging
markets

Citizen of 21st
century

Takaful customers profile

14

Overview
Back to the roots of Takaful
Takaful customers profile
Emerging markets development
trends
General Takaful products
landscape
Conclusion
Jakarta 6th,

15

Emerging markets
86% of worlds population

1.3 billions (China)

1.1 billions (India)
0.2 billions (Indonesia)

23% of global economic output

10% of global non-life business in 2003
Asia is the most important in the emerging
world with

62% of population
47% of GDP
47% of non-life premiums

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16

Non-life penetration rate &

per capita spending
1.5% in 2004
3.9% in industrialized markets

26.6 USD in 2004

1275 USD in industrialized markets

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17

Non-life insurance dominated

by motor and property
insurance
Motor dominant lob in most emerging
markets

Compulsory third part liability insurance

Own damage insurance (ex: leasing contracts
for cars)

Property, accident and health

insurance are generally next biggest

Jakarta 6th,

Accident and health depends on

governements role in this lob (high where
WCA are covered by private insurance (Latin
America, Asian markets) or where public health
is unsufficient).

18

Non-life insurance dominated

by motor and property
insurance
Transport insurance

Insignificant in Eastern Europ

6%-10% of non-life premiums in the other
regions

Liability still of minor importance in

most markets

Jakarta 6th,

Growth in recent years in Eastern Europe

stimulated by EU regulation
Smaller growth in Asia due to demand of
product liability for exports to the USA and
more widespread regulations.

19

Liability products
Liability accounted for USD2.8billion in
2003

Asia for 50%

Latin America & Eastern Europe
South Africa & Middle East (less than 10%)

General & product liabilty are the main in

emerging markets
Professional indemnity in Easter Europe in
response to EU requirements.
In Brazil, South Africa and India, increasing
demand for D&O coverage
Jakarta 6th,

20

Commercial - Personal
lines
Commercial lines dominate the
developing markets
Individual consumption limited
Lack of risk awareness among consumers

as well as low household income.

Commercial lines show higher

growth rate than personal lines
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21

Real growth by major LOB

Real premiums growth 19982003
Non-Life

Motor

Propert
y

India

8.9%

na

6.2%

Singapore

13.7%

8.3%

6.8%

Asia

8.8%

8.2%

4.6%

Africa

5.6%

5.0%

16.8%

Middle-East
Jakarta 6th,

8.6%

7.2%

8.2%
22

Strong growth between 1998

and 2003
Non-life growth was mainly driven
by increases in property business

Risk awareness and rates increases since

2001

Motor premiums strongly increased

mainly driven by improving
economic conditions

Jakarta 6th,

More motor vehicles sales

23

Different in size and

structure, but common
development
trends
Strong economic growth will continue to drive

development.
New products and new distribution channels will
help to tap growth potential.
Regulations to be aligned to international best
practices (Solvency, corporate governance and
transparency).
Insurers will find stronger incentives to maintain
sound underwriting standards.
Emerging insurance markets are moving towards
a more liberal regime with fewer entry barriers.

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24

Cat nat in the emerging

markets
Cat nat like Tsunami (dec 2004) in
SE Asia
Many emerging markets to rethink their

vulnerability to natural catastrophy,

Better and broader use of insurance as a
tool for managing these exposures.

Policy shift that should encourage

insurance development in these
countries.
Jakarta 6th,

25

Forecast growth
Increase 1 to 2 times faster than
overall economy

Countries where per capital 2000 USD <per

capita income<10000 USD

7,5% increase for 2004-2014

period

Jakarta 6th,

In real terms per year

8,9% in 2004

26

Conditions to achieve this

growth potential
General
factors

Economic growth

Products offered

Wealth/distribution of
income

Distribution
channels

Religion-culture

Risk awareness

Education

Insurance
regulation

Property rights; legal

certainty

Trust in insurance

Compulsory insurance
Non-life
insurance

Jakarta 6th,

Natural cat exposure

Public role in health
and workers
compensation
insurance

27

Overview
Back to the roots of Takaful
Takaful customers profile
Emerging markets development
trends
General Takaful products
landscape
Conclusion
Jakarta 6th,

28

Increasing array of risks

faced by individuals and
companies
Natural catastrophy
Fire,
Business interruption,
Product recalls,
Directors and officers,
Asbestos litigation,
Terrorism,
Financial volatility,
Weather volatility; etc.
Jakarta 6th,

29

No limits for the General

Takaful products landscape
Except the criteria of
insurability

Sami GUELLOUZ

Jakarta 6th, April, 2006

30

Criteria of insurability
Category

Criterion

Characteristic

Risk/Uncertainty

Measurable

Loss occurences

Independent

Maximum loss

Manageable

Average loss

Moderate

Loss frequency

High

Moral hazard, adverse

selection

Not excessive

Takaful contribution

Adequate,
affordable

Takaful cover limits

Acceptable

Industry capacity

Sufficient

10

Public policy

Consistent with
cover

Legal and syariah

system

Permit the cover

31

Actuarial

Marketdetermined

Societal
11
Jakarta

6th,

Conclusion, hopefully
General Takaful will benefit from the growth trend
in emerging markets in motor, property and
liability lob
Both commercial General Takaful lines and
personal will benefit from this growth trend
Personal lines will increase more than commercial
lines owing to Takaful concept
General Takaful will participate to natural
catastrophies covers
Innovative contracts targeting specific needs of
Muslims will make the growth of General Takaful
faster than that of non-life insurance

Jakarta 6th,

32

Thank you

Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005

Sami GUELLOUZ

Jakarta 6th, April, 2006

33