The quest for security
For Takaful operators such as Takaful EM it has also been difficult during the first years to find a Shariah-compliant re-insurance. Attracted by the huge potential, leading reinsurers such as Munich Re, Swiss Re or Hannover Re developed Re-Takaful. "We entered the market in 2006, first from Zurich, then through our branch in Malaysia's capital Kuala Lumpur", says Marcel Omar Papp, Director Client Markets at Swiss Re in Kuala Lumpur. With contributions of $1.2bn in 2009, Malaysian Takaful operators are world leaders, says Ernst and Young.
The world's second largest conventional re-reinsurer, Swiss Re, believes that the Takaful bonanza is far from over. "Look at the market penetration in the Mena-region and South East Asia. There is still huge potential, whether in the segment for individual or corporate insurances", says Papp.
In Saudi Arabia for example, every citizens spends on average $40 per year for insurance products, only half the amount in Argentina and more than 100 times less than in Switzerland. Ironically, Switzerland's leading conventional life insurer Swiss Life has not yet touched the fast growing Takaful market, although the stock-listed company runs branches in Dubai and Singapore: "Currently, we are not planning to develop Takaful products", says Swiss Life spokesperson Irene Fischbach in Zurich.
Takaful EM's Ghassan Marrouche agrees with Papp: "Products which combine insurances with saving plans are still rare in this part of the world. We recently developed a new solution which enables families to save for the children's education, all Shariah-compliant. We also offer a whole-of-life map, for example for people who want to retire at age 65 with a small fortune they can save over the years."
Takaful expansion challenges
According to Marrouche the challenges for Takaful lie in human resources. "In order to build up a Takaful operator, your internal systems must run properly. This is an intensive, but a solvable issue. Finding the right staff is most challenging, because it is time consuming and tricky." Takaful EM generated some Dhs40m of premiums in 2010.
As demands pick up, new distribution channels become inevitable: "Prior to my joining of the company last December, we had a small team of direct sales people", Marrouche told AMEinfo.com "Meanwhile, most of our business is generated through brokers. We are currently in the process of closing deals with banks, so that we distribute our products through an Islamic bank. We will announce the agreement shortly, Insha'allah."
Expanding to new markets is for Ghassan Marrouche and Marcel Omar Papp an option. "Firstly we want to expand our operations in the UAE, but on a later stage we will look at setting up branches in the GCC and in the Levant", says Takaful EM's Marrouche. Ernst and Young says that "most GCC markets have witnessed a slowdown in Takaful growth, with only Saudi Arabia's cooperative insurance market remaining strong on the back of compulsory medical."
Swiss Re's Papp identifies potential in Europe, "as 55 million Muslims live in Europe. But it is not that easy to set up Islamic insurances in non-Muslim countries." Although the UK is home of five Islamic banks and there is Islamic banking in France, Germany and Switzerland, the Takaful industry is yet to conquer Europe. According to Ernst and Young there are only two Takaful operators, one in the UK and one in Luxemburg.