Transcript 3 Retakaful at Swiss Re
Retakaful
Daniel Staib, Economic Research & Consulting Mutual insurance and takaful conference, Istanbul, 13 November 2012
Table of contents
1.
2.
3.
Market potential & outlook Retakaful at Swiss Re
Operating model (Wakalah-Waqf) Challenges in retakaful
2
2 Market potential & outlook
2 Market potential & outlook
25% of world population is Muslim (1.5 bn people). In addition, Takaful is also an attractive solution to non-Muslims.
Market premium written in Muslim countries (2010): USD 73bn. Islamic insurance premium (2010): USD 3.2 bn (takaful) + USD 4.0bn (cooperative model – KSA) + USD 5.1bn (conventional insurance within Islamic financial system): Total: USD 12.3bn.
Low level of insurance penetration compared to other emerging markets.
Population of Muslim countries are rapidly growing; favourable demographics.
Increasing Islamic consciousness.
Growth of Takaful has been exceptional over past four years (almost 30% p.a.), but is expected to slow in 2012 Until 2015 Takaful contribution could surpass USD 7bn.
4
2 Takaful contributions by country 2010: USD 3.2 bn
Malaysia is leading in terms of size and development of its takaful markets Bahrain 3%
Assumptions:
Muslim countries only United Arab Emirates 12% Business only included if written on the basis of wakalah, mudarabah or hybrid models Indonesia 13% Other South East Asia 8% Source: Swiss Re Economic Research & Consulting Other Middle East 12% Malaysia 31% Sudan 9% Saudi Arabia 12%
5
Malaysia Saudi Arabia Sudan Other South East Asia Indonesia United Arab Emirates Bahrain Other Middle East
3 Retakaful at Swiss Re
Operating Model: Wakala-Waqf
Fund Participants (e.g. AIA Takaful)
Investment Income Profit Sharing Basis Contributions (unconditional donation) Claims/surplus distribution
(Re)takaful Operator
Qard Wakalah Fees Initial Donation
Tabarru part: Mutual Pool for collection of contributions, payments and claims & setting up of stabilisation reserves Cash Waqf Slide 7 7
3 Characteristics of the Wakalah-Waqf Model
Swiss Re’s Wakalah Waqf model has been accepted by
Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI), the
National Shari’a Advisory Council
(SAC) of Bank Negara Malaysia, and
National Syariah Council
, Indonesia.
Wakalah-Waqf model is used in Pakistan, South Africa and the Middle East
Initial donation
to set up fund: USD 5’500/MYR 20’000 Swiss Re has set up various funds based on geographical location and lines of business covered.
1.
Waqf agreement
: Application to become member of fund 2.
3.
4.
Acceptance as member of fund Fund rules (same for all members) Applicable wording (Retakaful Agreement): General/Special Conditions 1.
2.
Swiss Re’s commitment
to the fund: To ensure that overall results are not influenced by large individual negative results In case there are insufficient funds to pay claims, Swiss Re will provide an interest free loan (Qard)
8
3 Characteristics of the Wakalah Waqf Model
Investment of fund in Shari'a compliant relatively liquid assets
investment income will remain part of fund: SR does not get share of investment income
Operator is paid a fee (
Wakalah fee
) out of the Waqf fund All contracts ending in the same financial year of the Operator are pooled together to calculate the surplus
Surplus
given back to participant is apportioned between participants in relation to their surplus contribution (i.e. based on technical result) No incentive fee for the Operator Same operating model used worldwide.
Swiss Re Retakaful ensures complete
Shari’a compliance
through: – No conventional retrocession – Only Takaful business ceded into the funds
9
4 Challenges in retakaful
Challenges in retakaful No global regulatory framework Diversity of industry practises Recent lack of growth of business Price pressure from cedent companies How to handle large commercial risks
11