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
3
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
Assumptions:
 Muslim
countries
only
only
included if written
on the basis of
wakalah,
mudarabah or
hybrid models
Bahrain
3%
United Arab
Emirates
12%
Malaysia
Other
Middle
East
12%
 Business
Indonesia
13%
Other South East
Asia
8%
Saudi Arabia
Malaysia
31%
Sudan
Other South East
Asia
Indonesia
Saudi
Arabia
Sudan 12%
9%
United Arab Emirates
Bahrain
Other Middle East
Source: Swiss Re Economic Research & Consulting
5
3 Retakaful at
Swiss Re
6
Operating Model: Wakala-Waqf
Fund Participants (e.g. AIA Takaful)
Investment Income
Profit Sharing Basis
Qard
(Re)takaful Operator
Wakalah Fees
Initial Donation
Contributions
Claims/surplus
distribution
(unconditional
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 WakalahWaqf 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.

Waqf agreement:

1.
Application to become member of fund
2.
Acceptance as member of fund
3.
Fund rules (same for all members)
4.
Applicable wording (Retakaful Agreement): General/Special Conditions
Swiss Re’s commitment to the fund:
1.
To ensure that overall results are not influenced by large individual
negative results
2.
In case there are insufficient funds to pay claims, Swiss Re will provide
an interest free loan (Qard)
8
3 Characteristics of the WakalahWaqf 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
10
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
Thank you