Syariah compliant General Takaful
products
A tailor-made service for Muslim
community
Sami GUELLOUZ
Jakarta 6th, April, 2006
1
Overview
Back to the roots of Takaful
Takaful customer’s profile
Emerging markets development trends
General Takaful products landscape
Conclusion
Jakarta 6th, April, 2006
2
Insurance not permissible
Uncertainty (Gharar)
Gambling (Maisir)
Interest (Riba)
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Syariah relevant concepts
Takaful
Tabarru’
Dharoura’
Fortune sharing
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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
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Operating models
Pure mudharabah
(Sudan)
Modified
mudharabah
(Malaysia)
Wakala (Bahrain)
Jakarta 6th, April, 2006
General Takaful
Family Takaful
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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
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Overview
Back to the roots of Takaful
Takaful customer’s profile
Emerging markets development trends
General Takaful products landscape
Conclusion
Jakarta 6th, April, 2006
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General Takaful contract
A customer’s needs driven product
Sami GUELLOUZ
Jakarta 6th, April, 2006
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Takaful industry in the World
World Premiums 2003

USD 2.6 trillions
Takaful contributions 2002

USD 2.1billions
Takaful contributions / Ww premiums

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1 per mil
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Takaful in Emerging markets
Takaful contributions 2002

USD 2 billions
Ww Takaful contributions 2002

USD 2.1billions
Emerging markets contrib. / Ww
contributions

Jakarta 6th, April, 2006
99%
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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.

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~1%
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Main current Takaful Markets
GCC
Malaysia
Other Arab countries
Other South & East Asia
Emerging markets…
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Muslim
Jakarta 6th, April, 2006
Citizen of emerging
markets
Citizen of 21st
century
Takaful customer’s profile
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Overview
Back to the roots of Takaful
Takaful customer’s profile
Emerging markets development trends
General Takaful products landscape
Conclusion
Jakarta 6th, April, 2006
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Emerging markets
86% of world’s 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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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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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

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Accident and health depends on governement’s
role in this lob (high where WCA are covered by
private insurance (Latin America, Asian markets)
or where public health is unsufficient).
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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


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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.
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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
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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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Real growth by major LOB
Real premiums growth 19982003
Non-Life
Motor
Property
India
Singapore
8.9%
13.7%
na
8.3%
6.2%
6.8%
Asia
Africa
Middle-East
8.8%
5.6%
8.6%
8.2%
5.0%
7.2%
4.6%
16.8%
8.2%
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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

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More motor vehicles sales
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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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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.
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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


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In real terms per year
8,9% in 2004
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Conditions to achieve this growth
potential
General factors
Non-life
insurance
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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
Natural cat exposure
Public role in health and
workers compensation
insurance
Claims awards
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Overview
Back to the roots of Takaful
Takaful customer’s profile
Emerging markets development trends
General Takaful products landscape
Conclusion
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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.
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No limits for the General Takaful
products landscape
Except the criteria of insurability
Sami GUELLOUZ
Jakarta 6th, April, 2006
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Criteria of insurability
Category
Criterion
Characteristic
1
Risk/Uncertainty
Measurable
2
Loss occurences
Independent
Maximum loss
Manageable
Average loss
Moderate
5
Loss frequency
High
6
Moral hazard, adverse
selection
Not excessive
7
Takaful contribution
Adequate,
affordable
Takaful cover limits
Acceptable
9
Industry capacity
Sufficient
10
Public policy
Consistent with
cover
Legal and syariah system
Permit the cover
3
4
8
Actuarial
Marketdetermined
Societal
11
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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
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Thank you
Sources : Sigma6_2003 ; Sigma5_2004 ; Sigma1-4-5_2005
Sami GUELLOUZ
Jakarta 6th, April, 2006
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