Consolidation on the cards

GLOBAL: The crowded Takaful industry, which is expected to surpass US$8.8 billion in premiums this year, will see more consolidations over the next three years, as insurers are struggling to make profits in the tough financial environment, according to Ernst & Young’s annual global Takaful report.

According to the report, many Takaful operators, especially the smaller players, had experienced heavy losses in their investment portfolios during the financial crisis.

This was compounded by the substantial expenses required to establish themselves in an overcrowded Gulf market.

Hence, the report pointed out, mergers and acquisitions in the Gulf would help create financial market leaders for a healthier industry.

Transfer proposed

MALAYSIA: Malayan Banking (Maybank) has proposed to transfer its entire 69.05% interest in Mayban Fortis Holdings to Etiqa International Holdings for RM359.3 million (US$112 million) to realign its Takaful and insurance business to provide flexibility for any potential business expansion. Maybank said the proposed transfer would also enable it to build on its existing platform internationally, hence raising its Takaful and insurance business profile. It added that the move was in line with the government’s initiative to promote Malaysia as a major hub for international Islamic finance, including Takaful.

Thoughts on Takaful

MALAYSIA: AXA Affin Life Insurance may venture into the Takaful business in the next two years. The possible move, according to CEO Loke Kah Meng, is based on the potential inherent in the Takaful market, where the current penetration rate is below 10% compared with over 40% in life insurance. Loke however said the firm would build a solid foundation for its conventional insurance and distribution first, before contemplating the Takaful venture.

Growth prediction

MALAYSIA: The Takaful and general insurance sector is expected to experience premium growth of between 9% and 11% this year, according to ISM Insurance Services Malaysia. This was in line with the global economic recovery and the increase in domestic vehicle sales, said CEO Carl Rajendram.

Takaful’s final frontier

UAE: Al Yah Satellite Communications Company (Yahsat), a private company owned by Mubadala, an investment arm of the Abu Dhabi government, has secured the first ever Takaful space policy.

It covers the launch and in-orbit operations of Y1A and Y1B, the Yahsat satellites scheduled to be launched in 2011. Methaq Takaful Insurance Company and ElseCo, both based in the UAE, provided the coverage.

Willis Inspace, a specialized space division of the UK-based insurance broker Willis, designed the Takaful coverage.

“This augurs well for the development of the Takaful insurance market in becoming an alternative market for space insurance products,” said Yahsat CEO Jassem Mohamed Al Zaabi.

Nod for Takaful

SAUDI ARABIA: Bank AlJazira has received the government’s approval to form a Takaful company with a capital of SAR350 million (US$93 million). The bank plans to sell 30% of the new Takaful firm in a share sale to the public, according to a report.

Going beyond religion

MALAYSIA: Local Takaful players of late have been aggressively scouting for non-Muslim agents to strengthen their foothold in the Takaful market. In fact, according to industry observers, the demand for these agents is expected to rise over the coming years, with existing players looking to enhance their Takaful footprint coupled with potential new entries joining the fray. Syarikat Takaful Malaysia group managing director Hassan Kamil explained that Takaful products are attracting not only Muslims but also non-Muslim customers. Hence, these products are no longer being positioned as an alternative to conventional insurance but rather as a preferred choice.

There are eight Takaful operators and two re-Takaful operators in Malaysia. Takaful assets and net contributions have experienced strong growth, advancing at an average 21% and 29% respectively between 2004 and 2008.

Following the rules

BRUNEI: Insurans Islam TAIB is tapping its own capital to meet the capitalization needed under a government order aimed at strengthening the Takaful industry. Under the order, the firm will have to restructure its general Takaful and Family Takaful units so that the two bodies will have a capital of BH$8 million (US$5.8 million) each. At present, the two units have a collective capital of BH$10 million (US$7.3 million), according to a report.

GCC focus

UAE: Munich Re Retakaful, a unit of Germany-based Munich Re, is holding talks with the Dubai International Financial Centre to enter the UAE in order to tap opportunities in the fastest growing Takaful sector, said CEO Tobias Frenz.

“We are already the market leader in Malaysia and now we plan to conquer the GCC market, with a focus on the UAE and Saudi Arabia,” he added.

He said the company plans to grow organically in the region through friendly partnerships instead of aggressive mergers and acquisitions.