Takaful sector lucrative in Oman: Experts

Muscat: With insurance firms gearing at ways of entering the takaful market in Oman, experts in the field have said that Oman could achieve RO42 million in the takaful segment by 2015. 

Giving the figure, Gautam Datta, chief executive of Al Madina Insurance said, "The opportunities in takaful are immense and the market is worth $12 billion according to Ernst and Young report 2012. Though there is great potential, it comes with challenges. It depends on how the operators take this opportunity in their stride and move ahead.-

Mohammed Owais Ansari, chief actuary of FWU Group, UAE, said that the emerging markets, mostly Islamic countries, have tremendous potential for takaful growth given the relatively low insurance penetration levels in the region. 

Industry sources say that insurance penetration in the region is much lower than the global and emerging market average. The penetration rates for the GCC remain significantly lower than the global average of 6.9 per cent.

Ansari said that potential for takaful existed long time ago but benefits were not properly identified and awareness level was enough as the product was missing. 

So, bringing an awareness, efficient customer service and operational efficiency coupled with current growth trajectory can all work in positive acceptance of takaful products. "One of the key elements of takaful is transparency and takaful is more transparent than conventional insurance,- he added.

Talking of re-takaful (reinsurance of Sharia-compliant insurance), Owaisi said that such a service was not made available when takaful was introduced. "There is an opportunity now for re-takaful operators to assist the growth and expansion of takaful insurance.-

The session on 'takaful new markets: prospects and challenges' was by presided over by Eng g.Abdul Rahman, deputy chairman, Madina Insurance. 

Dr Manfred J. Dirrheimer, chairman of FWU Takaful UAE, speaking at a session on 'Bancatakaful: An new dimension of takaful distribution,' said that successful bancatakaful bridges the gap between the more client-oriented sales approach of the banks and the rather product oriented sales approach of takafaul operators. The session was presided over by Sulaiman Al Harthy, group general manager, Meethaq, Bankmuscat.

Earlier in the day, making the opening remarks of the concluding day of the conference, Dr Mohammed Daud Bakar, group chairman of Amanie Advisors, debunked the myth that Islamic finance is far away from real economic activities. 

He said, "From Islamic point of view, money has always been viewed as a medium of exchange, store of value and unit of measurement; money is needed to facilitate the transactions of buying goods and services, and it is not a commodity and has no time value of money in itself. 

Money can only grow through putting the money into real economic activities and services such as trading, leasing, services and investment.-

"'The prohibition on riba and the allowance of trading as mentioned in the Holy Quran is the guiding principle for venturing into real economic activity while pure lending for interest and its derivatives/synthetic are not compliant as they do not relate to real economic activity,- he added.

"A new set of investment deposits at IFIs -” special investment account; parallel mudarabah; asset management functions of IFIs for SME and venture capital or via subsidiaries; Tier 1 capital (enhanced) under Basel 3 -“ sukuk mudarabah; istisna and forward lease (ijarah mausufah fi al dhimmah) or istisna and wakalah; and involvement in real supply chain for some calculated risk but with strong credit enhancement are the proposed strategies of re-inforcement of real economic activities in Islamic finance,- he said. 

According to Ernst & Young's World Takaful Report 2012, 'The Takaful industry continued to show double digit growth in 2011 albeit at a relatively slower rate of 19 per cent as compared to previous years. 

Amongst key markets, Malaysia and UAE again achieved growth rates of over 24 per cent, whilst Saudi Arabia saw its gross contributions increase by $0.5b. 

The challenge was once again, maintaining growth with profitability in the current economic climate. There were positive developments in the GCC with more operators showing profitability than previous years. 

The Saudi cooperatives continued their growth performance yet still struggled in generating shareholder returns.

Overall, return on equity for the Takaful industry was lower than conventional counterparts, both in the GCC as well as in Malaysia. However, a significant contributing factor to this was the lower investment returns for the industry relative to returns yielded by conventional insurers. 

The industry has now obtained significant market share versus conventional insurance in most GCC countries as well as South East Asian markets. There are a number of drivers behind this growth but one that is becoming increasingly important is regulatory support through appropriate amendments in legislature to provide a level playing field with conventional insurance companies.

(Times Of Oman / 08 Nov 2012)


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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com