International Takaful Summit 1 and 2 July 2009 London Dr. A.Rahman Tolefat, CEO of Allianz Takaful
Š Allianz MENA Holding 2008
Challanges Facing Takaful Industry
Agenda Outline
Overview about Takaful Industry challenges Regulatory Challenges Assets Management Challenges Product OverviewChallenges about Takaful market Š Allianz MENA Holding 2008
Distribution challenges
Industry’s Growth and Challenges
Growth of Takaful
Economic Growth
Islamic Assets Growth
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Demographic Growth
Critical Factors Human Rescores
Distribution
ReTakaful
Asset Management
Regulatory
Product Development
Challenges
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Agenda Outline
Overview about Takaful Industry challenges Regulatory Challenges Assets Management Challenges Product OverviewChallenges about Takaful market Š Allianz MENA Holding 2008
Distribution challenges
Contributions (premiums) Wakalah (Agency) Fee
Participants Fund
Shareholders Fund
Investment Profit Share
ReTakaful
Investment
Claims Surplus Share
Operating Expenses
Profit
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Shareholders fund investment Reserves Operating Expenses Surplus/Deficit Profit Dividends
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Corporate Governance Who is protecting the interests of Participants?
• There are two parties:
– Regulator- the current regulations & supervision. (Corporate Governance and Business Conduct)
– Shari’ah Board- from the ethical prospective
_ The regulation needs to be adapted to cater for unique characteristics of Takaful.
• Shari’ah Board: _ The shari’ah Board does not have the right competencies to perform this job. – It is not stated in the Shari’ah Board Mandate.
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• Regulator:
Elements of conflict of Interests (1/2) • The shareholders are in favour to charge higher fee.
• Distribute profit to participants before take reserves. • Charge incentive fee before taking reserves or distributing
• The deficit incurs in Takaful fund could be resulted from mismanagement or misconduct by the operator.
• The company may place shareholders fund in better investment opportunities vis-à-vis Takaful funds
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anything to participants
Elements of conflict of Interests (2/2) • The competition could lead the operator to pass the risk to Takaful pool without proper pricing.
• The amount that goes to risk pool and the remaining amount © Allianz MENA Holding 2008
which goes to saving pool.
Deficit Debate Deficit Independent Parties
Unaffordable Deficit
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Mismanagement & Miscond
Qarad Hassan
Qarad Hassan from shareholders fund
Liable to cover deficit
• Distribute profit to participants before taking reserves. • Charge incentive fee before taking reserves or distributing anything to participants
Reserves Takaful 50%
Surplus
50%
Incentive Fee
Distributed
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Fund
Investment with Related Parties Effect on Individual basis Group RB:
Difference between actual and desired
- Less than 10% - 10% -50% - Over 51%
Both are confirmed the control of related parties
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Statistical
Related parties Influence on Investment
RPI Ownerhi p Groups and Parti ci pants Funds 35
Millions
30 25 20 15 10 5 0 SHF-De pos its
SHF-Re al Es tate LT 10
SHF-Equitie s Inve s tme nts 10-50
SHF-Mutual funds /unit trus ts
51+
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RPI Ownerhip Groups and Shareholders Funds 60
Millions
50 40 30 20 10 0 SHF-Deposits
SHF-Real Estate LT 10
SHF-Equitie s Investments 10-50
51+
SHF-Mutual funds/unit trusts
Solvency Margin and Shareholders Fund There are two views regarding capital of Takaful companies: Lender of Last resort
How the regulators ensure that there are liquid assets to support Takaful fund all the times?
Takaful
Shareholders
Fund
Fund
Deficit
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Just to meet the Legal Requirements
Solvency Margin & Capital Adequacy Shareholders Fund
Reponses
Regulation of Shareholders Fund
Detail
1
Yes with same policyholders limits
2
Yes with flexiable limits
72%
20% 3
Source:
No need to regulate fund
PHD study form the presenter
8% Yes with the same policyholders limits
Yes with fixable limits
No
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Does the shareholders fund need to be regulated ?
Takaful
Shareholders
Fund
Fund
Takaful
Shareholders
Fund
Fund
Solvency Actual
Physical Transfer?!
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Deficit
Agenda Outline
Overview about Takaful Industry challenges Regulatory Challenges Assets Management Challenges Product OverviewChallenges about Takaful market Š Allianz MENA Holding 2008
Distribution challenges
Assets Management Challenges Short Term
Long Term
…The way forward
Lack of Short term investment : Currently almost all Takaful companies have invested their short term assets in Investment Accounts with Islamic Banks/Windows. •Low income compared to conventional Insurers. •Where short sukuk exists, there’s a lack of tradability .
•Highly rated sukuk funds.
Lack of longer term sukuk:
• Governments need to allocate certain part of their issuance of sukuk to Takaful industry.
•Only medium term assets available from 5 – 7 years. •No possibility that the GCC government will issue long term sukuk. •Lack of good rated corporate sukuk. Difficult to acquire medium term sukuk •Government sukuk is very expensive as the banks have the ability to acquire these sukuk from primary market.
•Government to issue more short term sukuk and tradable sukuk. i,e, sukuk Al-Salam structure is not convenience.
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Asset Management challenges …
•The rated Corporate needs to be given incentives to issue more sukuk as medium for financing for both medium and long term sukuk
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GOVERNMENT SUKUK GCC 16% 13%
0%
0%
Shareholders Fund
Actual
0%
General Fund
Family Fund
Malaysia 27% 19%
0%
18%
0%
Shareholders Fund Source:
20%
General Fund
PHD study form the presenter
Family Fund
Desired
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9%
CORPORATE SUKUK GCC 20%
18% 11% 0%
Shareholders Fund
0%
General Fund
Family Fund 40%
34%
30%
Malaysia
32%
18% 12%
Shareholders Fund Source:
General Fund
PHD study form the presenter
Family Fund
Desired
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0%
Actual
ONE YEAR OR LESS INSTRUMENTS
52%
GCC
33% 21% 15%
Actual Desired
General Fund
49%
Malaysia 32%
Shareholders Fund Source:
27%
23%
General Fund
PHD study form the presenter
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Shareholders Fund
Agenda Outline Overview about Takaful Industry challenges Regulatory Challenges Assets Management Challenges OverviewChallenges about Takaful market Product Š Allianz MENA Holding 2008
Distribution challenges
Product Challenges
Islamic annuity
•Difficult to design due to lack of long term sukuk. •Excellent Demand on this product.
Group pension Scheme
•No customization. •Asset management challenges. •One of the most growing market.
Product segmentation
•Lack of product segmentation in the market.
… The Way Forward Allianz Takaful as a leading company is working to provide this solution and plan to offer this product in the market by next year. …
Segmentation is key advantage of Allianz Takaful to cater for customer requirements. © Allianz MENA Holding 2008
Product Development challenges …
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Segmentation Approach Protection Investment
Child Education Plan with Parental Takaful Benefits
High
High
Islamic Retirement Solutions
Low
High
Mass Market / Telesales Products
High
Low
Ladies Products
High
High
Youth Products
High
High
High / Low
High
High Net Worth Individuals Products
Segmentation is one of the key elements for Takaful Companies to succeed
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Product Segments
Customer Services Innovation • Introduce added value services for each product
• Each of the process in the company linked to target service date for the customers.
• Regular Check on customer Satisfaction. • Customer Focus initiative “CFI” program • Ideas to Success “I2S”.
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• KPI for each process.
Customer Focus Initiative
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“A promise is a promise..”
The Promise – A promise is a promise The Delivery – Delivering in Moments of Truths 25
Agenda Outline
Overview about Takaful Industry challenges Regulatory Challenges Assets Management Challenges OverviewChallenges about Takaful market Product Š Allianz MENA Holding 2008
Distribution challenges
The Innovation in Distribution Channels leads Takaful industry for significant growth “Creating Real partnership with promoters and Distributors”
1
Educate Locally incorporated bank and give them full support
2
Increase number of promoters.
3
How to delight them!
Real Partnership Creating real partnership with Distributors
Facts & Figures Fiscal Year 2008 27
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Challenges
The Innovation in Distribution Channels leads Takaful industry for significant growth Direct Sales Force
• Powerful Software. • Products to cater for all the segments in the bank.
Distribution Channels (Focus on Retail)
• Agency model vs.
others models • Training. • Commission structure. • Recruitment and retention. • Takaful consultant
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Bank Takaful
Promoters • Identify other
distribution channels with large customer base. • Customize solutions for these channels
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“Creating Real Partnership…”
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Creating real partnerships with distributors. Increase number of clients and prompters- Delight them!
We play together or we don’t 29
We are Allianz
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Create synergetic relationships with our clients, employees and distributors backed by exceptional security and integrity!
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Thank you