Takaful Beyond the Tipping Point The industry's dilemma in moving forward 1 Ajmal Bhatty, Chief Executive Officer, Takaful ajmalbhatty@tm-mena.com
1 July 2009, Takaful Summit, London
.... in the beginning 2
From perception to realization From ridicule (of the System) to respect
1 July 2009, Takaful Summit, London
.... r eaching the tipping point Cr eating N iche, Gaining M omentum T otal number : Co’s + w indow s: 181
Extraordinary level of activity since 2003 Position as at January 2008
1 July 2009, Takaful Summit, London
.... building the block s: Spr ead of Tak aful 4
21 countries And counting…..
Con t r ibu t ion in 2 0 0 6 ( US$ m n ) Mor e t han 100 m n 50 m n t o 100 m n 10 m n t o 50 m n Less t han 10 m n
> 100 mn
50 – 100 mn
10 – 50 mn
< 10 mn
Sudan Malaysia Saudi Arabia Iran
Indonesia Qatar UAE Kuwait
Brunei Thailand Bahrain Jordan
Mauritania Egypt Senegal Pakistan Bangladesh
Sri Lanka Singapore Yemen Lebanon UK
.... at the tipping point 5
1. Resilience of Islamic Finance 2. Takaful growth outstripping conventional 3. But still there are several untapped markets 4. Huge potential in Family takaful 5. Huge possibilities in micro-takaful 6. ‘Mega Fund Flows’ .. Race to become global Islamic financial hub … Bahrain, Kuala Lumpur, London, Singapore, Hong Kong, Riyadh (?), Qatar (?)
1 July 2009, Takaful Summit, London
Potential Size of â&#x20AC;&#x2DC;Tak aful I ndustr yâ&#x20AC;&#x2122; 6 $7.4bn estimate for 2015 was made in 2001, see below, but Industry is already at this level in 2008
This is the lower estimate for takaful premiums
$14.5bn is the higher estimate. The highest estimate is in excess of USD30bn
http://w w w .islamicbank ing.com/aom/tak aful/ma_bhatti.php 1 July 2009, Takaful Summit, London
15 May 2009
â&#x20AC;Ś challenges beyond the tipping point 7
1. Takaful Industry: We still have difficulty defining ourselves? 2. Takafulâ&#x20AC;&#x2122;s Future: Will it always remain a NICHE? 3. Business Mix: Will we ever be big ticket players? 4. Takaful Ethics: Shariah credible? SRI aligned? 5. Spreading Awareness: Correctly, Effectively
1 July 2009, Takaful Summit, London
Tak aful, Co-oper ative, I slamic I nsur anceâ&#x20AC;Ś.. So many names? D o all these mean difficulty defining ourselves? the same? 8 Consolidated
We need
Industry data is
authentic and
hard to find?
credible industry source to provide vital statistics of the industry?
A B T ak aful I ndustr y ?
Exclude I r an ?
1 July 2009, Takaful Summit, London
D epending on our definition, we ar e as big as $1.4bn / $2.3bn / $6.5bn in 2007 9
Bahr ain I ndonesia I r an M alaysia Saudi Sudan U AE Other s
T ak aful I nsur ance Publicatio n Publication 2006 2007 34 42 80 104 3,685 3,505 545 526 831 909 203 232 65 83 249 241
T otal 5,692 I nsur ance Publication M alaysia Conventional Insurance Takaful Total Another Report 2007
A
B
5,642 2007 8824 526 9350 9469
A-B A
Global T ak aful Size, 2007 Insurance Publication Takaful excl Iran, KSA conv Takaful Estimates incl Iran
1 July 2009, Takaful Summit, London
U SD m 1.4 2.3 6.5
E R E H T TE Challenges for Tak aful I ndustr y TH IT R T I P 10 LE S D o-ables (battles of mind)
D ifficult (battles of hear t)
To be Shariah Compliant in
To be Shariah Credible in being true
developing products, funds and managing operations Setting up new takaful companies with large capital Building state of the Art systems Education and Training Competing for business
to its Ethics Converting ‘conventionals’ to takaful Using principles of Zarurah only when needed Application of education and training to increase takaful awareness and consumer acceptability Mass application of takaful in all OIC countries
1 July 2009, Takaful Summit, London
11
Zar ur ah & Ethics of SRI
Weak Takaful Ethics
Battles of Heart
Takaful companies in different parts of the
world still reinsure conventionally or have conventional reinsurers as leaders of their reinsurance programs. Why?
FAU LT L I N ES
Conventional Mind sets
Short cuts apply to Shariah screening of assets
Very busy Shariah
as well. Why?
Scholars
Too few Shariah
‘Ethical’ is the very theme of Shariah criteria,
Scholars
Lack of Shariah standards at Regulatory level
Biodiversity challenged
like the ethical use of money channeled into businesses that are good socially and environmentally. And yet we don’t market ourselves as Ethical besides being Islamic. Why?
Human Rights Abused
Greenhouse gas emissions
Destroying flora and fauna
12 M ak ing I slamic F inancial System a big and power ful ethical system
Battles of H ear t Smaller Univer se of I slamic F unds Smaller Univer se of Tak aful Companies And yet, lar ge Univer se of people w ho want Ethical Pr oducts
A: TR: AA
SR: A+
B: TR :AA
SR: C -
C: TR: B
SR: A+
Shariah scholars need to be more
forceful on the use and misuse of the principles of Zarurah. International Shariah Rating in
addition to technical rating would result in:
Better consumer confidence Better promotion of Shariah ethics Better Corporate Governance in enforcing compliance 1 July 2009, Takaful Summit, London
13 Lack of takaful awareness
Battles of Heart
CEO’s of some Takaful companies are still stating in their Annual Reports that there is Lack of Awareness about Takaful
But when you look into what they have done to alleviate this, there is not much to see
For how long will this continue?
Consumer Acceptability and Tak aful Ethics Takaful awareness is patchy, except in
Sudan, Malaysia and GCC to some extent
The word ‘takaful’ is not known to many
people
Takaful is sold as ‘insurance’ and not for
its ‘concept’ of ethics and fairness, for its goodness for society and environment
A dilemma for conventional Group with
takaful companies is how to promote takaful as ethical in the same market where it operates conventional business, when by implication it may become unethical.
1 July 2009, Takaful Summit, London
14 U N ’s M I L L EN N I U M D EVEL OPM EN T GOAL S 2000-2015 1.H alve the number of people w ith income <$1 per day 2.H alve number of people suffer ing fr om hunger 3.Ensur e childr en ar e able to complete pr imar y schooling 4.Ensur e equal schooling for gir ls 5.R educe by 2/3 rd the under -5 mor tality r ate
Alleviating financial conditions of poor
masses in many countries
More than 4 bn people live on less than $2 per day Micro-credit and micro-takaful can be
part of the UN’s Millennium Development Goals
15 M I CRO CRED I T / M I CRO TAKAF U L
LOW INCOME DILLEMA
Loss of property due to theft or fire Loss from natural and man made disasters
POVERTY TAKAF U L excludes high r isk per sons
Agricultural losses
VULNERABILITY
Accidental death
disability
M I CRO-TAKAF U L includes high r isk per sons
illnesses
1.Small benefit packages 2.Spreading cost over time to correspond with household cashflow & supplement with Zakat and Govt. subsidies
1 July 2009, Takaful Summit, London
Tak aful D ilemma R ecapping 16
M acr o Challenges 1. Cr edibility of Vital I ndustr y
Statistics 2. Shar iah cr edibility for social
goodness and avoiding dilution of pr inciples 3. Need a par adigm shift fr om small
is beautiful to big is power ful (and beautiful too) â&#x20AC;&#x201C; enlar ging the size of I slamic F inancial System, facilitating micr o tak aful.
Global Challenges 1. Concer ted effor t tow ar ds r egulator y
standar dization 2. N eed a) good mechanism for SRI
compliance, b) r edefining Zar ur ah pr inciples, c) Univer sally acceptable Shar iah R ating 3. L obby I D B and OI C mor e effectively for
suppor ting gr ow th and expansion of tak aful. I t is not just their r esponsibility but their bur den to deliver, especially in micr o tak aful.
1 July 2009, Takaful Summit, London
Takaful Beyond the Tipping Point The industry's dilemma in moving forward 17
Ajmal Bhatty, Chief Executive Officer, Takaful ajmalbhatty@tm-mena.com
1 July 2009, Takaful Summit, London