Emerging Issues & Challenges in Retakaful Safder Jaffer FIA Swiss Reinsurance Company Ltd Z端rich
Safder Jaffer 30 June 2009
Agenda
Slide 2
Key Issues
Challenges
Swiss Re Retakaful
Q&A
Agenda
Slide 3
Key Issues
Challenges
Swiss Re Retakaful
Q&A
Key Issues
Slide 4
Plurality of Models
Retrocession & Shariah Dilligence
Large Risks & Retakaful Capacity
One Large Pool vs Several Small Pools
Surplus distribution
Inforce Block Takeover
Diversity within Islam Share of Muslims as a % of total population
Slide 5
Sources: US State Department, CIA world fact book, Swiss Re Economic Research & Consulting: Gfk GeoMarketing
Plurality within Islam
Slide 6
73 Sects
5 Schools of thought
Range of Shariah Scholars
South Asia vs Middle East
Regulatory Framework
Plurality of Models
Slide 7
Mudharaba vs Surpluses
Wakalah vs Incentive fees
Wakalah –Waqf vs PRE
Regulatory Regimes
Retrocession & Shariah Dilligence
Slide 8
Transparency of retakaful contract
Retakaful “Branding”
Shariah Drill Down
Large Risks & Retakaful Capacity
Slide 9
Large Risks
low-frequency, high-severity & risk transfer?
surplus distribution & volatility
Halal vs Haram Risk?
One Large Pool vs Several Small Pools
Slide 10
Heterogeneity of Risk
Currency Risk
Geographical Risk
Family Takaful – Individual vs Group Life vs Credit Life
Reinsurance Structures – OT, RP, NLP
P&C – Short vs Long Tail Pools
Surplus Distribution
Slide 11
Incentive fee
100% less wakala fees
Contingency/Stabilisation Reserves
Nil Surplus ?
Cross-subsidy between generation of participants
Recouping Qard
Dissolution
Inforce Block Takeover
Slide 12
EV of takaful business?
From Haram to Halal?
Who pays the difference?
Can Qard be used to pay the EV?
Cross-Subsidy between “Old” and “New” Participants
Agenda
Slide 13
Key Issues
Challanges
Swiss Re Retakaful
Q&A
Challenges
Slide 14
Lack of Standardisation
Shariah, Technical & Regulatory Balance
Retrotakaful?
Credibility
Agenda
Slide 15
Key Issues
Challenges
Swiss Re Retakaful
Q&A
Swiss Re’s Retakaful Solution
Slide 16
Set up individual and group life reinsurance pool
100% of the surplus generated in the pool is distributed to participants on an annual basis
Swiss Re charges a fee
Investments are shariah compliant
Swiss Re ensures that best practice risk control measures are implemented by all Takaful companies participating in the pool
KL Branch Developments
Wakala/Waqf Model Swiss Re
Fund Participants
Conventional Pot Investment Income Profit Sharing Basis
Contributions (unconditional
Claims/surplus distributions
donation)
Wakalah Fees
Waqf Fund:
Retakaful Operator: (Swiss Re) Slide 17
Initial Donation Qard al-Hasan (if required)
Mutual Pool for collection of contributions, payment of claims & setting of technical and stabilisation reserves
Wakalah with Waqf – Benefits
Slide 18
Relationship of participant and operator is with the fund
Donation is unconditional (gharar removed)
Operator is a mudharib of the investments of waqf
Contingency Reserve Fund may be set up
Cross Subsidy of various generations of policyholders is permissible
Surplus distribution can be predefined on a variety of criteria with the primary condition that the operator does not get any share as a wakeel to the waqf fund.
Bank Negara Issues
Slide 19
New in Malaysia
Concept of Tabarru?
Policyholder Protection Mechanism
How independent is “Waqf”
Thank You and Questions
Slide 20