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Emerging markets to drive takaful’s growth
China, India and Central Asia are possible frontier markets for takaful to expand in Asia, while the established markets of Malaysia and Indonesia have yet to be fully penetrated, according to speakers at the 7th Asia Takaful Conference in Singapore
"As the emerging economies are the ones housing takaful growth, there are definitely many opportunities for takaful to grow," said Dr Saleh Malaikah, Chairman of the Board, Best Re. He said that though the recent world economic situation has affected takaful growth, it is currently in the tail end and that this year, emerging markets will contribute 41% of the global GDP – a phenomenon that bodes well for takaful.
He noted that there has been annual double-digit growth in takaful, which has resulted in a six-fold increase over the last seven years. Mr Chakib Abouzaid, Vice Chairman of Global Takaful Group, identified family takaful and personal lines as the future key points of growth globally for takaful.
Mr Hassan Scott Odierno, Partner at Actuarial Partners Malaysia, said that the takaful business may have to adapt to local preferences so long as they remain Shariah-compliant. “In some countries, it may not be possible to go with the name takaful due to various local factors so you may have to come up with a different term for it. What’s important here is substance over form,” he said.
Mr Wan Saifulrizal, Associate Director, Risk Consulting & Software at Towers Watson, touched upon the need for takaful companies to have adequate risk management in place to safeguard the welfare of their participants. One of the key components is for management to identify its risk appetite clearly. "When you set clear risk appetites, you then provide guidance for business decisions to be made, and then you can decide on how much retakaful to participate in," he said. "It should not be done the other way around."
In a panel discussion on retakaful, Mr Tobias Frenz, CEO of Munich Re Retakaful Malaysia, raised the issue of the need for uniform standards in takaful globally as most retakaful operators write business internationally. Even certain models are not suitable for all lines of business, he added, citing the Wakala model as not appropriate for non-proportional lines. He added that a review of certain takaful and retakaful models may be necessary to better align the interest of various stakeholders. Mr Ezamshah Ismail from the International Centre for Education in Islamic Finance (INCEIF), Malaysia, said that the spiritual aspect and the secular aspect of takaful cannot be separated. He recommended that penalties be put in place for organisations that do not meet Shariah requirements and advocated the concept of Total Quality Management in order to achieve Shariah-based philosophy at all levels of the organisation.
Meanwhile, Mr Ustaz Haron Hassan Akhtar, Member Islamic Advisory Board of HSBC Insurance (Singapore), said Shariah boards should not just be involved in advising on products, but should also be engaged in the marketing aspects of takaful products to better reach more consumers.
Organised by Asia Insurance Review, the conference attracted more than 120 delegates from 18 countries, and was sponsored by Best Re and Towers Watson.