National Takaful Company PSC - Watania has marked a milestone in its smooth establishment and brisk Initial Public Offering (IPO). Its stakeholders will benefit from the tailored designed services and experiences the firm can now provide.
“The solid foundation positions Watania in markets where we want to grow. We can now build on our platform and service our current and future clients with specialty expertise, latest technological innovations and tailor-made Takaful solutions and services,” says Oussama A. Kaissi, Chief Executive Officer of Watania. Kaissi strongly believes that Watania will vigorously pursue new opportunities and new ventures. Takaful gross contributions in the UAE are projected to grow at a CAGR of 30 per cent between 2010 and 2014 outpacing the growth in the overall insurance sector (CAGR of 17 per cent) during the same period.
Oussama A. Kaissi is one of the pioneers of Islamic insurance having 25 years of insurance experience in both the private and public sectors in the United States and in the MENA region. His many successful projects include establishing Islamic insurance companies and reengineering conventional insurance companies. By establishing Watania, Kaissi has recorded another added value to the Takaful industry. This entails broadening product offerings to higher value-added propositions.
BL: How was Watania’s operating performance for the year 2011?
Kaissi: 2011 marked the year in which we have witnessed the launch of the company. National Takaful Company is the newest edition to the insurance industry in the UAE, it is the latest Takaful operator to be launched and we have started underwriting risks on the 14th of November 2011, and the official launch was on the 1st of January 2012. This year on the operational side, we had little activities on the underwriting side, but the milestone was in the establishment of the company and listing the company in the Abu Dhabi Stock Exchange (ADX) which coincided also on the 14th of November 2011; the company in 2011 has finalized its robust IT infrastructure, hired the core technical team, finalized the ReTakaful programmes and devised a range of innovative solutions and services. Accordingly, we are geared up for a challenging but exciting start in 2012.
BL: How many branches does Watania have in the UAE?
Kaissi: So far, we are operating from our head offices based in the capital of the UAE Abu Dhabi and the plan is to open within the second quarter of this year a branch in Dubai and a branch in Al Ain. The second half of the year will witness the opening of a third branch to cover the main cities in the Emirates.
BL: What’s the number of your staff?
Kaissi: Currently Watania has 22 employees. As the business needs expands, we will recruit the right talents to join the current team.
BL: Are you planning to go beyond the borders of UAE?
Kaissi: In the short terms, we have no plans for expansion beyond the UAE border. During the first year of operations the company will consolidate its efforts on the local market for all the business transactions; the local and regional economic situation and the prevailing political conditions are not promising to expand across borders, nevertheless the feasibility study of the company has taken the expansion dimension into consideration and definitely we will study any opportunity that present itself and every opportunity will be dealt with on its own merit.
BL: Who are the owners of Watania?
Kaissi: The founding Shareholders of National Takaful Company – Watania are Abu Dhabi National Islamic Finance (Islamic Arm of NBAD), Abu Dhabi National Insurance Company (ADNIC), Abu Dhabi National Energy Company (Taqa) and Al Dar Properties. The founders as per local regulations have subscribed initially to 45% of the total share capital of AED 150 million, the company went into an IPO back in June 2011 where we have also secured reputable partners and they are mainly Ajman Bank and Qatar First Investment Bank as well as local groups. These aforementioned shareholders own close to 83% of the stocks of the company and the rest is held by other investors.
BL: How do you see the end results for the year 2012? Are you optimistic?
Kaissi: To say the least, 2012 will prove to be extremely challenging. This is not the first company, I establish, I established two companies prior to Watania, but they were established under more prosperous economic conditions than where we are today witnessing. The feasibility study and the business plan of the company calls on being very vigilant when it comes to the selection and management of risk. Consequently, we are not driven by the top line and the underwriting revenues; we are looking at the bottom line and how much return on equity (ROE) we can secure for the shareholders and surplus we can distribute to the policy holders. As such, we are very careful in addressing the market and we are being very selective in respect of the risks we are underwriting. Even though we are being very vigilant, the margins that we are seeing in the market are extremely low and depressed and that constitute a risk for the whole industry as such. At market level, losses will accumulate due to these underwriting practices and we will witness a severe market correction within the next 4 to 5 years.
BL: What’s the solution to this problem? Do you think that the government should intervene and introduce new regulations?
Kaissi: Absolutely Not, the government should never interfere; regulators cannot risk setting prices for the market because if they set the prices too high then the policyholders will be at a disadvantage and adversely effected financially and if they set the prices too low, then the Insurance and Takaful companies risk losing money and they will blame the regulator for their misfortune; this is not the job of a regulator nor the government, we are operating in a free market. I think this issue has to be resolved and dealt with at the level of individual companies and specifically via directives issued by the board of directors. The boards acting within the guidelines of the laws and corporate governance have to put in place and enforce strict control measures on the managements to deliver the proper return to the shareholders. If we are to be accountable as managements, we will see the beginning of a correction in the market, and that correction cannot happen overnight, the rates and conditions prevailing have become extremely low due to recent and current underwriting practices and it will take several years to achieve some level of technical rating and underwriting practices, but again I think it is a personal initiative in every company where we have to make sure in the absence of regulations in some markets that every management has to be responsible to the shareholders and the policyholders in the case of the Takaful operators and deliver the required financial returns. Once we act upon that premise, it will reflect positively on the market as a whole, and will help curb the free fall in the level of technicality.
BL: What’s the percentage of growth of the takaful industry in our region?
Kaissi: The takaful industry is still growing at double digits, some studies - and there are many - put the Takaful year to year growth in the premium contributions around 18% compared to 8% for the conventional companies. That does not necessarily means there is growth and the industry is healthy, it is a true reflection of a new industry that still has a growth opportunity and horizon. We are not seeing growth in the overall portfolios for specific companies in the UAE, which means the business, is being shifted from other companies; nevertheless there still are growth opportunities in our markets. We are sure if the political situation eases up in the region then we will see expenditures to be led once again by the local governments and followed by the private enterprises, we will see a growth and hopefully coupled with a turn-around in the pricing practices and strategies that we are seeing in the market today.
Takaful gross contributions in the UAE are projected to grow at a CAGR of 30 per cent between 2010 and 2014 outpacing the growth in the overall insurance sector (CAGR of 17 per cent) during the same period.
BL: What are the global challenges for the Takaful industry in regards to regulations and underwriting?
Kaissi: The Takaful industry has progressed in the proper way and has seen lots of advancement in the way we are defining Takaful as a principle and practice. Scholars and practitioners have defined the models, the financial principals and boundaries for the overall industry.
Today, Takaful is at a critical phase of evolution, there is a huge conflict between the commercial side of Takaful and the ethical & social welfare side of Takaful. The commercial part of Takaful calls on growth, securing market share and profitability, it calls in part to issues dealing with Shareholders welfare, whilst the ethical & social welfare calls on social responsibility, cooperation among policyholders, ethics and social welfare, It deals with everything that has to give back to the community and policyholders. Some regulators have engaged these issues, in the UAE it is interesting to see that there are more laws and regulations concerning Takaful and we are being consulted by the regulators about drafts of new laws and regulations, but I still say that there is a lack of understanding of what Takaful is about from the part of the regulator in order for them to bring about proper regulations. Takaful is not a complex concept, it is insurance at the end, but because there are multiple stakeholders within a defined entity, it makes it a bit more different to regulate than the conventional companies. The regulators should engage Shariah scholars to put in place a platform where we can build upon and bring about a healthier Takaful industry.
It is understandable to hear the criticism that the takaful operators are not being any different from their conventional counterparts. We have to have a different proposition, a different product offering and a different approach to our niche markets. We are entering the market as any conventional company under the umbrella of the Sharia and we have not been able to deliver more than this. There is a lot still to be done for the Takaful industry, and we hope that if not being done at the level of markets, we can do it at the level of individual companies whereby we can still work together to come up with a system that will be viable for the future.
BL: Do you think that the Takaful industry should have standardized regulations?
Kaissi: There are two points here: being Regulation and Sharia. I believe in diversity when it comes to the various models that are being followed in different countries and I think it is a definite positive attribute. We still have to integrate the Shariah principles with the regulations, when the latest Takaful regulations were issued in the UAE we called for one central Shariah supervisory committee being under the umbrella of the insurance authority to bring about regulations that are embedded within the Shariah principles to regulate the Takaful operators; this has not been adopted as of yet. There are not unified regulations and fatwas; when Shariah scholars give their verdicts and opinions on insurance matters there should be a central authority within a jurisdiction to enforce them under one umbrella. We call on the insurance authority in the UAE to establish the central Shariah Supervisory Board under its own umbrella, in order for them to work together and bring about regulations that are embedded within the Shariah principles.
BL: What are your comments on the ReTakaful companies that are established in the region? Do we have really efficient ReTakaful companies (because it is said that most ReTakaful business is going back to the conventional reinsurers)?
Kaissi: That is partially true. You have to make a separation between the international Retakaful operators which usually are either fully capitalized entities or Reinsurance entities who opened Retakaful windows. On the other hand, we have local and regional operators who opened in the region too and operate in jurisdictions such as the DIFC. I think we have enough capacity through these companies now and definitely they have come a long way, but the prevailing issue being they do not have the appetite to lead large risks or treaty programmes. Also this applies to specialty risk programmes for takaful companies like syndications in the London market. There is still some missing links in the Retakaful industry to enable it to play its intended role in the growth of the Takaful. The Retakaful industry has come a long way and we should do more to support the Retakaful operators because we have to complete the operational chain between Takaful and Retakaful in order to bring about a whole industry that is sustainable.
BL: How did you find this Takaful insurance conference?
Kaissi: I have always been a supporter of the Global Takaful Conference ever since its beginnings. It is a great gathering to meet subject matter experts and exchange ideas. There are a lot of interesting discussions that are happening at this conference and we hope that something positive will transpire as we shall continue building upon our industry successes for the years to come.
