Hussein Mohammed Al Meeza, Managing Director and Chief Executive Officer of Dubai Islamic Insurance and Reinsurance Company (AMAN) was the first to look seriously at the role of Takaful in the United Arab Emirates and how far it helps consumers, governments and global economies.
He called for Takaful reform in order to enhance the Takaful regulations and protect both consumers and companies. When Al Meeza assumed the role of Managing Director of AMAN in 2002, he says he was immediately struck by the enormous gap between what the industry was able to deliver to its customers and what those customers were increasingly used to receive from the other conventional entities that they do business with. He came up with elegant solution and products that attracted customers from all religions. He toured the world to gather the best needed information and spread the knowledge of Takaful in his country and the Arab world. In no time, he turned AMAN into a profitable financial organization. His countless achievements in Islamic Finance built one high-profile success story from the Arab World.
BL: The Arab spring has been a blessing on the insurance industry because people are insuring more and more, they want now to insure against riot, strikes, civil war or commotion etc, what are your comments?
Al Meeza: This is a more optimistic outlook among most industry executives. The Arab world has been totally changed. I’m going to give you an example from our region where lots of things have been changed and lots of things have been improved and consequently everybody wants to protect himself from certain issues surrounding us. Many consumers purchase this additional liability coverage to protect themselves from this specific liability. That gives us a confidence that the insurance sector is moving forward and I think even its growth is sustainable for both Takaful and non-Takaful. Globally, Takaful contributions are expected to record an annual growth of between 15% - 20%, with the global Takaful market size estimated to reach USD 7 billion by 2015. There is a shortage of Retakaful capacity and this has left Takaful operators to reinsure on a conventional basis, contrary to the customer’s preference of seeking cover on Islamic principles.
BL: Experts say that Takaful is in high demand, what are your remarks?
Al Meeza: Definitely, Takaful insurance is in big demand especially in the Arab world. There is therefore diversification into new distribution channels and increased public awareness of the benefits of insurance and Takaful as a result of intensified financial education initiatives. As I mentioned earlier, Takaful contributions are expected to record an annual growth of between 15%- 20%, especially that 1.5 billion Muslims populate the world today. The growth of Takaful has been over the last few years significant, it has to be acknowledged that it is a market in its infancy and thus small compared to the global insurance market – total Takaful contributions make up less than 1‰ of the global insurance premiums. But the potential for Takaful is enormous and lies first and foremost in the Muslim world, which is by and large underinsured. The overall structure of a Takaful set up comprises of three parties, participants (policyholders), operator and Shariah board.
BL: Saudi Arabia plans to build 16 nuclear power reactors by 2030 while neighboring United Arab Emirates in December 2009 awarded a South Korean consortium the contract to build four nuclear power plants worth $20.4 billion for peaceful purposes. Will there be an impact on the insurance industry? Is the region ready to tackle this business?
Al Meeza: The impact is vast. Actually, to tackle those types of businesses is not an easy task but I think what happened in Japan alerted everybody to be very cautious. Certainly, there are national companies in the region that can tackle that kind of business in coordination with the leaders in the insurance and reinsurance because the industry is linked today either directly or indirectly..
BL: Hussein Al Meeza, as an expert in the insurance and the banking sectors especially that you led Al Salam Bank and AMAN throughout the MENA region, what are your comments on the present situation in the entire Arab region?
Al Meeza: Everything is connected together, I think politics is the main issue if there is stable political environment definitely it will reflect positively on the economy and all the related financial sectors and one of these sectors is the insurance sector. Lack of political stability accounts for many of the development problems in the economy. We are hoping that peace will prevail the entire Arab world. Beyond doubt, the Arab world since the beginning of 2011 is facing a lot of internal and external issues and political conflicts. I am looking forward to see things settling down because the instability of any region will impact all the sectors.
BL: Would this instability take a long time?
Al Meeza: It depends; if we talk according to what we are seeing, we are not politicians but we are definitely part of this game. As I mentioned earlier, economy will be affected directly or indirectly by politics. For example, the situation of Tunisia and what is happening in Egypt are a good proof but we are hoping that after the elections things will improve. Also, things are very complicated in Syria and we are hoping that the situation there will not reflect negatively on the neighboring countries like what is now happening in Lebanon but I think people are looking for peace and security. I believe enough is enough because everybody is simply fed up to see the Arab world in chaos and hopefully people will use their rational, but I think Tunisia is going in the right direction and also Egypt will prosper after the election of the president. At the end, we are not a copy of each other, but we have many things in common.
BL: Are there any expansion plans for AMAN and Al Salam Bank?
Al Meeza: Considering the present situation regionally and in the Arab world, all expansion plans are on hold. We just postponed our plans in Syria and Egypt, for the time being all the expansion plans are suspended. The present regional situation is unlikely to encourage any expansion plans.
Hopefully, when things settle down then there will be a lot of business opportunities for all the sectors to grow.
BL: What about the news of Al Salam Bank in Sudan and Algeria and the news AMAN?
Al Meeza: Al Salam Bank - Sudan is listed on the Khartoum Stock Exchange and Dubai Financial Market (DFM), the bank has recorded a net profit of about AED 51 million and AMAN the largest Islamic insurance provider in the UAE is definitely listed in the Dubai Financial Market. Both Al Salam Bank and AMAN revealed good financial results for the first quarter. Unfortunately, last year AMAN reported slight losses but now we did a lot more homework and the first quarter shows very profitable result which is matching our plans. Also, Al Salam Bank-Algeria did a very good year and hopefully within two weeks we will hold our Annual General Meeting (AGM). Business is going on the right track; also we have a plan to expand in Algeria because Algeria is a big country as it is the second largest country in Africa. Size wise, it is the eleventh largest nation in the world with approximately 2381741 sq km. Al Salam Bank-Algeria is growing and we are opening more branches. Also, we are moving according to our plan though there are some difficulties in the world’s financial markets.
BL: What are the global challenges for Takaful and what are your recommendations?
Al Meeza: Competitive pressures and declining return on equity (ROE) will remain critical challenges for the global Takaful industry as more players enter the market. Unfortunately, the big challenge in Takaful is that we have a big number of companies and that is why we need the regulator to interfere and see closely this fact. I believe that UAE has over 62 insurance companies, 23 of which are locally owned, the UAE has the largest insurance sector in the region. We have 62 companies and we have to cope with each other. In addition, there is shortage in human resources expertise and Takaful still suffers from competition.
BL: How did Dubai reach this specific leading position among the Arab countries?
Al Meeza: Firstly, we thank God that we have great leaders starting from His Highness Shaikh Khalifa bin Zayed Al Nahyan, President of the United Arab Emirates and also His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai who work hard. I think everybody was expecting that Dubai will suffer a lot, definitely Dubai has been a very dynamic open city but unfortunately it has been impacted by various global issues. But Dubai is back in business and I think Dubai is fulfilling all the global requirements. Dubai is always in the lead and in our opinion, UAE is moving ahead with its plans. I am from UAE and especially from Dubai and I prefer to hear the world talk about our hard work and achievements. UAE is rated as the first among Arab countries and 19th in the world.
Our achievements came with hard work and we faced these challenges wisely. I am confident that the UAE is moving ahead, Dubai is unique and we are expecting a lot of activities in Dubai soon. Hopefully, we will see everybody happy in Dubai, the entire United Arab Emirates, the region and the Arab world.
