A cornerstone of the region is the pursuit of business amidst a peaceful environment. There’s no straight line to progress, and hardship always accompanies a season of hope and here comes the need for insurance cover.
This is how Younis Jamal Al Sayed thinks and that is why he is committed to actively contribute to the growth and development of the Takaful industry in accordance with Shari’a principles.
Younis Jamal Al Sayed is a leading pioneer in the insurance and reinsurance sector with a rich experience that exceeds 33 years during which he held various positions. A graduate of Kuwait University, he began his illustrious career with the Arab Insurance Group (ARIG) in 1982 and was responsible for underwriting operations of all aspects of aviation insurance regionally as well as in international markets. In 2001, he joined Dubai International Financial Centre (DIFC) as Managing Director and played a prominent role in establishing the infrastructure of insurance and reinsurance sector for DIFC. Being specialized in Islamic Insurance (Takaful) Younis joined Takaful International Company in 2003 as General Manager and was promoted to the position of Chief Executive in 2008.
Additionally, Younis is also the Chairman of Bahrain Insurance Association for the period 2011-2013.
BL: Unfortunately, in too many countries, calls for change have thus far been answered by violence. With the continuing wave of political unrest in pockets of the MENA region, the need for political violence cover is increasing and the insurance industry is forced to reinvent itself to meet this demand to keep itself relevant. Is this product demanded by the customers of Takaful International and how much is SRCC, Political Risks & Terrorism Insurance needed in the GCC and do you have new products?
Al Sayed: There are always new products, but a product is driven by the demand of the market because of what happened in the whole MENA area with regard to the political violence (RSMD) and act of terrorism • sabotage • malicious damage • riots, strikes or civil commotion. Simply, what happened in Egypt, Syria, Libya, and Yemen brought a demand for this kind of risk. But I cannot compare Bahrain to these countries because what happened in Bahrain is a summer cloud that passed by. So, this is the tax which the country is paying for having democracy. We have both the parliament and the government with a vision to have an open country and to listen to the citizens. We are very proud of that democracy, we can say whatever we want, and we can criticize freely. Hence, the un-success of Bahrain's Arab Spring confirms the wisdom of our leaders.
What happened is an incident that has already passed by, but it created a market and consequently there is demand on the motor and other products. The premium increased by 100% on the political risk plus 300% on the property and the other classes of business which reflected positively on the company’s balance sheet. Bahrain is safe, but sometimes the media exaggerates the news. With regard to business, there is a demand because people are scared and this is why it’s always good to have protection and buy this kind of insurance. This demand might last for another 2-3 years. Like what happened a few years ago, when the market recession started and companies started to question the credibility of some of the board members and top management, the demand on the Directors and Officers Liability Insurance (often called D&O) was high because a lot of directors bought this kind of product.
BL: IS security linked to capacity?
Al Sayed: In the past, we used to be under the umbrella of the Ministry of Commerce & Industry and we just got our license approved every year after paying the registration fee. Now, there is the umbrella of the Central Bank of Bahrain which is applying a very high standard which goes with solvency I. Solvency is the ability of a business to have enough assets to cover its liabilities. Solvency is often confused with liquidity, but it is not the same thing. Accordingly, there is a need for strengthening capacity and have corporate governance which will push the market to get organized. There is also capital adequacy, so if you are writing more business you need to increase your capital. In Bahrain, most companies have become increasingly aware of the advantages of being ethically rated. The market became more organized and in every insurance company there is a reinsurance security committee which looks at the rating and the ability of paying losses, they have their own criteria when they select to insure their business with reinsurers. They have to choose a rated company that has the ability to pay claims. I link, the reinsurance capacity with the quality of the reinsurance company. Nowadays, because of the competition in the whole GCC countries, big companies like Munich Re and Swiss Re pulled out of the market. Consequently, what is left is one company to handle a big load of business. So, they might enjoy increasing price on the reinsurance program. Consequently, most companies will suffer from an increase in the price because capacity started to become short. But on the other hand, we have the regional reinsurance companies or regional insurance capacity and therefore, people might not go for the 1st class and they might go for the 2nd class. They are all strong rated companies, but they will apply their own terms and conditions.
BL: How far are regional threats and security linked to capacity?
Al Sayed: The political security is very important but at least you need insurance. I mean you are talking only about a specific part of the insurance services which is political risk driven mainly by the international media. Once the media announces that there is revolution in Bahrain, the reinsurers worldwide put a red line and consider the country as unsafe area and so they increase the premium.
BL: Recently, A.M. Best published a report stating that GCC Takaful regulations lacks market growth. Younis, would you elaborate on this point?
Al Sayed: I respect A.M. Best rating agency, but sometimes if the rating of the country goes down, the whole insurance and reinsurance companies suffer and this is not fair because those companies are doing a good job, their balance sheet is very strong and they have no problem. What A.M. Best said might be right in certain countries, but with regard to Bahrain I know that they are working on a model which is going to be launched before the end of June. CBB already created a committee from takaful companies to come up with a model which will be very attractive for takaful and re-takaful companies. This new model is going to be mixed between the “Wikala” and the “Mudaraba” and the ability of distributing surplus to the policy holders. CBB is going to distribute a consultation paper to the whole takaful companies in Bahrain who will give their comments and then the new rules and regulations are going to be implemented. It might not actually exist in the other GCC country, but Bahrain is taking the lead in that point.
Nevertheless, there is significant debate as to the right level of regulation. Market participants in some of the more demanding regimes consider the regulations to be stifling their companies. A.M. Best believes the solution is not less regulation but more consistent application of regulation throughout the region, which has the potential to provide sufficient policyholder protection, and thus safeguard the long-term viability of the Takaful industry.
BL: Since the six GCC countries have almost same regulations, for example, why a Kuwaiti company needs to have a license if it plans to open a branch in Bahrain? Don’t you think that it’s better if the GCC countries have the same commercial regulations?
Al Sayed: Dubai has decided to have Dubai International Financial Centre (DIFC) to regulate the wholesale business whether it is banking or reinsurance or re-takaful companies but the retail business; it’s regulated by the Ministry in Abu Dhabi. Qatar Financial Center (QFC) has different model because it depends on the strategy of the country. It’s mainly regulating the wholesale business and the Ministry. It’s supposed to regulate the retail business, but actually, there is a big confusion in Qatar because there are both regulators: the QFC and the Ministry. It is not right; there should be one entity to regulate either retail or wholesale business. In Bahrain, we have CBB to regulate both. In Kuwait, there is the Ministry. I think it is a political decision, if these countries sit down and decide to have one regulator, it is their decision. The government is definitely much better, but in the last GCC Council meeting which was held in Bahrain, it was decided that any company can open a branch in the GCC countries but this decision passed through the Cabinet and the Prime Minister first and then through Parliament to get it approved. In Kuwait, it went through the National Council. Thus, it will be easier because you don’t need to have a separate capital; you can just go and open a branch if your capital in the other country is not less than Bahraini Dinar 15 million. This is a big achievement. We didn’t have it in the past, but my dream is to have one country, not six different countries and one regulation. Sometimes, we are driven by circumstances.
What happened in the whole area makes these countries decide on strengthening their union. I think for the last 32 years, the GCC Council has done a lot. The external circumstances are going to speed up in the formation of one union, one regulation, one capacity and mega insurance and reinsurance companies. This is my dream; I would love to see it coming true. Look at the European Union and the United States of America. I think we are part of the world, we speak the same language, and we have the same religion, so there is a need for such union.
A company in France can go and sell in Germany without opening any branch, it is cross boarder business. This should happen in the GCC and in the Middle East.
BL: What are the updates of the takaful industry these days? What are the recent news and regulations in the entire region?
Al Sayed: The takaful industry in the MENA region has witnessed significant transformation in the last two decades.
Yes, I think Takaful is growing, if you look at Bahrain, the growth in Takaful recorded around 24%. It’s a promising market because a lot of people believe in Takaful principles. Subsequently, there is still a room for more Takaful companies to join the market, but as I said earlier, we are desperately in need for re-Takaful companies because we need a reinsurance capacity in this part of the world.
We have Takaful Re which is one company in Dubai, Hanover Re in Bahrain, BEST RE and Al Fajer Re in Kuwait but still the Takaful sector needs to use the conventional reinsurance market, because there is a big shortage in the re-Takaful. These companies altogether don’t accept normally more than 40% of the business, so you still have a need for another 60% although the takaful business is growing, but there is a need for retakaful capacity. Despite the regular commentary on the need for more retakaful capacity, there are relatively few operators in the Middle Eastern retakaful.
Currently, there is a shortage of retakaful capacity in the market which presents a challenge as well as an opportunity. The challenge is to have a large enough takaful market to justify retakaful business. There is also a global need for strong and credible retakaful operators to assist the growth and expansion of the takaful business. Sharia’ scholars have allowed takaful operators to reinsure conventionally when no retakaful alternative is available, although retakaful is strongly preferred.
BL: Is Takaful International looking into establishing a retakaful company?
Al Sayed: No, we are not looking into this point. We opened a branch in Doha and we are doing very well compared to others. I know that some other companies started to actually close down their offices there, but we have not because we are writing business according to the plan. We focus mainly into the corporate business; we get the support from the market and from all the Qatari authorities.
Actually, our strategy is to reach the client at their home, they can insure their business through our E-Takaful system, they can process the claim through E-Takaful, they can do everything through the system. In addition, we have the strategy to open a call center, because we have both services: the claim and the insurance in the same place for all classes of business. Therefore, this is the strategy of 2013.
We are also focusing onto the Marine business which is very profitable and also on individual life insurance.
We took the permission from the board of directors and from the AGM to increase the capital within 3-year grace period to B.D 10 million. The Board appointed one of the banks to work on this matter. Consequently, we are in the process of increasing the capital.
The number of the staff in the company is 127 for the time being, but if we are going to open a branch definitely we need some more staff, but on the business plan which was already approved, we need 7 employees.
BL: What are the needed international insights in the Takaful industry? How can the Takaful industry benefit from the international insight, vision and experience?
Al Sayed: We still need the international reinsurance.
Of course, there is always the need for new products. Companies study products as per the requirements and demands of the client. It depends on the demand and the requirements of people. But when it comes to the international experts, we can benefit from their capacity and technology. We can also have the technology even from India these days. Now, we have a lot of highly graduated Arabs who are leading this company. In the past, you might need to use the experienced people from the international market.
BL: Younis, what are the new plans for the year 2013 and what is your vision being the Chairman of the Bahrain Insurance Association?
Al Sayed: We have actually a plan to increase market awareness. There are a lot of areas which Bahrain Insurance Association (BIA), is investing in. BIA is going to host ‘Insurance Awareness Week 2013’ which will commence form the 21st March to 26th March 2013. The weeklong event will include media campaign for the public and will end up with a Gala Dinner in Gulf Hotel for the industry on Tuesday 26th March 2013.
This is a message to the public telling them what is insurance. This event is in coordination with CBB. In addition, we are going to have, on the 30th and 31st of October a seminar in coordination with GAIF. We are going to cover medical malpractice and financial insurance. We are also going to call speakers from the international market. This is part of the activities which we are planning to have in 2013. Plus, we are going to elect a new BIA board on the 28th of March.
BL: What about the financial results of 2012?
Al Sayed: We have written B.D 18.4 million, this is our gross premium which is around 6% better than 2011.
And we have a plan to distribute dividends, but I’m not sure because we are waiting for the approval of Central Bank of Bahrain.
