The GCC market is the hub for Takaful, the biggest number of Takaful companies is around 206 companies exist in the GCC while in the MENA region probably there are only 34. Historically, insurance has not been popular in Islamic countries. Demographic change and other societal transformations are, however, creating market opportunities for Takaful.
Younis Jamal Al Sayed, Chief Executive Officer of Takaful International Company- Bahrain, Chairman of Bahrain Insurance Association and a board member-Takaful International – Kuwait began his business career in 1981 and gradually learnt the various aspects of the insurance industry. He pursued his career at ARIG which had a significant demeanor on his business future as he also became active in improving living conditions of his team. He led a highly successful management career.
His ambition is to see the gradual growth of the insurance industry in the Kingdom of Bahrain by spreading awareness an innovation via Bahrain Insurance Association (BIA) and additionally to see Takaful International as the leading company in the country.
Al Sayed acts as adviser to government on all insurance related matters. He also spoke on the industry's medical insurance scheme, training and raising insurance awareness.
Bahrain-based Takaful International Company (TIC) has secured a stable outlook projection, along with a 'B++' strength rating from ratings agency A M Best. AM Best had endorsed the restoration of Takaful's financial strength and stability throughout the years, and growth in all spheres of insurance activity.
BL: At what rate is the GCC Takaful industry growing?
Al Sayed: Good question. In the past, the growth was between 15-20%. Later on, it slowed down because of the economic crisis; this affected the global market which slowed down between 7.50%-10% and in certain years it might go up to 12%. At the beginning, there was substantial growth in the Islamic industry especially when it comes to Islamic banks and Islamic investment companies that work on real estate projects. This affected Takaful companies because the growth was much higher in the real estate sector and the Islamic banking, but later on it slowed down and eventually it affected the Takaful companies. At the beginning, many investors were interested to invest in the Takaful business because they looked at the growth in the gross premium, but at the end of the day there are some calculations to be done. The Takaful system is different from the conventional and the return was not as they expected; the slowdown in the growth of the Islamic economy plus the system itself is not mature 100% as it still relies on the conventional reinsurance companies. Takaful now operates in more than 60 companies in 23 countries. There is still much untapped potential in the re-Takaful sector. There should be a concerted effort to implement the concept of Takaful. Therefore, once the system is completed and there is surplus distributed by the re-Takaful companies then the system is going to be mature.
So far, the system of Takaful, re-Takaful and retro-Takaful is not complete. Maybe, 70% is Takaful business, but still we need re-Takaful companies where the re-Takaful capacity is between 25%-30% and the remaining 70% is still in the international market with the conventional companies.
BL: Why the capacity is going to the international markets?
Al Sayed: There is no investment in the re-Takaful; the re-Takaful will distribute a surplus. For example, Hannover Re is doing that, maybe it is the only company that has distributed a surplus. This is good, but still the system is not mature 100%.
At the present time, the available re-Takaful companies in the GCC market are facing challenges because the system is not mature 100%. The retro-Takaful is still not tapped yet and this is all going to have an impact on the re-Takaful.
BL: At what rate is the MENA Takaful industry growing?
Al Sayed: The MENA’s growth has also the same growth of 10%.
BL: What’s the difference between mutual and Takaful?
Al Sayed: Mutual is when you distribute Zakat. Takaful doesn’t distribute Zakat. Takaful is based on mutual cooperation.
The Central Bank of Bahrain (CBB) is working on a model which combines both mutual and Takaful insurance. It’s a tailor-made model for Bahrain; it is between the Malaysian system and the Middle East system. The CBB is supposed to launch it within a few weeks and accordingly all Takaful companies will start to distribute dividends for the shareholders and the policyholders as well.
BL: One of the key features of the Takaful insurance is the fund split between the shareholders (operator) and the policyholders (participants). On what basis is this fund split?
Al Sayed: The fund is not split because a shareholder puts a capital for the company, then the capital is invested normally, there are three different kinds of investments. The capital which is put by the shareholders is invested between 5- 6 years, you get better return on that, but the shareholder gets fees for managing that fund for the policyholder. It is not how you distribute the fund between the policyholder and the shareholder, the shareholder or the management gets normally between 17 to 20%. I don’t want to call it commission; it is a fee for managing the fund for the policyholder.
BL: What are the present market issues?
Al Sayed: We have to have an open mind because people wait until things happen; in Takaful International, we don’t wait until things happen, we want to be ahead and this is how we grow up in Takaful International. The whole team is educated to be ahead though there is a limitation because Bahrain’s market is very small, but we will not sit down and compete for the same business, there are few accounts which are left in Bahrain. What is next, we will not wait and compete with the other companies and wait for things to come from God; we have to come up with new ideas and new thoughts. This is why we had to introduce the medical malpractice which is the new product we are trying to work on, we want the law to be published by the government plus we want to educate the market that there is a need for this new product in Bahrain. Consequently, we bring people from the medical sector and from the public sector to think of this new product. The Parliament in Bahrain is going to push ahead to establish the law in Bahrain so if we come with that kind of product to insure the doctor and the pharmacies.
BL: What is the number of the Takaful players in the GCC?
Al Sayed: The Takaful players in the GCC are 206 companies.
BL: What’s the estimated global Takaful market at the time being?
Al Sayed: it is estimated to reach USD1.7 trillion in 2014. It is estimated that the global Takaful market could reach USD 7bn by 2015. The 1.5bn Muslims around the world, and also non-Muslims interested in the principles underpinning Shari’a-compliant products, represent a growing client segment for the insurance sector. The total number of Islamic insurance operators worldwide rose to 206 in 2013 compared to 200 in 2012.
BL: What are you focusing on at the time being?
Al Sayed: I have to push Takaful International ahead to be number one in Bahrain. The company continues to have the same rating from A M. Best. Takaful International has secured a stable outlook projection, along with a 'B++' strength rating. I am working to have A+ rating especially that we are in the process of increasing the capital. Once, we get the capital increased to B.D. 10 million, and then this company will do better results on the bottom line. The present capital is B.D 6250000 million. I am expecting this increase before April 2015.
BL: How do you see insurance in the emerging markets?
Al Sayed: Honestly speaking, the focus is on the banking while insurance is always kept in the backside though any bank cannot work without insurance. Therefore, an insurance company is much bigger than a bank. Currently, a bank is much bigger than an insurance company because it has higher return, better salaries and better bonus. Insurance companies have a lot of regulations and a lot of risk when writing business. Insurance is completely different, it’s nerve taking. But it is completing the banking process, it is a complementary tool.
BL: Which market in your opinion is the hub for Takaful and re-Takaful?
Al Sayed: There are 3 different markets; every market has its niche.
BL: What’s the growth potential for in the EU companies?
Al Sayed: The idea of Takaful is very important, the European people are considering Takaful and this is where they need to have regulations because there is a lot of Muslim population in Europe and they need to focus especially on products like Hajj and Omra. Takaful will be spread in Europe definitely, but it’s a matter of time of 4-5 years.
UK is building the regulations and the infrastructure for that kind of insurance whereas France and Austria are not working on it though there is a big number of Muslims.
BL: What are the recommended changes that should be implemented to the Takaful industry?
Al Sayed: One of the challenges faced by insurance companies as well as Takaful operators in the Bahraini market is the need to offer competitive rates, as consumers in the market are price conscious. By educating the public about the Takaful concept as well as offering products that are different from conventional insurance is a key factor. Furthermore, a lack of consumer data for targeted marketing should be overcome. For bancatakaful, there needs to be a stronger penetration of this distribution channel as banks and Takaful operators align their interests.
BL: How were the financial results?
Al Sayed: Takaful International distributed dividends of 5% this year, it’s already agreed and approved by the Central Bank of Bahrain and by the board of directors. We are very happy to maintain our rating with A.M. Best B++ stable, the result is good, we wrote around B.D 21 million this year compared to 2003 when I first joined it was B.D 3.7, now B.D 21 million which is a big growth. As I said earlier, we have to focus more in raising awareness on other products; it’s not only marine, motor and medical. We want to focus on life insurance, cyber insurance, medical malpractice, directors and officers, professional indemnity and personal line business.
BL: What are your present activities at Bahrain Insurance Association? What are you trying to achieve by the end of the year? And what are the present challenges of BIA?
Al Sayed: I have a lot of ideas in my mind, but the problem is I have limitations when it comes to human resources and when it comes to the financial side. I just recruited one lady; we have a lot of ideas to go and spread the awareness.
I am very optimistic that BIA is going to do better achievements for 2014-2015. We will try to give equal opportunity for Takaful and conventional companies. When I go to BIA, I should forget my company completely. I will organize the insurance week every year; this year’s event was very successful. I have a plan, but I want to do more but with my limited financial resources and limited number of people, it is not an easy job, I am putting a lot of effort myself on BIA’s progress.
