Developing Insurance in the Face of New Challenges Global l Insurance Conference 2011 Hosted by Hosted by World Bank & IFC Preston Auditorium, World Bank HQ, Washington, DC
Takaful is a response to Customer Need. Market study (2009) in a Middle Eastern Country Overall Opinion of The Takaful Concept 76% out of the total surveyed respondents have positive overall opinion on Takaful concept. Top 2 Boxes 76% 77% 78% Average/100% 75% 79% 76% 76% 75% 75% 70% Most new companies are Takaful 2011: Takaful IPO many times oversubscribed Conventional IPO barely made it. 2
Takaful is good for all Protecting Community and Investing in It Takaful stakeholders are all part of Takaful encourages the use of money with commensurate a community benefiting from 6 1 mutualand and co operativehelp. risk and reward for a operative Takaful is in between Proprietary sustainable system good for system and Mutual system all, irrespective of religion. Takaful system utilizes wealth to generate economic activity in socially responsible and eco friendly ways People, 5 Planet, Profit 2 Paradigm Takaful enables channeling wealth and capital with social conscience and responsibility The rights of stakeholders are clearly defined and transparent, and the takaful company is not just a manager but an enabler to enlarge the cooperative system 4 3 The system of takaful is built on the principles of equity, justice and fairplay, minimizing uncertainty of terms and ensuring a system of Risk Sharing where one party cannot exploit another
The mathematics of cooperation at Micro level Alleviating poverty and empowering people to keep away from poverty traps The Gap Issues of Awareness and Mobilization of Islamic 6 1 Micro finance and microtakaful programs Economic Empowerment Gives people economic independence through income producing assets and schemes with a freedom from interest based debt Zakat The Rich Social Hope & helping the Poor Empowerment A social distribution of wealth where the Rich have the responsibility to care for the Poor and the Needy. Institutionalizing Zakat effectively achieves this social balance 5 Happiness for 2 millions Asset Backed Financing 4 3 Cost Plus Financing, Financier buying assets and leasing back until owned Investing in Primary Education, Gender Equality, Primary health care for mother and child to detect / correct / monitor learning disabilities Risk & Reward over Interest Equity Participation, Matching Finance with Entrepreneurial skills to generate economic activity and returns
The GCC is a leading takaful market in the Middle East and worldwide GWP Takaful GWP No. of Company 2009 GWP Spread Co s Spread USD m GCC 4,887 70% 69 36% SEA 1,480 21% 57 30% Oh Other 610 9% 64 34% Total 6,977 190 GWP: Gross Written Premium GWP: Gross Written Premium In Takaful, Premiums are called Contributions. The Policyholders are Participants contributing to Risk Fund or Takaful Fund for the mutual protection of all those contributing. The Takaful contract is not a buy sell contract between the policyholders and the company but a contract between participants to help each other.
Takaful Contribution Middle East (figures in million USD) CAGR = 42% (2005 2009) 10 18 166 87 136 640 P B B Q U 4 15 34 42 83 1,850 2 4 34 50 65 90 2,289 3 65 41 53 369 95 2,912 105 71 128 542 101 3,896 128 K S 1,065 2005 2006 2007 2008 2009 Pakistan Bangladesh Bahrain Qatar UAE Kuwait Saudi Arabia
Takaful Market Share in the Middle East 5,113 figures in million USD 3,896 3,896 Total Insurance Takaful 1,193 457 773 640 128 841 494 136 87 166 18 627 0 Saudi Arabia Kuwait UAE Qatar Bahrain Bangladesh Pakistan Oman 100% 28% 13% 18% 18% 28% 2% 0% Takaful as percentage of Total Insurance Market
The GCC v Other markets: 2008 to 2009 Change in penetration rates in takaful & insurance 80% 60% 40% 20% 0% 20% Takaful 40% Insurance 60% 80% Bahrain Qatar UAE Kuwait Saudi M'sia Ind'sia B'desh 2008 2.15 2.38 2.18 0.69 1.27 4.62 1.38 1.03 2009 3.04 0.93 2.50 0.73 2.09 5.44 1.38 1.13 41% 61% 15% 6% 65% 18% 0% 10% Penetration Rates Takaful & insurance combined 41% 61% 15% 6% 65% 18% 0% 10% combined Penetration Rates = Gross Premiums as percentage of Nominal GDP Source: E&Y World Takaful Report 2011, World Islamic Insurance Directory, Sigma Swiss Re, Global Insight
The GCC has shown high growth due to strong economic fundamentals and social development 8000 7000 6000 5000 4000 3000 2000 1000 0 USD m USD m 14 5 121 474 770 17 8 181 544 1,239 18 11 256 695 2089 22 76 276 901 2846 28 104 299 1146 3742 2004 2005 2006 2007 2008e 2009e 1,384 1,988 3,068 4,122 5,318 6,975 39 193 377 1480 4886 Levant Indian Subcontinent Africa South East Asia GCC Tkfl Takaful Industry World Americas Europe Asia Africa Oceana CAGR 2004 09 4% 2% 6% 6% 6% 4% Growth 2009 4% 7% 5% 6% 7% 4% Source: E&Y
Economic Expansion across the GCC is being facilitated by oil revenues Global average Crude Oil Price and Total Nominal GDP in the GCC The oil and gas industry remains the single largest contributor to GDP across the GCC Ernst & Young
Economic expansion is in turn resulting in increasing wealth across the population Ernst & Young
Future Outlook for the GCC and the Middle East Source: E&Y Economic Slow Down. Greater channeling of funds into Islamic Finance Saudi economic growth 3.9% (Business Monitor International) Egypt: 3.7% down from 5.3%.. Tourism affected (Credit Agricole) Highimprovement improvement inhuman Development and Social Change Strengthening of non Oil based economy Oil Price Volatility and Political Risks
Global spread of Takaful Companies Source: Ajmal Bhatty 2011 190 to 200 Takaful Co s Takaful Co s / Windows 170 in 2008, apprx 200 in 2011 20% Windows 32 years 32 countries Estimated Capital committed $5bn 2011 TAKAFUL COMPANIES AND WINDOWS 78 37 70 5 Middle East Africa Asia Pacific Other 1979 1979 Takaful first started in Sudan
Takaful in the Middle East within Global Perspective 2011 78 Middle East 37 Africa 70 Asia Pacific 5 Other 40% 19% 36% 3% Saudi: Saudi: 31 42% Sudan : Sudan 15 : 41% Indonesia Indonesia : 36 51% UK : 1 Kuwait : Kuwait 12 : 15% Egypt : Egypt 9 : 24% Malaysia Malaysia : 15 : 21% L xmbrg: 1 UAE : UAE 10 : 14% Kenya: 3 8% B ngldsh Bngldsh: B ngldsh Bngldsh: 7 10% T&T : 1 Bahrain : Bahrain 7 : 9% Libya : Libya 2 : 5% Pakistan Pakistan : 5 : 7% Bahamas : 1 Qatar : Qatar 5 : 8% M ritania M ritania : 2 : 5% Thailand Thailand : 4 : 6% Canada : 1 Others: Others: 9 12% Sth Africa Sth : 2Africa 5% Brunei : Brunei 3 : 3% Iran excluded Others : Others 4 : 11% Sri Lanka Sri : Lanka 1 : 1% Both Saudi Arabia and Sudan follow cooperative insurance model Indonesia has 33 windows and 3 full fledge Takaful companies Source: Ajmal Bhatty, E&Y, www.takaful.coop, World Islamic Insurance Directory 2010
Growth of Takaful Industry v Insurance 5 year CAGR and growth in 2009 50% 40% 30% 20% 10% 0% 10% 20% 38% 31% 2% 6% 6% 6% 6% 4% 4% 7% 5% 7% 4% 14% America Europe Asia Africa Oceana World Takaful Industry CAGR 2004/09 Growth 2009
Takaful 2011 and Potential 2020 2011 1 $12bn est Past growth 30%, 40% pa Beaten previous 1979 estimates Modest growth 9% to 11% pa 2020 2 $20bn to $30bn MNCs in Takaful TMNF Prudential AVIVA AXA AIG (MetLife) Allianz Friends Provident ING HSBC Swiss Re Munich Re Hannover Re Scor Re Sources 1: E&Y 2: Various market studies The GCC and the Middle East is expected to continue to be a major contributor to the development of takaful Lloyds London
Developing Insurance in the Face of New Challenges Global l Insurance Conference 2011 Hosted by Hosted by World Bank & IFC Preston Auditorium, World Bank HQ, Washington, DC