Risk Participation Risk Management
Islamic Insurance 3,000 years ago, Phoenician sea merchants formed trade communities. Each community member agreed to contribute a portion of his profit to compensate a member who had lost cargo at sea. This was the oldest known origin of the principles of insurance Islamic or Shariahcompliant insurance is commonly known as Takaful and is also rooted in the principle of charitable support and literally means Mutual Assistance, Cooperation or Joint Guarantee In essence, Takaful is a community arrangement, supported through donations to provide mutual assistance to those few who suffer misfortune. In Takaful insurance, the concepts of community and charity are paramount. Each community member donates money to a Shariah-compliant insurance fund, with no expectation of repayment. If a member of the fund suffers a loss, those donations are used to restore him fully to his original English Law contracts of insurance are by and large fully Shariahcompliant. It is the structure of the insurer itself that is important and an insurer must: ensure all products, services and contracts have to be based upon the foundation of the ethics and principles of Shariah. These principles are founded on a need for transparency, certainty and fairness in any transaction or business dealing. avoid usury (for example, investment returns must not be from interest earned on insurance funds) involve the policyholder in the outcome of the underwriting process i.e there must be some participation ensure segregation of funds so that all monies are protected from contamination by non-shariah funds invest the funds exclusively in Shariah-compliant investment products have a Shariah Supervisory Board to provide credibility and integrity
Cobalt Underwriting London s first Shariah-compliant underwriting agency and Lloyd s Coverholder providing insurance and reinsurance for commercial risk Cobalt Group The Group was started in 2012 and is formed of two operations: Cobalt Underwriting - a specialist commercial underwriting agency based in the London Market Cobalt Advisory - providing Shariah audit, training and certification Our capacity is provided by a number of established carriers, all with an S&P rating of at least A or above. Cobalt s Mission Our mission is to establish London as a global centre for the provision of insurance and reinsurance capacity that satisfies the principles of Shariah. Compliance is in our DNA Our products and services are based upon the foundation of the ethics and principles of Shariah. These principles are founded on the need for transparency, certainty and fairness in any transaction or business dealing. The essence of Shariah-compliant Insurance (SCI) is that it should avoid usury (for example, investment returns must not be from interest earned on insurance funds) involve the policyholder in the outcome of the underwriting process. This is achieved by sharing the underwriting profits with policyholders. ensure that all monies are protected from contamination by non- Shariah funds place investments exclusively in Shariah-compliant instruments.
Setting a New Standard We have applied the standards of London to this exciting new part of the global insurance industry London has traditionally played the role of developing and creating innovative insurance solutions to meet the challenges of an ever changing world. Cobalt is continuing this fine tradition by working closely with leading Islamic Scholars and representatives of some of insurance industry s leading carriers to develop common standards for the development of new products and capacity. A unique proposition Cobalt utilises the strengths of the London Subscription Market model to provide broad capacity for complex risk and a depth of knowledge and expertise that only a unique market such as London has to offer. We are working closely with both global insurance carriers and Lloyd s of London to develop solutions to some of the globe s most challenging risks and work closely with the international broking community, to market and promote our underwriting capability, and build business relationships with companies throughout the Muslim world. Direct access to Shariah expertise We have a full-time in-house Shariah scholar, Sheikh Zubair Miah, and a Shariah Board chaired by Sheikh Nizam Yaquby. By building Shariah expertise in London, Cobalt is providing common standards, consistency of Shariah interpretation and a robust platform for collecting premiums and paying claims. Broker Only We will only work with professional broking houses that have representation here in London. We believe firmly in the added benefits that a broker brings to the placement process and their skills and expertise in ensuring the highest standards of risk presentation and control.
Risk For Cobalt to provide cover, it is the risk exposure itself that must be Shariah-compliant, not the entity requesting cover. From oil rigs to shipping, from aircraft to real estate, there are wide and varied assets owned or invested in by those who would like to protect their interests utilising the ethical alternative to conventional insurance that SCI provides. Cobalt will consider risks from many sources so long as the exposure itself is not forbidden. Those risks for which we cannot consider providing cover are: conventional financial services featuring interest, speculation and gambling certain food and beverage industries tobacco industry and illegal drugs gambling production of armaments sectors within entertainment industry certain aspects of Life Sciences However, not all risk exposures can be ruled totally forbidden. Where a risk exposure includes some aspect of non-shariah activity, so long as this can be measured and deemed in minority, then it is possible for Cobalt to provide a SCI contract. Examples of this are multi-tenure buildings, buildings such as hotels that have some sales of alcohol or manufacturing processes where a forbidden product is created as a byproduct. Having our in-house Scholar allows us to identify and rule on these exposures as part of our underwriting processes.
Risk Participation : Risk Management The model used to provide Shariah-compliant cover offers some significant advantages In order to provide a SCI or SCRI product, we have to ensure that the policyholder has a clear understanding of what each party to the contract does for them. We disclose what the carrier will do with the premiums received, how much they will take to cover their own expenses and the expenses of others i.e. brokers commissions etc. This is called the Insurer Protocol. Once deductions are made the remaining premium is put into a fund or risk pool where it is held in order to meet any claims that may occur. If at the conclusion of the underwriting year of account as surplus exists, this is then shared with policyholders. Cobalt believes in encouraging good risk management. As such we will ensure that any surplus generated will be used to reward those policyholders that take proactive steps to control their risks through good risk management practice. This approach, which is closely aligned to the mutual insurance movement prevalent in many developed countries, has proven value in helping emerging and developing
Principal Geographic Risk Focus
Inclusive and Broad Our capacity is available across a wide range of risk exposures We can offer solutions across a wide range of risk classes and can look to offer cover either for all or part of the placement and will consider quota share or excess of loss. If you have business in these areas, we would be pleased to discuss further. Risk classes supported include Commercial Real Estate Commercial Property Construction and Property Developments Political Violence, Sabotage and Terrorism Casualty Financial & Professional Risks including Financial Institutions Energy & Power Marine Cargo Fine Art & Specie Aviation Equine We are also keen to develop bespoke and specialty facilities for both brokers and insurers alike.
Real Estate & Development Underwriting Guidelines Coverage Capacity Property Damage Loss of Rent & Service Charge Associated Machinery Breakdown Terrorism All Risks or named Perils basis Includes wind, flood and earthquake exposure PAR/LOR/MB up to GBP 250 million at top location 100% or Quota Share market placement capability First Loss and Excess placements Client Profile Institutional Investors Sovereign Wealth Funds Family Office Trusts SPV s Exposures in excess of GBP 25 million Specialities Industrial Office Residential Retail Development Sites
International Property Underwriting Guidelines Coverage Capacity Property Damage Business Interruption Associated Machinery Breakdown All Risks or named Perils basis Includes wind, flood and earthquake exposure PAR/LOR/MB up to GBP 425 million at top location 100% or Quota Share market placement capability First Loss and Excess placements Client Profile Engineering Risk Management led programmes Exposures in excess of USD 100 million Specialities Residential and office blocks Education Leisure Ports, airports and social infrastructure Sports Stadia Exclusions High hazard manufacturing Stand-alone warehousing
Construction & Engineering Underwriting Guidelines Coverage Construction All Risks / Erection All Risks Advanced Loss of Profits Delayed Start Up Associated Third Party Liability Package covers for project cargo through to construction/erection phase Maximum 60 months coverage plus 24 months maintenance Capacity CAR/EAR up to USD 160 million on a maximum foreseeable loss basis Associated TPL USD 7.5 million Additional capacity may be available 100% or Quota Share market placement capability Decennial Mining Exclusions Completed Engineering Civil Risks Offshore Employer s Liability/Workmen's Compensation Decennial Mining Client Profile Engineering Risk Management led programmes Exposures in excess of USD 100 million Single Project Construction and Erection All Risks Annual contractors cover for Contract Works and associated equipment on a Losses Occurring basis Specialities Oil and gas projects Inherent and Latent Defect
General Liability Underwriting Guidelines Coverage Capacity General Third Party Liability Products Liability Pollution Liability Employer s Liability TPL/Prods USD 50 million any one occurrence Products USD 50 million any one occurrence/aggregate Pollution USD 50 million any one occurrence Employers Liability USD 20 million any one occurrence 100% or Quota Share market placement Exclusions Stand-alone Workers Compensation Client Profile Enterprise Risk Management led programmes Turnover of circa USD 50m to 500m Specialities Specialities Automotive Chemicals Construction Engineering Public Bodies & Utilities Transportation Wholesale & Retail
Management Liability Underwriting Guidelines Coverage Capacity Director s and Officer s Liability Management Liability/Side A Employment Practices Liability D&O USD 25 million each and every loss Primary D&O offered on Side A or Management Liability forms Excess D&O follows terms and conditions of primary policy and underlying insurance First Loss and Excess placements Client Profile Public and private companies Trusts and SPV s Specialities Broad Appetites
Civil Liability Underwriting Guidelines Coverage Capacity Professional Indemnity Errors & Omissions Civil Liability Includes personal injury from professional services USD 25 million in the aggregate (per occurrence limits on request) 100% or Quota Share market placement capability First Loss and Excess Placements Client Profile Annual Contracts Specialities Construction Lawyers Miscellaneous Surveyors Technology Media
Financial Institutions Underwriting Guidelines Coverage Comprehensive Crime incl Fraud Bankers Blanket Bond Electronic Computer Crime Civil Liability Director s and Officer s Liability Exclusions Small start-up organisations Attrition led programmes Client Profile Strictly Islamic Financial Institutions Specialities Commercial and retail banks Asset management companies Capacity Crime/BBB/ECC/CL/D&O USD 25 million each and every loss 100% or Quota Share market placement capability Will participate on multiple layers
Marine Cargo Underwriting Guidelines Coverage Marine Cargo Project Cargo including DSU Stock Throughput Fine art and specie Exclusions Static vehicles High risk warehousing Client Profile General cargo programmes High volume programmes via certificate issuance Bullion Storage Capacity Cargo Limits to GBP 20 million Project Cargo Limits to GBP 100 million Fine Art & Specie USD 25 million Annual and single transit covers Global to global 100% or Quota Share market placement capability Specialities Heavy machinery Oil and Liquid Natural Gas Freight forwarders Armoured Car Transits
Frequently Asked Questions
Where are you located? In the City of London. Are you regulated? Yes, by the Financial Conduct Authority. Are you yourselves Shariah-compliant? Yes, we have a Shariah Supervisory Board, chaired by Sheikh Nizam Yaquby and employ our own in-house Scholar Sheikh Zubair Miah. Why have you got Scholars in-house? The respected Scholars are few in number and are constantly moving around the globe. This makes getting opinions a slow process. By having an in-house Scholar we can provide this advice swiftly and, more importantly, in a consistent way on behalf of all supporting markets. Do you carry risk? No, we are an underwriting agency providing SCI & SCRI based on the London Market Subscription model via London based carriers operating Islamic windows. What is your security then? Capacity is provided by established global insurers and Lloyd s syndicates, with a minimum S&P rating of A. Is your model that of a Takaful? Our capacity is constructed using the syndicated placement model that is unique to the London Market and uses all the underlying principles of Takaful, but structured to comply with the requirements of the UK regulatory and fiscal environment. This model enables us to provide scalable capacity by class of business, whilst maintaining Shariah integrity. Is this model approved by the Scholars? Yes, we have a ruling (fatwa) provided by our Shariah Supervisory Board to prove it is. I ve heard that SCI involves mutuality. Does this mean that there might be a call if funds are not sufficient? This is a popular misconception. Whilst there is a concept of mutuality under the principles of Shariah risk carrying, this differs from the principle of mutual funding developed in the conventional insurance market, as uncertainty is not allowed. Therefore, any shortfall in funds is covered by the carrier s own capital until such time that it is reimbursed out of future surpluses thus ensuring that the contribution is limited to the amount paid at the time the risk is bound. How does your cover differ from normal conventional cover? There are subtle differences, but coverage is broadly identical. How do we know what is being provided is Shariah-compliant? All our policy documentation will contain a fatwa from our Shariah Supervisory Board to confirm that the cover is Shariah-compliant. Can a risk be insured on a partly Shariah-compliant basis? Yes. We can provide cover either as a quota-share or as an excess layer.
Policyholder or Cedant Premiums Claims Advice Broker Placement What are the differences in the placement of cover? Risk is placed in exactly the same way as any conventional cover placed in the London Market. The only difference arises when it comes to the payment of premium contribution. In order to keep the transaction Shariah-compliant, all premium contributions must be paid directly to Cobalt from either the client or cedant unless the broker concerned has a Shariah-compliant bank account of their own. What about Claims? Will they be handled differently? Claims will be handled in exactly the same way as that of the conventional market. Claims will be submitted to Cobalt, who will establish liability in conjunction with capacity providers and then make settlement in accordance with policy conditions. However, before payments are made, the claim will be reviewed by the Scholars to ensure that the client is made aware of any aspect of the claim that might itself be deemed non-shariah, and to give them the opportunity to decide whether to accept any non-shariah settlement. Will claims be settled via the Broker? No, like the payment of premium contributions, all claim settlements will be paid directly to the client or cedant. What about Broker s remuneration? A broker may work for either a fee or commission. However, if paid a commission, this will appear on the policy schedule.
For more information Phone: 020 3642 0200 Email: enquiry@cobaltuw.com Address: Gallery 4, The Lloyd s Building, 12 Leadenhall Street, London, EC3V 1LP Website: www.cobaltuw.com You can also follow us on LinkedIn Cobalt Underwriting Services Limited, trading as Cobalt Underwriting, is authorised and regulated by the Financial Conduct Authority.