Briefing: UK can grab opportunity to support Islamic insurance

By Jon Guy

Last week, the UK and London insurance markets were a major topic of conversation in the Indonesian capital of Jakarta.

The outcome of these conversations may see the UK presented with the chance to become a significant partner in the country’s insurance and risk transformation.

The three days of meetings between leading government officials, senior management at two of the most influential Islamic organisations and Indonesian insurance leaders was led by the team at the British embassy in Jakarta – and supported by the Islamic Insurance Association of London.

Last year, Indonesia announced a five year roadmap aimed at establishing the country’s insurance sector and significantly increase penetration levels.

The country is home to the world’s largest Muslim population and, while the conventional insurance sector remains the biggest underwriting sector, the roadmap includes ambitious targets for Islamic insurers around product development and penetration levels.

The London market has spent the last seven years developing the structure that would allow reinsurance and major insurance risks to be underwritten in a shariah-compliant way – and a range of partnerships between Jakarta and EC3 to support that development is one that appeals.

Roadmap 

Plans have already been announced by Indonesian financial services regulator OJK and the country’s ministry of finance to introduce the country’s first compulsory insurance product.

And that will come a significant increase in premium volumes, requiring reinsurance support.

As a majority Muslim country, Indonesia’s will is clear that its Islamic underwriters – which will be required to become standalone entities by December 2026 – should seek to access shariah-compliant reinsurance capacity.

Plans for major infrastructure programmes, including the creation of a new capital city for example, are – as much as possible – likely to seek shariah-compliant cover.

London’s reputation as a global Islamic financial services centre has the potential to create an advantage for UK brokers and underwriters as the Indonesian economy looks to access overseas markets.

Last week’s discussions are to be swiftly followed by the first of several government-level discussions, with insurance and the financing of Islamic investment bonds – known as sukuks – on the agenda for next week.

The investment bonds are vital to deliver the projects that the Indonesian government has planned and a key part of a sukuk’s structure is the insurance of the asset that underpins the bond.

While the discussions remain at an early stage, the deadline on the delivery of the insurance roadmap has already been set and published.

The meetings were hugely positive and there are several opportunities that will now be discussed by the London market – with the likelihood that they are followed by direct contact between interested parties in the UK and Indonesia.