Shariah-compliant insurance fails to lift off in Middle East
The take-up of Shariah-compliant takaful insurance in the Middle East is far lower than has been reported, say insurance bosses in the region.
During a debate at the General Arab Insurance Federation conference in Bahrain last week, they said that the expectation of a boom in the market has created an excess of capital in the region. This led Udo Krueger, ex-chief executive of Arab Investment Group, to say that the group was wrong in launching Takaful Re in 2005.
Andreas Molck-Ude, Munich Re’s Middle East and Africa chief executive, complained that highly-capitalised takaful providers were squabbling over existing policyholders, while uninsured individuals remained wary of the product.
The news comes despite calls from ex-Economic Secretary Ed Balls and Lloyd’s chairman Lord Levene for UK insurers to become the takaful insurers of choice across the globe.
Molck-Ude said: “The main aim of takaful was to access previously uninsured individuals with a product that was compliant with their religious beliefs. But this has not happened – only existing policyholders have been targeted.
“New, highly-capitalised companies that were set up to take advantage of this market have ended up fighting for very little premium.”
Commenting on Arig’s decision to launch Takaful Re, Udo Krueger, now a director of Solidarity, said: “We were wrong. Other market forces were in play, and we did not see them.”
Takaful insurance allows Muslims to comply with Shariah law, which prohibits the collecting of interest, gambling, and investments in non-Shariah compliant companies.
Globally, financial products that comply with Islamic law have attracted more than $250bn (£125m) – up 24% in the past five years. In 2006, HSBC estimated that the global market for takaful could soar to $14bn by 2015.5.