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Achieving International Connectivity in Takaful & Retakaful IFN Asia Forum 2011 Kuala Lumpur 17 th – 19 th October 2011 Azleena Idris, Deputy Director.

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Presentation on theme: "Achieving International Connectivity in Takaful & Retakaful IFN Asia Forum 2011 Kuala Lumpur 17 th – 19 th October 2011 Azleena Idris, Deputy Director."— Presentation transcript:

1 Achieving International Connectivity in Takaful & Retakaful IFN Asia Forum 2011 Kuala Lumpur 17 th – 19 th October 2011 Azleena Idris, Deputy Director Financial Infrastructure Development Islamic Banking & Takaful Department

2 2 Achieving International Connectivity in Takaful & Retakaful 1Takaful and retakaful worldwide 2The market in Malaysia 3International connectivity in takaful

3 33 1Takaful and retakaful presence worldwide

4 4 GCC Takaful & Retakaful Operators (TO & RTO) Saudi ArabiaTO (11); RTO (2) KuwaitTO (9); RTO (1) UAETO (9); RTO (2) QatarTO (5); RTO (1) BahrainTO (6); RTO (2) Source: MEIR 2011, GIFF: Country and Business Guide: 2010, Labuan FSA SEA Countries Takaful & Retakaful Operators (TO & RTO) MalaysiaTO (11); RTO (19) Indonesia TO (9); RTO (3) BruneiTO (3) SingaporeTO (3); RTO (1) African countries Takaful & Retakaful Operators (TO & RTO) EgyptTO (4) SudanTO (11); RTO (3) AlgeriaTO (1) SenegalTO (1) GambiaTO (1) KenyaTO (1) TunisiaRTO (1) Others Takaful & Retakaful Operators (TO & RTO) PakistanTO (4) BangladeshTO (3) Sri LankaTO (2) LuxembourgTO (1) UKTO (2) 4 1Takaful and retakaful presence worldwide Estimated to be over 200 takaful companies

5 55 1Takaful and retakaful presence worldwide OUTLOOK: Highest takaful contribution is expected to come from Asia Pacific PAST 6 YEARS TREND: Highest global gross takaful contribution is from the GCC region Malaysia contributes 21% of its total contributions Global takaful industry growth: 39% (2005-2008) vs 10.2% in conventional insurance Still less than 1% of global insurance premiums Source: GIFF 2010

6 6 Slide 9 No. of takaful operators12 Composite takaful operators8 Family takaful operators 4 No. of retakaful operators4 No. of takaful brokers35 No. of takaful adjusters36 Market Share200520062007200820092010 Contributions5.5%6.7%8.9%10.3%11.0%12.4% Assets5.9%6.1%6.9%7.7%7.9%8.3% Diverse players… Increasing market share in terms of contributions & assets in every year… Takaful vis-a-vis Insurance: Total Assets & Total Premium (in RM million) Takaful Market Penetration* TakafulInsurance 20055.7%38.9% 2006 6.6%39.6% 20077.7%40.1% 20087.9%41.6% 20099.1%41.7% 201011.2%42.9% *Market penetration = number of policies in force / total population Source: Bank Negara MalaysiaSource: Sigma Re, Ernst & Young World Takaful Report 2011 Insurance Penetration & Real GDP Growth for Selected Countries Insurance Penetration (% of GDP) Malaysia4.8% OIC Average 1.47% Asia6.2% UK12.4% US8.0% World6.9% Malaysia ranked 32nd globally in 2010 6 2The market in Malaysia CAGR of takaful industry (2005-2010): Net contributions : 27% Assets : 20%

7 7 Singapore Malaysia Japan Shareholding Composition in Malaysian Takaful Operators Hong Kong UK & Europe Middle East 2The market in Malaysia: diversity of shareholders Participation of 12 foreign shareholders from 10 countries

8 8 India, Sri Lanka, Bangladesh Hong Kong, Japan, South Korea 26% (RM 481.17 m) UK Middle East, Africa and Levant 2The market in Malaysia: Other markets served Americas Significant opportunities remains untapped

9 9 3International connectivity in takaful How can takaful capture a bigger share of USD1 trillion industry? Resilient, viable and profitable Takaful grew the least (less than 1%) compared to other Islamic finance components

10 10 3International connectivity in takaful Clarity of takaful as a protection product Mutual recognition of Shariah interpretation and enforcement Universally accepted legal, regulatory, tax and accounting treatment Intensify development of international best practices Slide 17 Slide 17 Slides 13 & 14 Slide 15 & 16

11 13 Takaful – Clarity in how each model operates and can co-exist needed Takaful Funds Participants Emergence of different takaful models across jurisdictions presents opportunities for greater understanding and acceptance Rights of takaful participants Duties, responsibilities and obligations of takaful operators and re-takaful operators Protection elements of the takaful funds Co-takaful and re-takaful compatibility Permissible takaful risks Al-Mudharabah Al-Waqf Al-Taawuni Hybrid Al-Wakalah & Al-Mudharabah New concepts? Global Takaful Group Al-Wakalah Collaboration through Global Takaful Group? Greater collaboration with brokers?

12 12 Covers operational processes relating to takaful and shareholders fund, include the requirements relating to: Establish operational model that based on the contract and approved by Shariah Committee Setting up fund Segregate shareholders fund and takaful fund Management of takaful operations Adequate tabarru allocation into PRF to cover risk and obligations associated with takaful contract Establish written policy on the management of surplus that are approved by Shariah Committee and Board Management of operating costs and income of takaful operators Management of assets, liabilities and surplus Rectification of deficiency of takaful fund Establish written policy on mechanism to rectify deficit and/or loss in PRF that are approved by the Board Guidelines of Takaful Operational Framework Key Requirements: Purpose: Ensure business activities and innovations are within TOs risk management capacity and do not compromise prudence Ensure long term business sustainability and safeguard interest of stakeholders via comprehensive internal controls Snapshot of Malaysian TOF Back to Slide 10

13 13 3International connectivity in takaful Clarity of takaful as a protection product Mutual recognition of Shariah interpretation and enforcement Universally accepted legal, regulatory, tax and accounting treatment Intensify development of international best practices Slide 17 Slide 17 Slides 13 & 14 Slide 15 & 16

14 14 Mutual recognition of Shariah interpretation and enforcement: Two main issues Addressing leakages of business and investments Seizing a more sizeable share of Shariah compliant investible universe

15 15 Back to Slide 10

16 16 3International connectivity in takaful Clarity of takaful as a protection product Mutual recognition of Shariah interpretation and enforcement Universally accepted legal, regulatory, tax and accounting treatment Intensify development of international best practices Slide 17 Slide 17 Slides 13 & 14 Slide 15 & 16

17 International Financial Services Board 17 Back to Slide 10 A good start but more needed in augmenting the uniqueness yet comparability of takaful as a mainstream protection product which co-exists alongside insurance (eg risk-based capital for takaful and impact of Solvency II requirements on takaful) Facilitates rating of takaful operators

18 18 3International connectivity in takaful Clarity of takaful as a protection product Mutual recognition of Shariah interpretation and enforcement Universally accepted legal, regulatory, tax and accounting treatment Intensify development of international best practices Slide 17 Slide 17 Slides 13 & 14 Slide 15 & 16

19 19 Azleena Idris azleena@bnm.gov.my Thank You


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