1. Is it time to convert from conventional?
بسم الله الرحمن الرحيم
New Retakaful:
Is it time to convert from conventional?
By:
Chakib Abouzaid
CEO - Takaful Re
ICMIF, Bahrain - 5th & 6th of May 2009

2. Agenda Introduction Islamic Takaful industry today Retakaful
Technical & Shari'a requirements
Existing Retakaful
Capacity & demand
Challenges for Retakaful
Conclusions: is it time to convert to Retakaful?

3. Introduction Three main questions: Size of the Takaful market?
Is the existing Retakaful financially sound and reliable?
Are they having enough capacity?
Is the “darura” still the rule?
Is the increasing number of Retakaful and additional capacities a threat for established companies?

4. The need for Retakaful
Technical requirement to spread the risk and avoid the insolvency risk;
Takaful companies cannot survive within Retakaful and/or reinsurance;
Is Retakaful a risk transfer or risk sharing?
Takaful & Retakaful are risk sharing operations even if formally the operation appears as a risk transfer; however:
Takaful & Retakaful is liable for all the claims occurred and falling under the contract,
In case of deficit, Takaful or Retakaful can only:
Ask the shareholders for “Qard al hassan”,
and/or adjust the pricing for the new or renewed contracts.

5. Shari’a requirement
Takaful are obliged to comply with all Shari'a requirements including the Retakaful;
Retakaful is completing the Takaful operation chain;
Using conventional when unnecessary is harmful for the credibility of Takaful;
Is “darura” still the rule?
10 Retakaful:
USD 1,150 Paid up capital
7 “A” rated, 2 “BBB”,1 Non rated
Treaty capacity > USD 67,5 – 77.5 Million
Fac. Capacity :
Non Marine >USD Million
Marine > USD

6. Contributions per Region
2005
2006
2007 Est.
Africa
181.1
215.2
246.4
East Indian Sub-Continent
7.8
11.2
12.8
Far East
536.7
695.4
872.4
GCC
1,547.1
2,088.5
2,560.8
Levant
14.7
17.7
21.7
Middle East (Non Arab)
2,372.4
2,880.1
3,505.0
Grand Total
4,659.8
5,908.1
7,219.1

7. Contributions by Region

8. Number of Islamic/Takaful companies
* GCC: 72 companies including all licensed companies in KSA

9. Contribution Split 2007 by Line of business

10. Contributions volume and split by LOB
Islamic insurance is growing all over the world:
The contribution increased in 2007 from USD 5.9 to 7.2 billion
There is no major change in the split by geographical area;
Cooperative KSA is the main component of the GCC Islamic/ Takaful markets;
The Iranian market represents over all 48%;
Motor remain the main line of business 42%, property 25% and Family + Medical 25%
The differences in statistics comes from the definition and whether cooperative Saudi model and Iranian markets are included or not.

11. 50 – allotted but not called
Existing Retakaful(*)
ARIL
BEST Re
Takaful Re
Hanover Re
Labuan
Re Takaful
MNRB
Takaful
Incorporation
1997
1985
Dec 2005
2006
Company
Retakaful Division – 2007
Dec 2006
Capital
($ million)
Authorized : USD 50
Paid-up : USD14.1
100
125 Paid up
500 Authorized
55 paid up
135 Authorized
150 - Issued & Paid Up
50 – allotted but not called
(US 31m)
Rating
Not Rated
BBB+ (S&P)
A- (AM Best)
BBB stable (S&P)
A stable
(S&P)
AM Best A-
Fitch IFS A-(stable)
Parent company A-
(*) Retakaful windows are not included in this presentation

12. Existing Retakaful ARIL BEST Re Takaful Re Hanover Re Labuan Re MNRB
GWP
(Takaful) ($ Million)
(2005/06)
10 – 12
(2005 Estimate)
34.2 (2008)
15 (2007)
11.0 (2007 Estimate)
Start operation
Aug 1st 07
Takaful Model
Mudharaba -
Wakala policyholder’s
Mudharaba for investment
Wakala/
Wakalah for both retakaful and investment
(Window)
Wakalah, optional mudharabah/wakalah on investment
Business Model
Takaful /
Conventional Mix
Conventional / Takaful Mix
Takaful Co’s only
Outsourcing agreement
with Arig
Retakaful only
Conventional +
Takaful Cos only for treaty. Allowed fac on halal risks from conventional

13. Existing Retakaful ACR ME + SEA AL FAJER Re SAUDI Re Tokio Marine
Incorporation
2008
May
September 2004
Capital Mln $
300
188
270
Auth 170
Paid 17
Shareholders
Khazana + Dubai Group
GFH + Dubai Group
Al Ghosaibi, Jordan Islamic Bank (listed)
Tokyo Marine Holding
RATING A-
AM BEST
BBB+
S & P AA
GWP na
36 million
2009 first year of complete operations
Takaful model
Wakala+ Mudharaba
Wakala + Mudharaba
Cooperative
Business Model
Takaful +
Conventional
Takaful+ Conventional
Life only

14. Available Capacities (*)
Million USD
ARIL
BEST Re
Takaful Re
Hanover
Labuan Re
MNRB
ACR
Saudi Re
Al Fajer
Prop/Eng
Prop
N. Prop 2 3 5 30 1
5-15
5-10
7.5
Variable
Marine 4
1.5
Family
0.1 1/
Life
1.66 to 3.33
0.7 no
Fac.
Property 12
PML 6 20 50 25
(*) Tokio Marine write only Family Takaful, and capacity non available
(**) Retakaful windows are not included in this presentation

15. Sample for requested capacities
Mln USD
Cedant
Property
Engineering
Accident
Marine
N.M XL
Marine XL
Motor XL
Africa
Sudan 30
12,5 9
0.5 10
Middle East
KSA 1
122 26 13
KSA2 60 8 4
Kuwait
11,2
1,5
UAE 1 34
2,5
8,5
UAE 2
17,75
20,5
2,4
Far East
Company 1 7 5
Company 2 39
16,8
16,2
Company 3
73,80
29,7
15,7
7,5 6

16. Capacity vs. demand Marine: USD 81.5 million
Treaties: few big players are asking for huge capacities:
USD + 67 million
Only 2 companies needs capacity exceeding USD 45 million
Facultative:
Property & Engineering: Available capacity million, which can accommodate more than 95% of the Facultative business
Marine: USD 81.5 million
The need for conventional capacity will only remain for very large risks or special lines; as Retakaful/ Reinsurance are global activities by nature

17. Challenges for Retakaful
The Retakaful must:
Provide the needed capacity for the development of the industry;
To move from the follower position to lead the companies programs;
To be able to price all lines of business;
To have a dual strategy:
For personal lines: to develop Family Takaful offer,
For industrial risks, to have the expertise, the tools & the pricing models,
Retrotakaful: Till now “darura” is still the rule (with limitations to XOL only)
to complete the chain: 2 options;
GTG Lloyd syndicate;
And/or Retakaful pool

18. Conclusion
The Takaful operators are required to cede to the existing Shari’a compliant capacities and “Darura” cannot/no longer invokes as a rule:
The obligation to cede to Retakaful will be implemented gradually by Takaful;
Takaful will continue relaying on conventional and London market for some LOB and for retrocession.
Treaty capacity exceeds the need for almost 90% of the existing Takaful / cooperative operators, and can absorb almost all the treaty programs.
However, there is still a gap to be fulfilled by Retakaful:
Specialty lines
Aviation
Energy, petrochemical
Very large property and engineering risks
The 10 Retakaful and the global players’ windows are now operational.
The available Retakaful is encouraging the Takaful companies to convert to Retakaful.
The time o convert to Retakaful has come; and it is up to the Retakaful by
their professionalism and commitment to attract Takaful.

19. Thank you