MANAMA, 25 September 2005 — Bahraini Islamic insurance firm Takaful International Co. plans to set up joint ventures in Kuwait and Saudi Arabia to take advantage of the industry’s rapid growth, a senior company official said.
Bankers say Islamic insurance is growing up to 20 percent a year, compared to 7 percent for conventional insurance. Islamic insurers underwrite about $2.1 billion in policies a year, a number that is expected to hit $6.7 billion in five years.
“We and partners have obtained a license to set up an insurance company in Kuwait with a capital of 5 million Kuwaiti dinars ($17 million), 20 percent of which will be ours,” General Manager Younis Jamal told Reuters in an interview on Saturday.
“Takaful has also requested (a license) to set up another company in Saudi Arabia with Gulf investors. Around 25 percent of the new firm will belong to Takaful,” he said, adding that the company would have a capital of $27 million. “The Saudi market is big and there are big projects announced continuously, so we expect the demand on insurance to be high.” Jamal said Takaful, set up in 1989 and Bahrain’s oldest Islamic insurance firm, planned to boost its market share to 18 percent from an estimated 7.5 percent in the Gulf Arab state. He said demand for Islamic products was rising in the Gulf with growing awareness of the importance of insurance. Business opportunities were also opening up with the rising number of Islamic financial institutions in the Middle East and Asia.
Jamal said Takaful, which has a capital of 5 million Bahraini dinars ($13.3 million), was waiting for approval from Bahrain’s central bank to set up a holding company. “We plan to own stakes through this company in Islamic insurance firms inside and outside Bahrain and manage them from here,” Jamal added.
Jamal said his company had to convince many Muslims about insurance. “We held many lectures to educate people and started to provide (life) insurance as a service to support families where a parent had died rather than as a price for people’s lives or a loss and profit topic. “Now life insurance sector is making the highest growth of about 35 percent within the Gulf as more people get to know how important this is for them.”
Islamic insurance resembles conventional mutual insurance. Premiums are paid into a pool which customers effectively own, with any surplus repaid to customers, less the insurer’s fee.
The pool is invested in ways that comply with principles of Shariah. “When providing insurance to hotels it does not cover bars or discos, but we reinsure these with international conventional insurance firms and then provide their income to charity.”
