While Takaful currently only represents a small fraction of the global insurance industry, it is among the fastest growing categories, rising over 20 percent a year in most available markets.
Research indicates that gross Takaful contributions have grown from $1.4bn in 2004 to over $3.4bn in 2007, and there still exists an expanding and untapped Muslim population on almost every continent. Based on research interviews and estimates, the likely size of the global Takaful market could be over $8bn by the end of 2012.
Bearing this in mind, the Hannover Re Group recognised the potential and decided to enter this niche market, establishing Hannover ReTakaful. The group has had extensive experience in the operations of cooperatives and mutuals in the past, and so entering the market was logical.
Hannover ReTakaful BSC (c) was established as a fully Shariah compliant company, licensed by the Central Bank of Bahrain (CBB). It was formally registered on October 3, 2006 in Bahrain. The company’s authorised capital is $135m and currently has a paid up capital of $54m.
The board consists of André Arrago (chairman), Christian Lefebvre and Mahomed Akoob. Arrago is a member of the Executive Board of Management of Hannover Re Germany and Lefebvre is the Head of Hannover Re’s Facultative Operations. Akoob, who also serves as managing director of Hannover Retakaful, has extensive experience in the reinsurance market and has been with the group for a number of years.
The Shariah Advisory Board of the company consists of eminent scholars from around the world namely, Dr Mohammad Elgari, Mufti Abdulnabi Hamidi and Mufti Hassan Kaleem. The board supports and underpins the development of the company and its product offering. Mahomed Akoob noted “Hannover Re is the first of the major international reinsurance groups to devote itself to the emerging Islamic insurance market with its own exclusive subsidiary.”
Growth of an industry
Bearing in mind that a quarter of the world’s population are adherents to the Islamic faith, 70 percent thereof are under the age of 35 and the global Islamic insurance market is scarcely developed, the group sees extremely attractive prospects for innovative product design. The governor of the Central Bank of Bahrain (CBB), His Excellency Rasheed Mohammed Al Maraj, noted, “We are sure that the participation of Hannover Re will make a positive contribution to the development of the financial sector of the Kingdom of Bahrain and the region.”
Bahrain has been chosen as a base due to its success as a financial and insurance hub, supported by the following success factors:
The ongoing support by the government through the CBB;
A comprehensive and clearly defined legal and administrative framework;
A highly skilled and qualified workforce;
Strategic location;
Excellent infrastructure facilities;
Liberal economics based on free market.
Hannover ReTakaful is a 100 percent subsidiary of Hannover Re Germany and therefore an integral part of the group. It provides Retakaful underwriting expertise for Takaful companies worldwide, in all lines of business on a proportional, non-proportional and facultative basis. Hannover ReTakaful has substantial underwriting capacities for property, casualty and family retakaful.
Recognised success
In 2007, Standard and Poor’s awarded a rating of A with a stable outlook to Hannover ReTakaful. The rating was reaffirmed by S&P in 2008. For a retakaful operator, a top rating is a prerequisite for being offered and awarded the full spectrum of business to underwrite.
For the financial year ended 2008, Hannover Retakaful had a gross premium of approximately $42m. Over the last two years, it has established business relationships with more than 70 clients spread across MENA, South East Asia, the Asian sub-continent, South Africa, Sudan and the UK. Hannover Retakaful is also watching developments carefully in other potential takaful markets.
According to Mahomed Akoob, setting up a fully-fledge retakaful company is evidence of the strong commitment of the group to takaful development. The group decided not to take a ‘wait and see’ approach or stepping slowly into the market, by opening windows without adequate tie-up capital. Neither did it want to be a party that exploits momentum without being able to contribute significantly.
A subsidiary approach coupled with professional expertise is the model that Hannover Re has adopted. It avoids many possible problems of having dual systems in one body, as might be found in the window concept, but at the same time secures full access to group know-how and technical experience. By so doing, it will be able to boost its role by implementing conventional discipline and professionalism into the new market that faces natural scarcity of both.
Hannover ReTakaful has been playing a primordial role in its cooperation with regulators and industry bodies such as ICMIF, the IFSB and the GTG to ensure soundness within the industry. In recognition of its contributions, it has received a number of awards, such as:
Innovation Award 2007, International ReTakaful category, Middle East Insurance Forum (MEIF);
Best ReTakaful Company 2008 Award, International Takaful Awards 2008;
Best ReTakaful Operator 2008 Award, Islamic Business and Finance Awards 2009 by CPI Financial.
Most recently, it received the Best ReTakaful Issuer 2009 Award, from World Finance, and the award for the Best Reinsurance Company at the International Takaful Awards 2009. The company is growing steadily within the market. It is confident that growth will continue, especially as Takaful appetite increases within the Islamic community and Takaful companies increase placement with professional and technically sound Retakaful companies rather than conventional reinsurers. The opportunities for increased takaful insurance, particularly in the GCC is tremendous. The growth in the region and low insurance penetration means that there are substantial prospects for further development.
The robustness of the industry is emphasised by the fact that Islamic institutions have been less affected by the global crisis because Shariah law prohibits interest-based products. Islamic institutions were therefore not involved in some impaired and toxic asset classes that have affected many conventional banks. Takaful insurance and reinsurance have demonstrated resilience to current conditions, which is expected to continue. Sustainability may be attributed to liquidity, capital adequacy and strict guidelines as prescribed by shariah.
“We are in a very exciting market which is open to innovation and knowledge sharing. Hannover ReTakaful is committed to playing a significant role in the growth and development of the Takaful and Retakaful markets.” said Mahomed Akoob.
Hannover ReTakaful transacts all lines of non-life, life, and health reinsurance and maintains business relations with more than 5,000 insurance companies in about 150 countries. Its worldwide network consists of more than 100 subsidiaries, branch and representative offices on all five continents with a total staff of roughly 1,900.
The rating agencies most relevant to the insurance industry have awarded Hannover Re very strong insurer ratings (Standard & Poor’s AA- Very Strong and AM Best A Excellent).
The company’s overarching objective is to expand its position on the international reinsurance markets as a major reinsurance group of above-average profitability with an optimally diversified portfolio. The portfolio of Hannover ReTakaful supports this objective.
For further information tel: +973 17 214 766;
email: mahomed.akoob@hannover-re.com
