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Bahraini Islamic insurance firm Takaful International Co plans so 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 per cent a year, compared to 7 per cent 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 licence to set up an insurance company in Kuwait with a capital of 5 million Kuwaiti dinars ($17 million), 20 per cent of which will be ours," general manager Younis Jamal said in an interview yesterday.
"Takaful has also requested (a licence) to set up another company in Saudi Arabia with Gulf investors. About 25 per cent 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," he said. Jamal said Takaful, set up in 1989 and Bahrain's oldest Islamic insurance firm, planned to boost its market share to 18 per cent from an estimated 7.5 per cent in the country. 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 conservative Muslims that insurance, especially life insurance, was not un-Islamic. "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 per cent 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 Sharia, or Islamic law, which prohibit interest-bearing assets, and businesses involved in alcohol, pork or gambling. "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."
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