INSURANCE

The Strategic Takaful Lead

          Majed Akel, General Manager of General Takaful Co. spoke about the reasons why most financial institutions and banks are opening Takaful subsidiaries. Akel also spoke the future of his company’s business in the Kingdom of Saudi Arabia, Jordan and Lebanon. Then he shed some light on the future prospects of his company.

Akel spoke about the reasons why most companies are opening Takaful subsidiaries, as there are more than 140 companies because it is one of the safest fincail institutions currently, in wake of the crisis. Akel added that "the principal of Islamic insurance is that customers pay contribution and not premiums, they are partners and they get part of the profit at the end of the year. However, in case of losses the shareholders handles that part and shield the customers. It is solidarity among people based on Islamic Shariaa. As we have to deal with Moudaraba and Mourabaha. The Takaful industry is still growing in Qatar and it is still in its early stage of growth. General Takaful has been around one year in Qatar but I can assure you that our company will grow very fast. As General Takaful, we are planning to become one of the leaders in the Takaful market in Qatar, especially that we have strength of character with Qatar General Insurance and Reinsurance Co... Our customers come from a wide variety of backgrounds, they liked the concept of Takaful and trusted our company especially our provided services, so they became our partners. We also follow a very stringent rule on paying claims; if our customers are entitled we have to pay them, which eases customers’ burdens and provide them with peace of mind."

Concerning the future of his company’s business in the Kingdom of Saudi Arabia, Jordan and Lebanon, Akel said "the Takafl business has a big portion in the Saudi market. However, we are focusing on our local market before thinking of expanding in the Saudi market. However, we are thinking of opening up new branches in Qatar by next year." "Because of the financial crisis, it is now the right time for the Takaful industry to step up and play its role, as its reputation has not been tarnished at all.

Takaful Ramadan Sports Session

          Takaful International Company concluded its second Ramadan sports club session at Manama Sports Club lounge in Jufair under the auspices of Younis Jamal, Chief Executive of Takaful International Company. At the end of this session, the two sports clubs were declared as winners. In addition, Younis Jamal was honored by the Organizing Committee for his dedication to the success of this session

and also for his continued support to the activities of the company. In this occasion, Jamal said: “This kind of events promotes the team spirit among the staff outside the scope of work and I express my thanks to the organizing committee for its valuable efforts towards achieving the desired goal and success.

Building Momentum in Syria

          In times of recession and global economic collapse, Syria undoubtedly looks inviting to most insurers and reinsurers. It is still a new market with big potential and a population of 20 million; such markets help stabilize our economy and build a better tomorrow. Success is all about making the right move. "Ultimately, Syria has a lot of growth ahead of it," emphasized Samir S. Nahas, Managing Director of GlobeMed Syria. GlobeMed Syria started its operations two years ago, and the company controls more than 50% of the Syrian insurance market. However, GlobeMed Syria has five other competitors. "The market is still slow as people are not yet used to insurance, there is a lack of insurance awareness. We need more education for the masses," added Nahas. All the concerned parties like the Syrian insurance Supervisory commission and the Syrian Insurance Federation as well as the rest of the companies are trying hard to increase awareness. "And there are different means to accomplish that, these are not always easy to access but we are trying hard with the assistance of the proper authorities to reach the population in one way or another." On the other hand, when the government starts making insurance compulsory, the market will automatically be enhanced. So far, there are only 75 to 80 thousand adherents in the medical insurance sector. "This is too small a number for our two years operations. Nevertheless, the growth will speed up and in the coming two years we will reach the two million threshold," he added.

There are thirteen different companies in Syria including the national company and two new takaful companies, and there is one company in the process of applying for a license. Nahas believes that the number of companies is more than enough for the current market and authorities should not go beyond ten companies in the start. If the authorities grant licenses to additional companies that would harm the existing established organizations. The market as a whole needs more time to mature and develop. Therefore, for the time being 14 companies are more than enough. "Additionally, we are six TPA, which is also adequate for this stage in the development of the market. I hope the authorities will stop issuing new license." On a side note, the capital required for a new company is US$14 million for general insurance and US$3 million for life. That is quite a large capital and in order to acquire such a capital companies need to underwrite a substantial amount of business. "Therefore, I am always trying to compute the capitalization of the companies, which is reaching 300 million, and compare it to the market capitalization which has not yet produced 250 million dollars, after two years of operations," he said.

GlobeMed Syria has a capital of US$ One million; it is the biggest among the TPAs. It has around 40 employees; it is serving around 80000 of the market adherent, and six of the 13 companies. "You could say that we are the leaders of the market, but we believe in competition as it drives creativity and efficiency in the market, and creating more services, which are vital part in medical insurance," Nahas explained.

In 2008, GlobeMed Syria broke even and started earning profit this year. "We achieved our targets and we are confident that in the next three years we will make larger profits."

The total premiums in the Syrian market are around US$200 million, and medical takes only US8 million. Nevertheless, only five million Syrian nationals have medical insurance. Thus imagine the potential in the market when awareness grows and our penetration increases.

"We are continuing our business plan and helping insurance companies to market their medical plans, and enhancing the medical insurance needs in the market, as we have dealt with professional people who really know the market and its intricacies," Nahas added. GlobeMed Syria also helps companies to develop and design products in addition to reinsurance. Not to forget GlobeMed Syria is part of a larger group that has around ten sister companies in the region.

GlobeMed Syria has a branch in Aleppo and management is opening a new branch in Latakia and in several others area, depending on the number of customers. "Our branches consist of doctors and delegates that undertake all the administrative and control purposes."

Nahas went on detailing the effects of the crisis on the region: The crisis will need some time to be resolved, and we will require strict regulations to alleviate its fallouts and shorten its span. However, in our area I don’t think that we were affected like Dubai was. We were affected indirectly, as our insurance and banking companies were heavily regulated." But in other sectors for example the industries were affected by the drop in demand and prices.

Another effect is the loss of jobs by expatriates in the GCC which created a burden on the local market to find new job offers. In Syria, most problems have been quite benign and indirect. Therefore, we were not seriously affected and I think that these undirected consequences will not last long. But this is not the case in other countries such as Dubai which will face big problems that will last a long time. However, Dubai is getting substantial help from Abu Dhabi which will alleviate some of their problems.

Arig Scores Highest Again

          In the current environment of global credit freeze and at a time when listed firms in the Gulf have been struggling to attract capital, regional issuers have surprisingly shown an increasing level of transparency, according to the latest GCC transparency rankings. The BASIC (Behavioral Assessment Score for Investors and Corporations) index developed by The National Investor (TNI) of Abu Dhabi in partnership with Hawkamah Institute for Corporate Governance, Dubai, improved by 8.3% since 2008 - an indication of the rapid progress made by regionally listed companies in improving transparency and disclosure.

"All crises have an upside too", stated Dr. Nasser Saidi, Director of Hawkamah. "Shrinkage of the financial pie has resulted in greater competition for the available capital, which, in turn has forced Gulf firms to adopt better corporate governance policies."

For the second year running, Arig (Arab Insurance Group) of Bahrain took Number One honors among the 607 companies listed in the Gulf, which for the first time included NASDAQ firms listed in Dubai. Runners up included UAE companies Emaar Properties, Sorouh Real Estate, Abu Dhabi Commercial Bank and Aldar Properties. In accepting the award, Yassir Albaharna, CEO of Arig, commented: "We are extremely pleased and proud to be selected as the leader in terms of transparency, disclosure and corporate communications for the second year running. This is a wonderful reward for our efforts to be as open and informative to our stakeholders as possible."

Arig is one of the largest Arab-owned, professional reinsurance providers in the Middle East and North Africa. Arig is listed on the stock exchanges in Bahrain, Dubai and Kuwait and offers a wide range of reinsurance products and services. Arig’s subsidiaries include Takaful Re (Dubai), Gulf Warranties (Bahrain) and ARIMA Insurance Software (Bahrain).

Best Re’s Modern Tuning

          The best way to get the best information about the insurance and reinsurance industry was to conduct an interview with Riyad Karray. In his profound observations on Best Re, Riyad Karray, General Manager of Best Re started by shedding some light on his company’s latest projects and performance. Then he moved on to speak about Best Re operations in the region, in Lebanon, Tunis and others countries. As the United States unemployment rate inches towards double digits, more Americans are left without health insurance and are looking forward for affordable alternatives. Karray also gave his opinion on the AIG debacle, and the state of the insurance business in Dubai. Karray started by shedding some light on his company’s latest projects and performance, saying "We closed our accounts in December 2008, which has been a very interesting year. However, we managed to make a profit of US$10 million, on a gross income of 200 million. We have been steadily growing but we are mainly focusing on our underwriting results. Last year, even though we have been affected by the crisis and its fallout on investments, we managed to limit that to a very constraint level and managed to accomplish one of the best underwriting results ever for Best Re." This means that the foundation and Best Re’s core business are fine and sound and "we will continue this strategy in the next few years." There has not been any major change in Best Re’s structure, other than opening a representative office in China. Best Re has also five other offices: Malaysia, Algeria, Senegal, Tunisia, Istanbul and Beirut and it is worth noting that Malaysia is one of the major offices generating around 60% of Best Re’s premiums and has been stable for the last five years. The Middle East market has been very competitive, especially in the UAE, with a very low margin compared to the risks involved. "But we have been witnessing a progress in the market, not a major shift though, but a good readjustment. As Best Re, we have been very conservative as the rate has not been adequate at the time, but now we could get more involved in these markets. Finally, we changed our shareholders to SALAMA Group and we are trying to streamline our logo and name with that of SALAMA Group, having the same colors, mission and vision."

Concerning the AIG debacle Riyad Karray explained that the portfolio of AIG was a good one; the problem comes from a small line of business which affected the whole company. And this small line was controlled by a small number of staff based in London and it affected the whole company. The Business model of AIG was and is still a good one.

In a move to UAE insurance market, Karray explained that the premiums have not been affected; only the investments side of business. "Now we are facing a recession and business is slowing down and we will have to be careful because in recession, insurance is less important to companies and there is a greater moral hazard. Therefore, companies will prefer to pay less and less for more services and more insurance coverage," he added.

Then Karray moved on to speak about Best Re operations in the region, In Lebanon, Tunis and others countries "So far we are quite happy of our operations in Lebanon, as we choose it for historical reasons. Our office in Lebanon covers all the Middle East and the GCC. We are currently trying to work more in Lebanon as the market is still fragmented due to the presence of many companies but its fundamentals are much better than in the GCC where market suffers from increased capacity." The markets of morocco and Algeria are very important and have a lot of potential, and Tunisia is the smallest one. Companies in those markets are becoming more creative to reach special niche and they are targeting the middle class which forms the majority of their societies, by providing motor, real estate and life insurance. Algeria witnessed a good growth but Karray believes that it could grow at a much faster pace. "We are trying to have a better position in the future in these markets because we know these market and we could help them grow. Therefore, we recently enhanced our offices in Tunis to serve the whole area, with new talented underwriters and officers that will offer better services and new products," Karray concluded.

t’azur Focuses on Innovation

          t’azur, the new name in Takaful, focused on product innovation within the Islamic Insurance industry at the World Takaful Conference, which ran from the 14th – 15th April 2009.

Headquartered in the Kingdom of Bahrain, t’azur has plans to expand and offer its General and Family products across the GCC and MENA region through organic growth, strategic acquisitions and strong local distribution partnerships.

t’azur, which is backed by an initial authorized capital of $500 million, has set out on a bold and ambitious program to be a region-wide market leader in both Family (Life) and General (Non-Life) Takaful. With industry experts projecting an $11 billion market for Takaful by 2015, t’azur’s Chairman believes that the organization’s ability to innovate in the industry will allow it to reach its long term objectives.

"One of the major elements we will focus on innovative Takaful products and t’azur’s ability to meet the broad array of protection needs of its policyholders. Within the framework of a Shari’a-compliant entity there is an opportunity to develop and grow the Takaful industry. t’azur aims to attend to the evolving needs of both Muslim and Non-Muslim policyholders for ethical products," says Sheikh Abdul Aziz Bin Naif Al Orayer, Chairman, t’azur.

t’azur became operational in Kuwait and Bahrain in 2008 thanks to a strong team of seasoned local and international experts with proven financial and Takaful/insurance backgrounds. It was established, and is supported by seven Islamic Financial Institutions from GCC countries.

Takaful is an Islamic alternative to conventional insurance. It is a mutuality concept where resources are pooled to help the covered members (beneficiaries) through Shari’a-compliant products. The Takaful industry has grown rapidly in the Far-East, mainly in countries such as Malaysia and Indonesia, but there has been an increase in demand in the GCC and the Middle East.

The 4th Annual World Takaful Conference (WTC 2009) was held at the Dusit Hotel in Dubai. A true embodiment of the industry’s growth, the WTC brought together industry leaders from across the world to debate and map out the major growth drivers for the Islamic insurance industry.