Moderator Sohail Jaffer began with a question to Mohammed Muqeem on the global view of the Takaful industry. Muqeem said between 133 and 150 reTakaful and Takaful companies have set up worldwide within a short span of 15 to 20 years.

The Takaful industry recorded a growth of 20% compared to 2.5% for conventional insurance. Growth has been phenomenal and the trend continues. Muqeem said the Muslim population totaled 1.5 billion globally, of which 60% are below 25 years of age. There are two determining factors that are likely to show the trend in the development of Takaful — the shifting of wealth and the demographic distribution of the Muslim population.

According to Muqeem, the Takaful industry is likely to grow to US$7 billion in 2015, a small fraction of the total global insurance premium which currently stands at US$3.7 trillion. This indicates that there is a huge scope and gap to be covered by the Takaful industry.

Sohail then asked Norlia Mat Yusof about investment-linked products and how these investments are managed by Takaful operators. Norlia said the challenge in investment-linked products is to find the right instrument as the range of Shariah compliant assets in the market is still limited. The growth in the Islamic funds is remarkable and Etiqa expects growth of RM3 billion to RM5 billion (US$867.42 million to US$1.45 billion) in the next two to three years, indicating encouraging demand, particularly for investment-linked products.

She said Etiqa has launched five to six investment-linked products in the past. The liberalization in the guidelines on the investment-linked products which allow the insurance company to invest 50% abroad provides diversification and product innovation to the Takaful players as well as other insurance companies.

Another challenge is the returns expected from the Shariah compliant products. According to Norlia, clients tend to compare the returns expected from the Shariah compliant products with that of the conventional products. Hence, the Shariah compliant products have to compete in the market to offer a good value proposition to the customers.

Ismail Mahbob said MNRB Retakaful, being a young company, faces many challenges but considers these as opportunities. The main challenge is the conventional mind-set of various parties in the industry such as shareholders and the management. He said rating agencies also rate Takaful or reTakaful companies using the criteria applied for the conventional. Ismail said this is because rating agencies do not understand how Takaful operators operate and those not rated risk the possibility of not getting business.

He also said MNRB Holdings has a share in UK-based insurance company Salaam Halal and that there is huge demand for Takaful in the UK. He said research revealed that 67% of the Muslims who have insurance in the UK will shift to Takaful.

Dr Ludwig Stiftl agreed with Ismail on the need to change the mindset. He said the Takaful industry has tremendous growth potential.

Professor Sado Al Jarf said Saudi Arabia, which saw its first insurance company in 1985, now has 21 cooperative insurers. He said Takaful is a new transaction in Saudi Arabia and the challenge is that a lot of its people do not have knowledge of Takaful and those working in the insurance firms are not well-trained. He said Saudi needs professionals for its insurance industry.

Responding to Sohail’s question on how to penetrate the Takaful business in secular countries such as Turkey, Egypt, Morocco and India, Muqeem said one way is to set up windows at conventional insurance firms. He said several companies have made progress in some of these countries.

Muqeem added that India, which has a Muslim population of about 160 million, has the advantage as the insurance business has been in existence there for the last 100 years. “In the last few years, the insurance industry has opened up and there are new players,” Muqeem observed.

Dr Stiftl believes that all Muslim countries in the long run will have a Takaful industry. “This business is new. Takaful operators must target the untapped segment, the people who are not insured, not the new countries,” he said.