Despite the current economic slowdown, ACR ReTakaful SEA is confident of a steady performance and hopes to achieve its targeted gross contributions (premiums) by the end of next year.
“The effects of the crisis are likely to be seen earlier in the direct sector before in reinsurance. Given the overall potential of our market, we are confident in the medium to long term, even if there is any short term impact,” said CEO Zainal Abidin M Noor, who sees significant growth in gross contributions by the company’s third year of operations.
ACR ReTakaful SEA, a wholly-owned subsidiary of the world’s largest reTakaful group, ACR Retakaful Holdings which is based in Dubai, received its license from the Central Bank of Malaysia on the 1st July this year.
“We are the only dedicated reTakaful player in Malaysia with A- rating and that helps us tremendously. Apart from that, ACR is already a strong brand, a quality brand, and it makes it easier to sell our services. We also have strong technical support, for example in the area of underwriting,” he said.
ACR ReTakaful SEA has been assigned a financial strength rating of A- (Excellent) by AM Best, one of the world’s leading rating agencies for the insurance industry.
Another contributing factor is the company’s business model that allows it to also accept businesses from non-Shariah compliant insurers that are “halal” and “suci”.
On the company’s business plan, Zainal Abidin said ACR ReTakaful is looking at the current potential markets in Malaysia, Indonesia, Brunei and Bangladesh.
The company aims to penetrate Malaysia and Indonesia, with equal emphasis on treaty reTakaful and facultative reTakaful. “Many professional reinsurers are not very active in facultative reTakaful. We will target the large and specialized risk (LSR) market,” he said.
For Indonesia, the company jointly markets its products with its counterpart in Singapore.
“The Takaful market in Indonesia is still young but growing fast. A lot of companies are conducting their Takaful businesses through windows. The recently announced new capital requirement for takaful operators is seen to be part of the authorities’ plan to strengthen the industry,” he said.
Touching on Bangladesh, Zainal mentioned that “At present, around 60 insurers operate in Bangladesh, including 6 Shariah compliant operators. Recently in September, a new law was passed, under which insurers would have to choose operating as conventional insurance or takaful operator, within 6 months. The law separates Islamic insurance business from conventional insurance. I see this as a positive development which will spur the growth of takaful there.”
ACR ReTakaful SEA has a Shariah Committee and its members are Dr Asraf Md Hashim and Dr Aznan Hasan from Malaysia, Dr Muhammad Imran Usmani from Pakistan and Dr Abdul Latif Mahmoud from Bahrain.
In an exclusive interview with MIF Monthly, Zainal Abidin spoke on the company’s business, focus and future plans amidst the current financial crisis.
How do you see the growth of the reTakaful industry in Malaysia and the global market so far? What kind of growth do you foresee for the reTakaful industry in Malaysia compared to the growth of the industry globally? What about the growth of conventional insurance?
There are about 1.3 billion Muslims in the world accounting for 20% of the global population, making up the second largest religion in the world. Islam is the state religion in some 40 countries. The Takaful market is currently thriving.
The global market value for Islamic insurance is expected to reach between US$10 billion and US$15 billion by 2016 if the current growth rate of 20% is maintained beyond the initial 3-5 years predictions.
As for Far East, the market size of the Takaful business is currently estimated to be around US$1 billion, with a growth rate of 20% per annum. Malaysia is currently the world’s largest
Takaful market and the government through its vision to make Malaysia an international Islamic financial center has plans to increase the Takaful market share to 20% of the country’s insurance sector by 2012 from the current 6.1%. The general reTakaful income in Malaysia is estimated at around US$100 million annually.
Demand for reTakaful would expand in tandem with the Takaful business, growing between 15% and 20% a year and feeding off an annual Islamic insurance market as large as US$3billion.
Is the current global financial crisis affecting the growth of the reTakaful industry?
It is really too soon to be able to make that kind of observation and probably no one is able to make predictions on all the effects of the crisis.
Generally, trends would likely appear in the direct sector before the secondary markets of reTakaful and reinsurance. However, given the overall potential of our market, we have every reason to remain confident in the medium to long term, even if there is a short term impact.
Which countries in Asia are you targeting at?
Our initial target markets are Malaysia and Indonesia and these followed by Brunei, Bangladesh, Thailand and the Philippines.
ACR ReTakaful is strategically located in Malaysia to capture the business opportunities arising from all parts of the Southeast Asian (SEA) region. Our physical presence here attests to our commitment to have a firm and sound understanding of the SEA market that we are serving.
The establishment of more reTakaful companies will promote Malaysia as the center for international Takaful business, which is one of the measures being taken to promote Malaysia as an international Islamic financial center.
With Malaysia being positioned as the upcoming Islamic financial center, coupled with the mounting demand for Shariah compliant financial products, ACR ReTakaful is in an optimum position to provide reTakaful services to our Takaful partners in this part of the world, thus helping to strengthen overall Takaful capacity in SEA.
Indonesia, the world’s most populous Muslim nation, also has a buoyant Takaful market and is expected to experience soaring growth in its Islamic financing market. We foresee room for consolidation in the Indonesia market which welcomes capacity.
ACR ReTakaful SEA hopes to step in and act as a catalyst for the growth and development of the Indonesian Islamic insurance market.
As for the overall SEA region, given that the presence of dedicated reTakaful players in the region is relatively emergent, we are at a stage where the industry players have to work much closer than before with authorities and regulators within the region to ensure that there is consistent understanding of the Shariah frameworks across countries and regions.
At present, there are around 60 insurers operating in Bangladesh, including 6 shariah compliant operators. In September 2008, a new law was passed, under which insurers would have to choose operating as conventional insurance or takaful operator, within 6 months.
The law separates Islamic insurance business from conventional insurance. I see this as a positive development which will spur the growth of takaful there.
The next big challenge for the Takaful and reTakaful industry is to work out a system of transparency, consistency and standardization, which should serve the purpose of enabling industry players to provide more effective and efficient Takaful cover.
How is the business of ACR ReTakaful since it started operations in July this year?
We are very pleased with our progress so far and ACR ReTakaful has been very well received in the marketplace. We are the only dedicated reTakaful player in Malaysia with an A- (excellent) rating by AM Best, which affirms that our business is based on strong capitalization, effective management and technical abilities. We also work with conventional insurance operators for “acceptable” and “halal” businesses.
What is the company’s target gross contribution for the 18 months ending the 31st December 2009?
We have made an excellent start but given the current turmoil and uncertainty, we do need to watch the developments closely.
The financial landscape has changed drastically within the very short time since we started operations in July this year and in view of the present situation, we will no doubt face many industry challenges ahead.
We are not changing our position but of course, like all prudent operators, we will monitor the market conditions closely and if necessary review our plans.
What sectors are you focusing on?
We are going for treaty business, particularly non-proportional, while at same time not losing our focus on facultative reTakaful across the major lines of business.
However, with our expertise and capacity, one of our competitive strengths is in our capabilities to underwrite specialized risks, like offshore energy, aviation, satellite and also special liability risks.
We aim to provide Takaful operators with not just capacity but quality capacity, such as firm understanding of SEA’s market conditions, efficient risk management backed by technical expertise, high underwriting standards and stable capitalization.
Our partnership with ACR (ACR Singapore) enables us to leverage on this existing known brand, which makes it easier to sell our services.
What are your future plans for the company?
Our immediate plan involves penetrating the local as well as the Indonesian markets, with equal emphasis on treaty reTakaful and facultative reTakaful.
As with every business, we have to pace ourselves and manage our risk appetite prudently to achieve sustainable growth.
We recognize that our goal for now is to work towards leading the reTakaful market with innovative and reliable reTakaful solutions.
Our focus currently is still to build stronger recognition, higher levels of market penetration with a stable book of business and developing a credible and lasting track record.
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