Turin Islamic Economic Forum 2014

M Iqbal Asaria

Insuring Capital : Takaful

18 November 2014

Turin Islamic Economic Forum (TIEF 2014)

Presented at:

Opportunities in Europe

Contents

Insurance

Conventional Insurance

Co-Operative and Mutual Insurance

Takaful

Insurance • Rationale • Risk Mitigation • Actuarial Inputs • Moral Hazard • Mortality and non-Mortality Related • GDP and Insurance Penetration Levels • Insurance and Islam • Concept and Process of Insurance

Insurance

Conventional Insurance •Shareholder Driven •General and Life •Re-Insurance •Retro Insurance / Large Risks •Licensing

• Composite • General / Life

•Asset Management •Capital and Regulation

Conventional Insurance

Mutual and Co-Operative Insurance • No Shareholders • Pooling of Risks • Participant Owned / Managed • Evolution • Contribution Pools • Members’ Rights • Reserves

Mutual and Co-Operative Insurance

Shariah Objections •Gharar (Uncertainty) •Inherent in Insurance •No Valid Contract Possible

•Maysir (Gambling) •Mitigated by Insurable Interest

•Riba (Usury) •Asset Management

Insurance – Shariah Objections

Takaful

• Tabarru (Contribution to Takaful Pool) • Qard Provision as a Substitute for

Reserves • Risk Sharing Pool – No Gharar

(uncertainty) • Only Pure Risk Insured • Riba-free Asset Management

Global Gross Takaful Contributions 2007 - 2013 (Including Iran)

Global Gross Takaful Contributions 2007 - 2012 (Excluding Iran)

Takaful Provision – Conceptual Model

C O N T R I B U T O R S

T A K A F U L O P E R A T O R

Takaful Pool Contributions

Tabarru

Mudharabah / Waqala / Waqf Operating Contract

Ownership Management

Takaful Provision - Challenges

• Mutual in Spirit – Risk Sharing • No Gestation Period to Allow for Reserve

Build Up • For - Profit Hybrid for Capital Provision • T/O Obligation to Provide Qard al Hassan • Branding • Asset Management Risk / Returns

Takaful – Asset Management

Takaful – Asset Management Returns

Takaful – Investment Composition

Opportunities in Europe

• Significant European Market Potential • Demographics – Young Population • Emerging Family and Pension Provision Needs • Ethical Investment Opportunities

• Sukuks - Creating an Ethical “Bond” Class • Capital Market Instruments for Takaful Capital Needs • Long Term Investments for Takaful Needs

• Global Asset Management Expertise • Global Re-Takaful Provision

• Hanover Re; Swiss Re; Munich Re; Allianz

Takaful Resources • International Takaful Summit Archives • www.takafulprimer.com • ITS 2009, ITS 2010, ITS 2011, ITS 2012, • ITS 2013, ITS 2014

• World Takaful Reports • http://www.ey.com/UK/EN/home/library • WTR 2009, WTR 2010, WTR 2011, WTR 2012, • Takaful Insight 2013, 2014

Takaful Resources

Professor M Iqbal Asaria

mia@afkar.com