Following his participation at the 7^th Annual World Takaful Conference, which ran from April 16^th- 17^th at the Dusit Thani, Dubai, Ghassan Marouche, CEO Takaful Emarat, who participated in a panel session entitled ‘Market Growth Engines: Capitalizing on the Key Business Lines Driving New Business Opportunities in the Global Takaful Industry’ afforded Business Islamica some of his precious time to further expand on the subject. The following Q&A was aimed at learning from his experience with the Takaful industry in the UAE and the region.

1)     What is the key business line driving new business opportunities in the global Takaful industry?

The business line that is driving opportunities in Takaful is the family Takaful or LIFE insurance sector. This is what will drive us forward. In the UAE, we have either a license to sell Life and Medical or Medical and General. We have Life and Medical. In Medical, we have too much competition and so our focus is on Life. I believe that LIFE is what will make it or break it, because we are a Shari’ah-compliant Takaful operator and when our board of directors ask us to go Retakaful, which we are licensed to do, we find that the conventional Re-insurance has a much bigger slice and portfolio of the market and as such our rates won’t be as competitive. At this stage, I prefer not to go Retakaful. Takaful operators should think in terms of long term profitability, which would come from Life and not from Medical Insurance, unfortunately.

For life, we are talking about individuals, and we have products to meet the needs of all individuals, whether nationals, expats, low and middle income people; everybody. Through our research we deliver.

2)     What separates Takaful Emarat from other Islamic insurance providers like Salama, Aman and others in the UAE?

We are dealing with a community that will only go with a Shari’ah-compliant company dealing with Shari’ah-compliant products. I cater for Muslims and non-Muslims as well. We have innovative products such as a fund specifically developed for Takaful Emarat and no one else, where 90% of the capital is protected, with the invested equities Shari’ah and board approved. I am providing something that even the conventional side does not have. This open ended fund, allows you to put your money and withdraw it in a few days or a few weeks’ time. This Islamic fund is expected to yield 3-5% and is 90% protected, which is great. I have around 7 million Dirhams as investments in it. It took me a year to get that fund going. You will find closed ended funds in the market, where you invest your money and wait on it for five years. But people are wary and even afraid of the stock markets.

Our products are backed by intensive research. I have a unique distribution structure. I cater for Life Insurers, and brokers who have their own direct sales force and who sell to us. We provide international services. On the Medical side, and because one of our founders is a Central European company called UNIQA Group Austria, we bring international expertise. We are concentrating on the Takaful concept, and not selling to sell, but selling to cover the needs of individuals. We are succeeding because we present the bare facts to the investor. We say look: “What are you investing in? What are your rates? What are expected returns? Who or what is your guarantee?” Based on all this, we ask people to make their decision. We are now around 148 employees, of which 100 are direct sales people. We are currently operating out of Dubai, Abu Dhabi and Sharjah. Slowly but surely, we are building the foundation and building on our experience to take it elsewhere.

3)     2010 Global Takaful contributions reached $8.3 billion, half of which came from Saudi cooperatives? How come?

Global Takaful contributions are mostly coming from Saudi Cooperatives. The answer is a simple one.  You have 7-8 million expatriates living in Saudi Arabia. With medical insurance compulsory, a Saudi medical insurance has to be a cooperative, thus you will notice that the contributions coming from the Saudi market is very large. You also have the Saudis and the private sector that have to be ensured by their employers. Insurance in Saudi Arabia has to be cooperative and Shari’ah-compliant. They have to distribute profits among the shareholders. In Abu Dhabi, there is compulsory medical insurance, Islamic or not. Sharjah, Qatar and Oman will follow soon. We are readying ourselves for that potential growth. We are revising our packages and methodologies, while updating our systems to take our share of Takaful medical when it becomes compulsory.

4)     Takaful is predominantly retail driven in most markets. How can the corporate segment of Takaful grow?

For corporate Takaful to grow, we need to become more competitive. Many Retakaful companies are adjusting their rates to allow us to compete in the corporate market. In Takaful, we have two funds. The participants’ funds and shareholders’ funds. Some Takaful companies are able to distribute profits back to the participants’ fund which is great. Most corporate insurance is taken up by the conventional side. We cannot sustain certain rates that we are seeing in the UAE. Even the conventional side is hurting. We see a lot of doctors in conventional companies being hit with heavy losses. The Medical side of Takaful is incurring heavy losses. This is not the way to get market share. It’s suicide. Those who have general insurance and making money on it, reduce the rates on the medical and cover their losses.  I cannot do this. I can only offer life or medical.

5)     Insurance companies continued to yield higher returns with an average return on equity of 8% in the GCC compared to the Takaful operators with 4%. Why is that?

On the conventional side, there are more means to invest. We are limited to Islamic products and thus we have limited opportunities. Where can we invest? Properties are high risk. We have to make sure that every investment is Shari’ah-compliant. Because we are young, we have to go low risk and low return. Family Takaful is our focus for high profitability.

6)      Strong competition, evolving regulations and shortage of Takaful expertise are identified as key risks in the GCC. Agree?

Unhealthy Takaful competition is hurting us while the biggest competition is on the corporate side, with group medical coverage, etc. I don’t enter a business to lose. I take it on a case by case basis. I will wait. Those companies entering with aggressive marketing strategy just to grab market share, on the medical side, will not survive. We are hearing that a lot of reinsurance companies are leaving the country. We are hearing about huge losses on group medical. When will this drainage stop? The attitude here is that there is no money in medical and this drives people to try to grab market share. But it’s not true. With the right package and necessary parameters to ensure there is no abuse, from the company, client or medical provider, one can make money.

About Takaful Emarat:

Takaful Emarat was established in May 2008 as a dedicated Life & Health Islamic Insurance company, through a joint venture between ‘Al-Buhaira National Insurance Co.’, the UAE’s leading insurance company, and UNIQA Group Austria, one of Central Europe’s most trusted insurance brands. It has a paid up capital of AED 150 Million. It was established to provide Takaful insurance in the Middle East with a view to expand internationally.