Islamic insurance products, otherwise known as takaful, are mutually beneficial coverage policies that cater specifically to Muslim communities looking for Shariah-compliant savings and investment solutions. Currently the takaful industry comprises only around one percent of the cumulative global insurance market but that will soon improve as highly populated Muslim markets such as Indonesia, Saudi Arabia and Malaysia begin to spend more on protection policies. In April, Ernst & Young’s World Takaful Report forecast the takaful market would likely be worth US$12 billion in 2011, growing 31 percent from US$9.15 billion in 2010. Key takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth. Major foreign insurers have duly taken note of the huge growth potential from this brand of products. For example, Standard Chartered and Allianz Takaful in Qatar entered into a 5 year agreement to distribute Alliaz Takaful’s insurance services through Standard Chartered Bank in 2010. The two insurers then quickly partnered again toallow Standard Chartered SME insurance products to be sold through Allianz Takaful in Bahrain.
Takafol SA was established in 2003 to tap into South Africa’s emerging Islamic insurance market, which now brings in an estimated ZAR 3 billion (US$419 million) in annual premiums. The company found success in being South Africa’s sole firm providing short-term takaful insurance for business, vehicle, personal and household cover. In 2008, Takafol made AIC their underwriting partner and this relationship contributed to Takafol SA’s further development, with personal lines and commercial business growing by more than 66 percent over the next two years.
Due to their successful partnership, Absa Group, parent company of AIC, decided to acquire Takafol SA and merge their operations into Absa’s own developing Islamic financial services sector. After the transaction in completed, Takafol SA will become part of Absa Islamic Banking and operate as the new brand Absa Takafol. The integration of Takafol SA’s Islamic product portfolio into AIC will enable greater control over the company’s underwriting, pricing and administrative efforts. Through AIC meanwhile, the newly-rebranded Absa Takaful will enjoy a greater capitol position and be better able to respond to customer needs in a dynamic international environment. The group will also maintain that Absa’s new range of takaful insurance products will continue to meet global standards of Shari’ah governance.
Speaking on the transaction, Edwyn O’Neill, AIC Managing Director, told reporters that the acquisition of Takafol SA would make Asba the leading provider of Islamic financial solutions in South Africa, with a look towards developing the takaful market on the rest of the continent. “This deal demonstrates Absa’s commitment to provide the Islamic community with a holistic financial services offering that is Shari’ah compliant. Today, we cement our relationship with the Islamic community and recognize that there is a need for similar products in the rest of Africa.”
Uwaiz Jassat, Takafol SA’s CEO who will head the new unit, confirmed that incorporation into Absa would enable their company to further develop their specialized Islamic portfolio for clients and provide the necessary means to expand their presence further in Africa. “The global Takaful and Re-Takaful industry is experiencing significant growth. The principles of mutual or joint guarantee are the foundations of Takaful and play a significant role in the economic and social development of societies. By integrating into the Absa Group, Takafol South Africa will be well positioned to expand Absa’s Takafol offering into the African continent,” Mr. Jassat told reporters.
This article is from www.globalsurance.com, the full article can be read here: http://www.globalsurance.com/blog/absa-invests-in-takaful-insurance-418120.html