1. 1 The growth potential for Islamic Insurance (takaful) in the Arab Market A.Rahman Tolefat Head, Licensing and Information Manama, 21 st March 2006

2. 2 MENA REGIO IS A SIGNIFICANT LARGE MARKET WITH HIGHER GROWTH TREND North Africa Egypt Algeria Tunisia Morocco GCC countries Bahrain UAE Kuwait Oman Qatar Kingdom of Saudi Arabia Other Middle Eastern countries Lebanon Syria Jordan Iran Iraq GDP GROWTH OF MORE THAN 5% in 2004 SECOND FASTEST GROWING REGION AFTER CHINA

3. 3 Attractive opportunities for new international players THE INSURANCE MARKET IN THE REGION IS EXPECTED TO GROW SIGNFICANTLY IN THE NEAR-MEDIUM TERM Growth expected in the premium Revenue Pool in the MENA region US $ million 1,700 6,000 20002007 Source:McKinsey Team Analysis, Swiss Re, WMI average growth of 36% per annum

4. 4 what Takaful? Derive from the verb Khafel Derive from the verb Khafel Mean in Arabic mutually joint guarantees or Guarantees each other Mean in Arabic mutually joint guarantees or Guarantees each other

5. 5 Pact among group of participants who agree to jointly guarantee each other in case of any member suffer from a loss or misfortune in the future.

6. 6 Flow of contributions Policyholders funds Contributions (premiums) base on donation Pay claims, reinsurance & expenses Investments (Mudarabah) Surplus Shareholders funds Wakhala fees 70% 30% Reserves Dividends

7. 7 Obligation of participants Shareholders fund Participants fund Insurance operation Deficit Option(1): Qarad Hassan Investment Participants Option (2):Pay additional premiums

8. 8 Issues Specific to Takaful Conventional An exchange contract (sale and purchase) between insurer and insured An exchange contract (sale and purchase) between insurer and insured A combination of donation and Agency or profit sharing contract. A combination of donation and Agency or profit sharing contract. Premiums owned by policyholders Premiums owned by insurance company Takaful Premiums Contract Policyholders Policyholders pay premiums to the insurer. Participants mutually expected to share the surplus or pay the deficit

9. 9 Issues Specific to Takaful Conventional Insurer is liable to pay the insurance benefits as promised from its assets. Takaful operator act an agent. If there is a deficit in takaful funds, the operator expected to provide interest free loan Takaful No restriction apart those imposed for prudential reasons. Assets must be invested in shari’ah compliance instruments Insurer Investment

10. 10 Takaful companies CountryNumber Bahrain14 Malaysia8 Kuwait4 Qatar1 Iran5 UAE4 Sudan16 other8 Total60

11. 11 Geographical Distribution of Takaful contributions GPW (US$ Million) Market share (%) Arab Countries58028 Iran77737 Malaysia28013 Other Asia Pacific Countries 42520 Other522 Total2,114100

12. 12 Arab Countries Vs Malaysia Market

13. 13 Growth Potential for Takaful GCC & MENA Malaysia Iran Why?

14. 14 Family Takaful would grow at faster rate of 20% p.a. than general takaful of 8% p.a. Family Vs General growth? Family General

15. 15 Enhancement of Islamic banking and finance huge infrastructure project (multi billion projects): -Durrat al-Bahrain. -Qatar energy city. -Financial Harbor. Growth Factors for General takaful?

16. 16 General Takaful Enhancement of Islamic banking and finance Market share of Islamic banks in customer finance: -Islamic Mortgages -Automobiles - Personal financing.

17. 17 Growth Factors for Family takaful? Factors Cost of education Compulsory insurance Joint family system Social security benefit Young populations

18. 18 Growth Factors for Family Takaful Demographic Young and more educated population - Takaful product awareness (health and financial securities). - Demand of takaful products (housing …)

19. 19 Growth Factors for Family Takaful Reducing Government security benefits Population will save more for the future (Annuity and saving plans)

20. 20 Growth Factors for Family Takaful Cost of education Education is greater priority for people in Arab countries Saving plan for children education

21. 21 Growth Factors for Family Takaful Economic Growth, per capita income and insurance penetration Insurance penetration: -Saudi 0.5% -Malaysia 6%

22. 22 Growth Factors for Family Takaful Diminishing of joint family system Force to have their own financial security Compulsory Insurance Open the market further for takaful products

23. 23 Survey Conducted Saving for the future (education)? 80% with Banks Do they understand differences between banks and insurance 91% No Awareness campaigns are needed

24. 24 The most important factor Branding Identity Surplus distributed to the participants for both general and family takaful

25. 25 Survey Conducted Change from conventional to Takaful if a reasonable percentage of surplus distributed? 70% will move to takaful companies on a condition that the same customer services quality will be provided

26. 26 International conventional insurers Movement of international players to takaful Foster growth of takaful

27. 27 Market potential for takaful worldwide – projection for 2015 US$ BillionMarket share (%) Middle East4.238 South East Asia3.734 America1.311.7 Africa1.19.6 Europe0.393.5 Other0.43.2 Total11.09100

28. 28

29. 29 Thank You..