TAKAFUL MARKET TO REACH $12 BILLION IN 2011 A recent report by Ernst & Young predicted
that the takaful insurance market will grow to approximately $12 billion in 2011.
However, the report, called Transforming
Operating Performance - The World Takaful Report 2011, also notes that, despite this expected growth, the takaful industry and its core markets have experienced another challenging year. It says that positive signs of economic recovery and improved business sentiment have been shaken by the socio-political uncertainty witnessed across the Middle East and North Africa region during the first quarter of this year.
Others agree that this sector faces a number
of challenges. “The retakaful market will continue to see
challenges going forward as we continue to see a soft market cycle and oversupply of capacity,” says Nav Garayal, director of the advisory unit at Aon Benfield. “We will also need to see a sustained recovery for Islamic economies, which, for example, have been
impacted by recent unrest in North Africa and the Middle East. Family takaful continues to be the only class of business that is displaying good prospects.”
Those within the takaful industry recognise
that there is still much work to be done. Parvaiz Siddiq, chief executive officer of Noor Takaful, acknowledges that takaful is still ‘significantly less developed than the broader Islamic finance industry’.
He said: “If we are to take advantage of the opportunities that are emerging on a global scale, we must perfect an industry-wide shariah- compliant corporate governance mechanism that people can put their trust in.”
However, despite the challenges that the
takaful industry faces, the Ernst & Young report acknowledges that while “the industry is not without
risks...its potential remains an important feature of Muslim emerging markets for many indigenous and global insurance players”.
SOLVENCY II DELAYS COULD HAVE KNOCK-ON EFFECT Delays in the regulatory process could hamper
the efforts of organisations to conform to Solvency II, according to industry experts.
Level Two proposals were supposed to have
been tabled by the European Commission for parliament and council by June this year. But because of Omnibus II, they will probably not be ready until January 2012.
“The problem is that Omnibus II amends the
Level One text, and so the Commission can only propose Level Two implementing measures after the Level One text is finalised,” says Yannis Pitaras, head of prudential regulation, Comité Européen des Assurances (CEA).
“The Commission will not be able to formally
propose Level Two measures until after Omnibus II is adopted. That means that the
“ The problem is that Omnibus II amends the Level One text, and so the Commission can only propose Level Two implementing measures after the Level One text is finalised.”
Commission is probably only going to be able to propose Level Two measures after January 2012. This is a concern for us, because it doesn’t leave enough time for companies to prepare. We need the certainty of what Levels One, Two—and to a certain extent, Three—would look like before they begin preparing for entry into Solvency II.
“That means that there is a timing issue
because of Omnibus II, and it is becoming an increasing concern for the industry. So we want certainty—we need to know what Levels One, Two and Three will be about as soon as possible to enable us to prepare, but at the same time, we want a proper consultation around Level Two and Level Three as well, so that ultimately they are provisions which make sense.”
Summer 2011 | INTELLIGENT INSURER | 9
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