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Risky Business A U.S. and Bermuda Under 40s (Re)Insurance Collaboration Winter 2010 |
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Takaful Reinsurance: An Opportunity to Grow By Ashley Hunter
In recent years the cultural landscape of the United States of America has changed significantly. With these cultural changes, the need to offer products and services for immigrants has become a must for industries such as insurance. Islamic Insurance, also known as Takaful, has shown tremendous growth in premium rates, growing 20 percent since 2000. According to Moody’s Investment Services, premium revenue is expected to grow to 7.4bn by 2015. Takaful insiders have attributed the rapid growth in premium volume to the lack of traditional U.S. insurers willing to comply with Sharia law. A typical insurer will invest at least 80 percent of un-earned and earned premium in fixed-income securities that will earn interest. Interest of any kind is forbidden under Sharia law. For this reason, many traditional United States insurers would be disqualified as a possibility for insurance to many Muslims living within the United States. A Takaful insurance scheme is very similar to a conventional mutual insurer, with a few deviations to account for some factors that are specific to the beliefs of Muslims. These deviations include clear separation of funds owned by participants and those owned by insurers. Investment funds are also restricted. Insurers are prohibited from investing in companies that are involved in entertainment, alcohol, and pork or other interest that are prohibited by Islamic law. As this industry continues to grow, so does the number of United States insurers entering the marketplace. The leader in this industry is Chartis Insurance Company, which has been successful in launching several insurance and re-insurance schemes. It is estimated that 130 insurers globally offer Takaful Insurance schemes, with only 4 of those insurers domiciled in the United States. With Muslims accounting for 25 percent of the world’s population, it baffles many insurance insiders as to why this segment only accounts for 5 percent of the entire insurance industry. As demographics change globally, income earnings increase among a younger generation of consumers. With this comes an overall social attitude change towards insurance. In the core Takaful markets, a younger population will need more coverage as government subsidies decrease and more families require private insurance coverage. As the insurance industry changes, it is imperative that we look for ways to accommodate growing cultural segments that have been ignored in the past.
About the author: Ashley M Hunter is President of HM Risk Group, a boutique insurance brokerage located in Austin, Texas, where she works as an international insurance and reinsurance broker specializing in construction, energy and aviation risk. Ashley can be reached at ashley@hmriskgroup.com. |
