Lloyd's Creechurch syndicate's chief executive said his firm is set to begin underwriting reinsurance programs tailored for the Islamic marketplace and expects 500 percent growth in five-to-six years.
The new operation, a first for the market, will open up a range of classes, providing Takaful, or Islamic insurance products, specifically designed to meet the needs of the world's Muslims and abiding by their religious precepts, according to Lloyd's.
Islamic insurance products have strict rules which forbid entering any contract that could be deemed as gambling. Traditional insurance and reinsurance models, where a payment of a smaller premium provides the potential of a larger claims payment, breaches Islamic law, Lloyd's said.
The new endeavor "enables the policyholders to share in the ultimate returns on the underwriting," Bruce Graham, CEO of Creechurch in London, told National Underwriter.
The concept of mutuality is "with policyholders, rather than other forms of mutuality," he noted, adding that, similar to a mutual, a mechanism would enable the syndicate's policyholders to share in the ultimate profits derived from the Islamic products.
In the future, after the firm moves into Takaful, it plans to market Takaful reinsurance, he said. "That's a second-phase development as we become established."
Mr. Graham predicted that growth within the primary Takaful market would be "at least 20 percent per annum. So within five-to-six years we'd expect 500 percent growth."
He added, "We think it's an extremely rapidly developing market, and we know there are a number of initiatives afoot to assist that development, particularly in places like Malaysia."
One of the inhibitors to the development of Takaful, he noted, has been availability of secure reinsurance from compliant insurers. "So, we would hope to assist in that capacity, and the growth should at least match the growth in primary business."
Initially, he said, Creechurch intends to open a service operation within Dubai. Initially, he said, the majority of income will be derived where Takaful operators are currently established, including Malaysia and Indonesia.
The primary growth is in personal lines, with auto being the key area as coverage becomes compulsory, he noted. This will be followed by personal property and small commercial lines. Large commercial risks are already covered because of "the need to protect the larger marine and energy-type risks," he said.
"We are working very closely with Lloyd's and it is a brand new initiative, and so we'll be entering it very cautiously," he said. "But we do see there is a very large growth prospect." The time frame for growth remains to be seen, he said.
The new entity is expected to sit alongside its existing Syndicate 1607.
According to the Web site of the international Cooperative & Mutual Insurance Federation in the United Kingdom, Takaful is an Arabic word meaning "guaranteeing each other," or joint guarantee.
The site listed the principles of Takaful:
o Policyholders cooperate among themselves for their common good.
o Every policyholder pays a subscription to help those that need assistance.
o Losses are divided and liabilities spread according to the community pooling system.
o Uncertainty is eliminated with respect to subscription and compensation.
o It does not derive advantage at the cost of others.
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of "bear ye one another's burden," according to the Web site.
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