Munich Re said today it has opened a branch in Kuala Lumpur that is entirely devoted to the Islamic form of reinsurance known as (re)takaful.
Takaful reinsurance is based on the principles of Islamic law, Shari'ah.
The firm said its Retakaful branch in Kuala Lumpur offers general retakaful (as an alternative to non-life reinsurance) and family retakaful (as an alternative to life reinsurance) that complies with Shari'ah principles.
Munich Re said it sees this as an area with major growth potential–1.3 billion Muslims, or 20 percent of the global population; make up the second-largest religion in the world. Islam is the state religion in some 40 countries.
The Takaful (Shari'ah-compliant alternative to insurance) market is currently thriving, with growth rates in double figures. Munich Re said its retakaful initiative caters to the needs of this client group.
The Group's retakaful branch will initially write business in Malaysia, but will extend the scope of its activities to other Southeast-Asian countries and beyond in the near future, according to the Munich, Germany-based reinsurer.
Ludger Arnoldussen, member of the Munich Re's board said in a statement: "We already enjoy very good relations with our clients in the Islamic world. Writing Retakaful business via our new branch will broaden and enhance those relations, giving us access to additional fields of business and new clients."
He added that "This is a further step in our Changing Gear program and will speed up the pace of profitable growth at Munich Re."
Under the retakaful system, the insureds form a community, which attaches great significance to mutual support and solidarity. Premiums are therefore paid as a kind of donation to help members of the community who sustain losses.
In addition to this communal risk-sharing, surpluses are placed at the disposal of the community. Premiums are invested according to strictly Islamic principles. Interest is prohibited and sectors such as gambling or alcohol excluded.
While most of the profits are returned to the community, the retakaful company receives a fee for managing the funds, Munich Re said.
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