Taking off: Jubilee to launch Takaful window operations

State Life to enter the market as well after chairman is appointed.

KARACHI:

The largest insurance players in both private and public sectors are soon going to enter the Takaful business by setting up window operations for selling Shariah-compliant life insurance products.

Speaking to The Express Tribune, Jubilee Life Insurance CEO Javed Ahmed said his company will likely launch Takaful window operations within four to six months.

Similarly, a senior official at State Life Insurance Corporation said the government-owned conventional insurance giant will launch Takaful products as soon as the ministry of commerce appoints its chairman and the rest of the members of board of directors.

“We will not stay out of the Takaful business for long once State Life’s chairman is appointed. It’s an untapped market with a huge potential for growth,” the State Life official said while requesting anonymity.

Conventional insurance companies received the permission to enter the Shariah-compliant segment following the recent lifting of the stay order from the Sindh High Court that had kept traditional insurers from launching window Takaful operations for almost two years.

“Just like conventional business, Jubilee Life will strive to take a lead in the Takaful business as well. In view of our vast distribution network and Bancassurance partnerships, we are confident that this is achievable,” Ahmed said.

Jubilee Life is the country’s biggest life insurance company with gross premiums amounting to more than Rs17 billion in 2013, which is 21.4% higher than the gross premiums written by its closest private-sector rival.

State Life’s gross premiums were over Rs45 billion in 2011. It has not released its financial data for the last two years because of the absence its chairman and an incomplete board of directors.

Ahmed said with the current level of insurance penetration in Pakistan -- 0.9% of the gross domestic product (GDP) – the potential market for Takaful is huge. “It is only a matter of devising an appropriate strategy to tap into this huge potential. Companies can continue to grow their business in double digits for the next 10 years at least,” Ahmed said.

His expectation of the double-digit growth rate for 10 consecutive years seems plausible. After all, Jubilee Life, which is currently a 100% conventional insurer, managed to increase its gross premiums from Rs8.2 billion in 2011 to Rs17 billion, a rise of 107% in just two years.

Ahmed says he expects the Islamic insurance operation to become profitable within two to three years. Typically, new insurance companies take five to seven years to reach the break-even point. But window operations by conventional insurers will likely achieve break-even sooner because these companies will capitalise on their existing infrastructure.

The Securities and Exchange Commission of Pakistan (SECP) held a session with Karachi-based conventional insurers on Wednesday in order to educate them about regulatory requirements in case they want to enter the Takaful business. A similar session will be held in Lahore on Friday.

Speaking to The Express Tribune, SECP Insurance Commissioner Asif Arif said many conventional insurers are interested in setting up window operations to cater to the Islamic insurance market. However, he did not disclose the exact number of conventional insurance companies that have approached the regulator for permission to sell Islamic insurance products.

With the share of less than 5% in the overall insurance industry, Arif said the size of the Takaful segment has substantial potential to grow.

Published in The Express Tribune, May 29^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.