Pakistan’s second largest life insurance company informed members of the Karachi Stock Exchange (KSE) on Friday that it intends to enter the window Takaful business.
The board of directors of EFU Life Assurance has approved changes in its memorandum of association under Takaful Rules 2012 to launch Takaful, or shariah-compliant insurance, according to the notice sent to the KSE.
Total gross premiums of EFU Life Assurance amounted to over Rs14 billion at the end of the last year after increasing by 18.4% over the preceding year.
The Securities and Exchange Commission of Pakistan (SECP) replaced Takaful Rules 2005 with Takaful 2012 two years ago, which allowed conventional insurance companies to set up Islamic windows to conduct shariah-compliant business.
However, existing players in the Islamic insurance industry – two in the life segment and three in the non-life segment – resisted the SECP’s move, resulting in a two-year-long legal battle. Their plea that allowing conventional insurance companies to sell Takaful products would distort the Islamic insurance market won them a stay on the implementation of Takaful Rules 2012 from the Sindh High Court.
Three months ago, conventional insurance companies received the permission to enter the shariah-compliant segment when the stay order was finally lifted following an out-of-court settlement among conventional and Islamic insurance companies.
EFU Life Assurance is not the only company that has shown interest in setting up Islamic window operations. Jubilee Life, the largest player in the life segment in terms of gross premiums, is also eyeing the Shariah-compliant business after the implementation of Takaful Rules 2012.
Speaking to The Express Tribune on Friday, Jubilee Life Insurance CEO Javed Ahmed said the company is “working towards the launch of window Takaful”.
“It will take around three to four months to materialise,” he added. 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.
In addition to Jubilee Life Insurance and EFU Life Assurance, State Life Insurance Corporation (SLIC) is also set to establish Islamic window operations. However, its plan is currently in limbo because the state-owned insurance giant does not have a full-time chairman and no strategic decision can be taken by its incomplete board of directors.
A senior official at SLIC had told The Express Tribune a few months ago it would launch Takaful products as soon as the Ministry of Commerce appointed its chairman and the rest of the members of board of directors.
With the current level of insurance penetration in Pakistan – measured at 0.9% of the gross domestic product (GDP)–the potential market for Takaful appears to be substantial.
Total premiums of non-life insurance players, excluding government-owned SLIC, were in excess of Rs40 billion at the end of 2013. The share of the Takaful segment, however, is currently less than 5% in the overall insurance industry.
Published in The Express Tribune, July 26th, 2014.
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