Takaful has been a haven for many Muslims around the world who consider conventional insurance policies to be haram, or religiously forbidden. Takaful, or Islamic insurance, is one Islamic financial instrument that has been growing robustly as a Sharia-compliant alternative to conventional insurance policies. Takaful premiums amounted to $12 billion in 2012 globally, with annual growth ranging from 20 to 25 per cent, which is one of the highest growth rates in the financial world, according to Al-Morsi Hegazi, the Egyptian finance minister. Speaking at the Seventh International Takaful Summit (ITS) held this week in Cairo, Hegazi said that while countries were seeking to recuperate from the global financial crisis, takaful has proved to be an effective instrument to accumulate savings and increase investment. Egypt first introduced takaful insurance in 2003, when the first takaful company started operations. Currently, there are eight takaful companies operating in the market, and these are achieving high growth rates jumping from eight per cent in 2008 to 27 per cent in 2012, Hegazi stated. Takaful premiums in the local market amounted to LE620 million in 2012, up from LE34 million in 2008. The percentage of these premiums to overall insurance premiums in Egypt did not exceed one per cent in 2008, whereas it reached 10 per cent of total insurance premiums in 2012, according to Hegazi. Moreover, takaful companies paid LE472 million in claims in 2012, which represents six per cent of the total claims incurred by the Egyptian insurance market. Despite these figures, the volume of takaful premiums in Egypt is small compared to other countries, Hegazi said. He said that the government was ready to increase takaful and introduce other financial instruments, such as sukuk, that would benefit the Egyptian economy. It has been preparing a new sukuk, or Islamic bonds, law that would regulate the issuance of such bonds in the Egyptian market. The law has drawn much criticism and was rejected by the Islamic Research Academy of Al-Azhar. The law was then referred back to the ministry of finance to reach consensus on the controversial articles. Hegazi said that the ministry was almost ready to send the revised sukuk law to the cabinet over the next few days in preparation for its presentation to the Shura Council for endorsement. Hegazi was hopeful that 2013 would see the first issuance of sukuk bonds in Egypt, and he said that the country had all the components to make Islamic finance tools a success. The government was ready to support legislation that would help in spurring the takaful industry in Egypt, he said, noting that Islamic financial instruments would not substitute other forms of conventional financial tools. “Both instruments are complementary to enhance the national economy,” Hegazi said. Ashraf Al-Sharkawi, chairman of the Egyptian Financial Supervisory Authority (EFSA), agreed with Hegazi that the takaful industry in Egypt was well below its potential. He said that insurance of all types represented a very small percentage of GDP, though Islamic insurance had achieved high growth rates in comparison with conventional insurance, and this trend was likely to continue. Al-Sharkawi said that takaful had played a significant role following the 25 January Revolution in protecting people's lives and properties. The insurance market, he said, had paid out LE4.5 billion in claims in 2012, increasing by 47 per cent from the year before. The takaful industry in Egypt had great potential due to the country's sizable market and the strong religious sentiment of its people, the secretary-general of the World Federation of Takaful and Islamic Insurance, Sirag Al-Hadi Qarib Allah, told Al-Ahram Weekly. In a takaful system, policyholders, or participants, are joint investors with the insurance company, which in turn acts merely as a pool manager. Policyholders share in the investment pool's profits as well as its losses. In case of surplus, the benefits are distributed between the shareholders and the participants. According to Qarib Allah, takaful could help spur economic growth, since instead of giving the participants any surplus from the takaful fund in the form of cash, this surplus could be reinvested in productive projects. “We can give participants shares in projects instead of small amounts of cash,” Qarib Allah said. “These projects would add to the country's economy.” The potential of the takaful industry in Egypt has also been evident in the success story of the Nile Family Takaful Company, which has been operating in the country since 2008. Sameeulhaq Thanvi, the company's managing director, said that the growth potential of the takaful industry in Egypt was big and was expected to expand in the coming years. Not only is takaful expected to grow in the Egyptian market, but it is also expected to expand in the world at large. Thanvi said that the expansion of takaful was driven by a fast-growing Muslim population, which is expected to constitute 24.9 per cent of the world's population by 2020. There are currently some 250 takaful insurance companies operating worldwide. In 2011, the global takaful market amounted to $12 billion, an increase of 31 per cent from 2010. Ernst & Young, the global advisory services firm, expects that the global takaful market could reach $25 billion at the end of 2015. Experts at the Cairo conference said that the fast-growing takaful industry was in line with a fast-growing demand for Islamic financial instruments worldwide. Islamic banking and instruments had gained momentum after the global financial crisis, since they had shown themselves able to withstand the impacts of the crisis. In Egypt, greater legislative support and a regulatory framework is needed to capitalise on the potential of the Islamic financial instruments. Hegazi and Al-Sharkawi said that the government would support any legislative amendments required to regulate and boost the takaful industry in the country. The holding of the International Takaful Summit in Cairo this year was a sign of the international community's trust in the Egyptian economy, according to Hegazi, and it was the first time the conference had been held outside London. Hegazi said that the conference would help increase awareness of Islamic banking and takaful insurance principles and practices. The two-day conference ended on Tuesday, and it featured some 50 international speakers who shared their experiences in a bid to establish a road map for expanding the takaful industry.
