Salama expects 30-40% growth in 2008
The Islamic insurance market is one of the fastest growing sections of the financial services industry.
And with increasing demand being generated by 1.3 billion Muslims and growing per capita income in the Islamic world, the potential for such Shariah-compliant services is high.
Sheikh Khaled bin Zayed Al Nahyan, Chairman of Islamic Arab Insurance Company, or Salama, is sure the Islamic financial products industry will continue to grow at a fast rate over the next decade.
And he says the Islamic insurance sector in the UAE will expand by 30 per cent this year.
What do you expect Salama’s profit growth to be in 2008?
I believe the company’s profits will increase by between 30 and 40 per cent this year.
The total insurance sector achieved a 25 per cent growth rate in 2007 while Salama achieved growth of 30 per cent.
This success led to Standard & Poor’s upgrading Salama’s rating to BBB. Also BEST-Re, our Tunis-based operation, is the world’s largest re-Takaful company, operating in more than 60 countries.
The sector is expected to expand at the same rate this year.
What are the main drivers of this growth?
We see increasing interest in Islamic financial products among the world’s 1.3 billion Muslims and the demand is growing fast.
Also per capita income in Muslim countries is increasing and people are interested in saving and protecting their earnings in Shariah-compliant products.
What are Salama’s expansion plans for 2008?
Our goal is to acquire a major stake in a Malaysian Islamic insurance company – this will be finalised soon.
It will give Salama a strong presence in Asia, where demand for Islamic insurance is greatest.
We also have a Dh1 billion programme for acquisitions in the Middle East and Asia.
A number of options are currently under investigation.
Do you have plans for new Islamic insurance products?
Insurance products are very old and what we do at Salama is restructure conventional insurance products to make them compliant with Shariah.
We offer high quality and standards of service and access to Takaful best practices.
For example, we do not offer life insurance but Salama was the first Islamic insurance company in the GCC region to offer a Shariah-compliant family insurance product.
Our Shariah advisory committee studied the issue for two years to restructure life insurance products to be compliant. It is a very long process.
Do you plan to offer sukuk similar to traditional insurance bonds?
At the moment we do not have plans for such products. Only a few very large insurance companies offer them because they are very sophisticated and need a large amount of capital and investment.
We focus on products where there is increasing demand among our clients.
What are Salama’s plans for expansion in the local market?
The company is focusing on expanding its share of the fire, residential and commercial building, vehicle and international trade markets.
The local economy enjoys a high growth rate and the increasing exports and re-exports create an increasing need for insurance services.
Insurance companies are investing heavily in stock markets – do you think this creates risks for investors?
Insurance companies are major investors in the local stock markets.
Investing in stocks is not a marginal but an essential part of our business. We have high liquidity and have to invest the capital of our clients.
There were high loses in 2006 because of stock market decline but we learned the lesson. We hedge our companies against such risks.
Only small insurance companies will suffer from any decline in the stock markets.
The Accounting and Auditing Organisation for Islamic Financial Institutions recently declared that 85 per cent of Islamic products – especially sukuk – may not fully conform to all precepts of Islamic law.
But Sheikh Khaled says such products have been on the market for 15 years and Islamic scholars have studied them for a long time.
“There is a wide consensus among Islamic scholars about the basics of Islamic economy and financial services,” he said. “The differences appear in the implementation of
“In fact this debate and these differences are healthy but issuing a fatwa [religious opinion] should be considered very carefully.
“People would need fatwas all the time because as new financial products appear Islamic scholars would have to give their opinions on each of them.”
He said customers and the financial sector needed flexible fatwas that met economic realities and would prevent any misunderstandings about Islamic financial products.
“We have a lot of new Islamic financial instruments and we have to carry out practical examinations of these products so we can investigate their compliance with Shariah and amend them to ensure that they are fully compliant.
“Salama has a Shariah advisory committee consists of three Islamic scholars from the GCC region, Tunisia and Malaysia who provide different opinions on its products and ensure they meet the needs of the companies Muslim clients.”
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