‘Takaful sector must evolve’

by Alfean Hardy
The government has called upon the global takaful and retakaful sector, which has weathered the global financial crisis relatively well, to embrace pragmatism, new developments and to pursue non-traditional opportunities in order to ensure the growth of the industry, Deputy Finance Minister Datuk Dr Awang Adek Hussin said.
In a keynote and opening address at the 5th International Convention on Takaful and Retakaful (ICTR) in Kuala Lumpur yesterday, Awang Adek said, in spite of the vestiges of the financial tsunami and the global contraction in insurance premiums as of end-2008, interest in the takaful sector remained strong.
"This is driven by demand for its services and international insurers in search of new avenues for revenues and market diversification. Between 2004 and 2007, average annual growth rate of the industry was estimated at 25% compared to traditional insurance at 10.3% and I strongly believe that this trend will continue to be strong over the next few years," he added.

However, Awang Adek said that there were several essential aspects that the industry needed to take on-board in order to contribute towards the growth of a viable and orderly takaful industry.
"Firstly, there must be mutual recognition and acceptance of diversity in Shariah interpretations.
"Malaysia has upheld the view that diversity in Shariah thoughts in itself is a strength and catalyst for innovations rather than rest raint s. Progress must be made. Stagnation, skepticism, fault-finding cannot be allowed to rule the day to the point of inaction and condemnation towards other who want to progress.
"We have also adopted the stance that any rulings on Shariah relating to Islamic finance, if delivered by a recognised body or authority, will be accepted as a valid and accepted ruling.
"We hope that this mutual recognition concept will accelerate the expansion of Islamic thoughts in the area of Islamic banking and finance. If more countries are willing to adopt this stance, it would radically transform the way the industry is developing," he said.
Another step that needed to put the industry on a sustainable growth trajectory, Awang Adek said, was placing emphasis on applied research in the areas of Shariah with the view to enlarge the existing operating boundaries within the global Islamic financial sector.
"Much needs to be done in the area of Shariah-applied research on critical areas impacting on the industry, like solvency, governance and financial reporting. We also need to expand further the boundaries of our takaful industry and venture into new areas including non-traditional areas," he said. Awang Adek said two areas that the takaful sector could venture into were in the areas of medical and health coverage, and microtakaful.

PIX: Malaysian Takaful Association chairman Datuk Syed Moheeb Syed Kamarulzaman (right) and Awang Adek (2nd right) with participants at KLIFF 2009
(This story appeared in The Malaysian Reserve on Nov 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)