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Discover the untapped potential of Takaful Industry


Dr. Syed Arif Hussain is a motivated person, at present he is with Alpha Insurance Company Limited serve as General Manager Marketing and Compliance; his expertise in management, resource development, marketing and execution of business strategies.

His professional experience is spread over 24 years at progressive senior level positions and has the experience of underwriting, reinsurance, claims management and marketing with the State Life Insurance Corporation of Pakistan, Dawood Family Takaful Limited and as a Chief Executive Officer; he also headed Takaful Pakistan Limited a Non-Life Takaful Company and Excel Insurance Company Limited and Head of Takaful of East West Insurance Company Limited.

His expertise includes Life, Health and project related Insurances/Takaful schemes. He has extensive experience in restructuring, insurance operations and automation. He holds M.B.B.S. and Master’s Degree in Business Administration. He has also attended a number of Insurance/Takaful and management related workshops and conferences conducted locally and internationally.

Alpha Insurance Company Limited is a Subsidiary of State Life Insurance Corporation of Pakistan was registered in 1951 and to underwrite all classes of general insurance businesses.

Our company has acquired IFS rating “A” by JCR-VIS. With the objective of providing and delivering the best the organization is operational all over the country.

We are bonafide member of the Insurance Association of Pakistan. Our balance sheet reflects the financial soundness of the company with sizeable paid-up capital of Rs. 500 million, Equity 705 million.

Insurance Industry in Pakistan

There are currently 49 insurance (including Takaful) providers and 1 reinsurer operating in Pakistan, as follows:

  • 10 Life insurance companies, including 2 state-owned companies and 5 Dedicated Takaful operators;
  • 39 Non-Life insurance companies, including 1 state owned company;
  • 1 majorly state-owned reinsurer;

There are no local offices of international reinsurers in Pakistan. However, a number of local insurers reinsure with international reinsurers either directly or through a broker. It is a requirement of all local non-life insurers to cede at least 35 percent of reinsurance business to Pakistan Reinsurance Company Limited (PRCL) on a treaty basis.

The non-life insurance market has three top insurers who have approximately 60 percent market share. The market is found to be extremely price-competitive and is currently in an aggressive pricing dynamic which is putting significant pressure on the overall profitability of the local insurance market. The state-owned non-life insurer, National Insurance Company Limited (NICL), exclusively insures state’s non-life risks, but it does not compete with private insurers for non-state insurance business.

All the insurers are regulated by SECP. The two state-owned life and One non-life insurers are entirely owned by the Government of Pakistan, through the administrative control of the Ministry of Commerce and Finance, but are fully regulated by SECP. The non-life market majorly comprises of three main classes of business, namely motor, property and marine. Motor business is the largest single class of business but has been to have a reducing share of the total premium written whereas the actual amount of premium itself is also reducing, indicating a shrinking motor insurance market. Anecdotal industry estimates indicate that the vast majority of vehicles are uninsured, though if this was reversed then the market would significantly change.

Accidental and Health insurance business is allowed to be written by a life insurer as well as non-life insurer in Pakistan. Typically, this business is largely corporate accounts with very little retail or individual health business. This is also an extremely competitive market and is often part of a broader package of business for a large client. This often leads to under-pricing for the health insurance business as it is part of a total package of insurance business written by it.

What is Takaful

The word Takaful comes from the Arabic root word Kafala, meaning “guarantee”.

Takaful therefore is the practice whereby individuals in the community jointly guarantee themselves against loss or damage. For example, individuals can make charitable donations to a common fund from which they may each draw in the event that they suffer loss to their houses or livelihoods. It was first established in the early Islamic era with the purpose of promoting mutual solidarity and co-operation among the Muslim community.

In Takaful the elements of riba (interest), maisir (gambling), gharar (uncertainty) are removed from the operations.

Models of Takaful

There are almost following types of Takaful models practiced globally.

  1. Modarabah Model
  2. Wakalah Model
  3. WakalahWaqf Model

In Pakistan generally Wakalah Waqf Model is followed.

Takaful Industry in Pakistan

Pakistan, after passing crisis related to terrorism its economic impact and unstable political landscape, is in the process of reshaping its economy to meet the challenges of a global marketplace. Insurance being the key to the economic development is in the center of different measures taken by the government to revamp its economic landscape. Government. has introduced a range of reforms designed to promote and consolidate Pakistan’s position as an emerging market in the region.

The biggest change introduced in the insurance industry is to allow window Takaful operations to the conventional insurance companies. Previously to keep Takaful companies separate from conventional companies the regulators allowed only independent Takaful companies to work on Takaful model; however, now conventional companies with certain conditions, are allowed to do Takaful business through independent and separate window operations, called Takaful window operations.

The decision is beneficial for insurance industry as a whole and for Takaful industry in particular; this will enhance understanding of Takaful concept for professionals, insurers and insured that will help to increase Takaful penetration in the insurance industry, at present Takaful is only around 11% of the total insurance business.

Total insurance business for the year 2019 was PKRs. 99 billion and it is growing modestly with double digit growth rate, despite huge challenges faced by the country. The non – life insurance market is concentrated toward top four insurance companies that take around 60% of market share. The big players having huge historical experience in risk management and over the years they have accumulated reputation and reserves to offer competitive price that small business cannot afford.

The Takaful market is in its formative stage globally, however, for Pakistan it is very new concept and it need time to mature and take its position in the market. Takaful Rules 2012 is the basic law that governs the functions and conduct of Takaful companies as well as for Takaful window operations.

Takaful across the globe have different model which were developed and approved by renowned Shariah scholars that suits to their country, balancing the shareholders and policyholders role and rewards, to enhance risk management and ensure profitability to both policyholders and shareholders.

In Pakistan, the regulators allowed only “Wakalah Waqf Model” to operate, eventually with the passage of time other models may also be introduced in the country giving the options to get maximum benefits.

The following table provides the insurance industry data to understand how conventional and Takaful are moving ahead in Pakistan.

It can be noticed in the above tables that despite being huge potential for growth of Takaful business, the market share of Takaful was 8% in the year 2017 and it increased to 11% in the year 2019. However, growth is marvelous, it was 39% in the year 2018 and 27% in the year 2019 as against 10% and 14% for conventional business.

There are now 31 Takaful Operators authorized in Pakistan to carry out Takaful Business, out of which 5 operators are dedicated and full fledge Takaful Companies and authorized under the Takaful Rules, 2012 (repealed Takaful 2005) however 26 conventional insurance (Both Life and Non-Life) are awarded with window Takaful authorization under the Takaful Rules, 2012.

Future of Takaful

There is a lot of potential for the Takaful industry in Pakistan, as demonstrated by its robust expansion with annual growth rate of total assets and contributions.

According to the report, the global Takaful industry “continues to gain market share across several high value rapid-growth markets, which still show significant untapped potential”.

The Takaful industry indeed represents an important component in the overall Islamic financial system. Given its role in providing risk protection, the Takaful industry offers a suite of financial products and services that complement the existing range available for consumers.

In recognizing its importance, focus has been given in developing a dynamic and vibrant Takaful industry within our Islamic financial system. Where the industry is today has been an outcome of an accumulation of efforts in instituting a comprehensive Islamic financial landscape in our financial system

A strong institutional infrastructure and effective legal, regulatory and Shariah framework are the underpinnings of our Islamic financial industry.

New Takaful Rules, 2012 is implemented in Pakistan that has enhanced the Shariah governance framework aiming to assist Islamic financial institutions in meeting this overarching requirement, through further strengthening of the existing Shariah governance process, decision making, accountability and independence.

Reinforcements of the Shariah compliance functions include introduction of internal Shariah compliance officer and external Shariah audit requirements, supported by an appropriate risk management process and research capability.

This new framework is envisaged to contribute towards evolving a more robust and sound Shariah governance framework within Islamic financial institutions, with the establishments of end-to-end Shariah compliant control mechanism that promotes greater Shariah observance throughout an organization.

Effective implementation of the new Shariah governance framework will further promote stakeholders’ confidence and enhance the integrity of the Islamic financial industry, and for the Takaful industry, by reducing the risk of Shariah non-compliance, Takaful products would be at a more competitive edge in comparison with conventional insurance products, as discerning customers would opt for Takaful as their ethical financial solutions.

The regulator expects that most of Pakistan’s conventional insurers will eventually offer Takaful products. Takaful is seen as a bellwether of consumer appetite for Islamic finance products. It is based on the concept of mutuality: The Takaful company oversees a pool of funds contributed by all policyholders, and from which claims are paid. Insurance penetration, measured as total premiums to gross domestic product, has hovered at 0.7 percent of GDP for the last decade and now stands at 0.9 percent of GDP. This ranks as the third-lowest level in Asia, against 4.1 percent of GDP for India, a report by Swiss Re said.

Takaful has contributed marginally; the sector represents about eleven percent of the total insurance market, although this is expected to change in the coming year. Conventional insurers are bigger in size and have operated for longer, whereas Takaful companies are on average five to six years old, but Shariah-compliant products can have greater appeal to consumers as they do care about price and service but religious matters are always on their priority list.

Since the regime of Window Takaful Operations by Conventional counterparts are allowed in Pakistan which will increase the number of Takaful service providers which shall enable the Takaful industry to draw upon their years of expertise, reach, resources, brand image and loyalty of the conventional insurance companies creating a prospective win-win situation for all concerned.

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