DUBAI WEIGHS SETTING UP NATIONAL RETAKAFUL FIRM
▶ Chief of Dubai Islamic Economy Centre says there is growth potential for the Islamic insurance industry in the UAE with the emirate as the centre
Dubai is considering the creation of a national Islamic reinsurance, or retakaful company, as the emirate moves towards positioning itself as the centre of Islamic finance, an official said.
The Dubai Islamic Economy Development Centre (DIEDC), which was formed in 2013 to implement Dubai’s 2021 vision to cater to all facets of Islamic finance and Sharia compliant industries, is leading efforts to create the retakaful company in collaboration with the private sector, the centre’s chief executive Abdulla Al Awar said.
“We are thinking of encouraging and developing the retakaful sector in Dubai and the UAE because it does have the potential to grow and Dubai can really position itself as a centre point also for the specific takaful industry,” said Mr Al Awar.
“The outlook is very good in terms of growth and sustainability of the takaful industry.”
Unlike conventional insurance, Islamic insurance refrains from any interest-related activities, gambling and other transactions not compliant with Sharia law.
The global takaful gross written premiums grew 14 per cent in 2015 to US$14.9 billion from a year earlier, according to a 2017 study by US consultancy Milliman.
The industry grew at a compound annual growth rate (CAGR) of 13 per cent between 2012 and 2015.
The Arabian Gulf takaful market grew at CAGR of 18 per cent between 2012 and 2015, higher than in South East Asia.
The Gulf had a 77 per cent market share of contributions, with Saudi Arabia, the largest Arab economy, taking the lion’s share of the market in 2015, with gross written premiums of $9.7bn, the report said.
In the Gulf, family takaful grew at a record of 34 per cent in 2015 in terms of total contributions, thanks to UAE driven-growth from the introduction of compulsory health insurance in Dubai.
The DIEDC is currently in contact with a private sector entity which is conducting a feasibility study on launching a national retakaful company, Mr Al Awar said.
“If we see the feasibility of such a project is positive and needed we will also have an audience with the relevant authority that issues the licenses such as the Insurance Authority,” said Mr Al Awar.
Dubai’s plans to become a global centre for the Islamic economy, includes many sectors such as finance and the halal industry, which will further diversify its income sources.
The centre is working with the Central Bank of the UAE, which is involved in the creation of a Higher Sharia Board for Banking and Finance that will supervise the Islamic financial industry in the country.
“The Higher Sharia Board plays an important part or function in terms of streamlining processes as well as standards among financial institutions that could act as a reference point,” said Mr Al Awar.
The UAE Cabinet approved in May the appointment of members to the Higher Sharia Board, which will be responsible for setting “rules, standards and general principles for banking and financial activities that comply with Islamic laws” and “a general framework for Islamic governance and fatwa issuance on matters highlighted by the central bank or other financial institutions” in the UAE.
The precise remit of the board has not been disclosed, but its creation puts the UAE on par with other Islamic countries with similar boards, such as Malaysia.
“We have a good anticipation that the Higher Sharia Board will also work with other international Sharia boards globally to make sure of harmonisation of standards between jurisdictions,” said Mr Al Awar.
“Harmonisation could only lead to an enhanced trade, but also enhanced activity between jurisdictions if products that are launched in one part of the world are accepted in other parts of the world.”