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EXPERTS' INSIGHTS

3 TOsman MDAn Interview with:

Mr. Tarig Khalil Osman

Managing Director, United Insurance Company

Event: Sudan Islamic Finance 2016

Next Phase of Development

 

 

How widely are you looking to see how the takaful industry could be disrupted in Sudan?

And how are you assessing the impact of increased competition, distribution channels
and new technologies to your organisation? 
    

 

tko article1xWe have no concerns of disruption from international entrants to the market yet. Local players can cause short term disruptions by creating a price war and /or providing inferior services resulting in the lack of trust in insurance companies. In our organization, we are embracing change by first instilling the right principles of Takaful insurance. We also believe that the insurance market is too vast for serious competition and there is more room for collaboration and creation of shared value rather than competition.

For the past three years, our customers have decided to annually distribute 40% of our insurance surplus as a bonus to our staff and as reimbursements to our customers. In regard to competition, we believe in alliances and are focused on creating strategic relationships between our competitors.

As the nature of our business involves reinsurance that is mainly conducted internationally, we have fostered special relationships where we distribute work locally.

EXPERTS' INTERVIEW

3 TOsman MDAn Interview with:

Mr. Tarig Khalil Osman

Managing Director, United Insurance Company

Event: Sudan Islamic Finance 2016

Next Phase of Development

 

 

INTRODUCTION

In asking questions about Takaful Insurance, the normal view of economic growth will not be sufficient. One must take a few parameters, which makes this industry different:

> Takaful was established in Sudan in 1978 and only started gaining traction worldwide from the year 2000 in a very young market.

> Takaful’s growth is over 15% per year for the past 15 years and its estimated value as of 2015 is between 12 to 15 billion USD.

> There are less than 300 companies worldwide with over 50% in GCC coun-tries and 20% in Malaysia.

 

1. How do you see the impact of the global economic growth slowdown on the insurance industry, particularly Takaful? And in what ways are you using information to assist in making strategic and risk decisions for your organisation?

Although the global economy might be slowing down, our niche of Takaful Insurance has been growing mainly due to its infancy and acceptance as an alternate to conventional insurance. The growth of Islamic banking worldwide is also another major reason for the growth of our industry and for banks to be truly ‘Islamic’, their insurance services must be sharia compliant. When we look at the developing world in general, and specifically in the Africa region, the insurance sector is relatively very small with vast potential. For Takaful Insurance, the vast potential has become immense.

Our main approach in making strategic and high risk decisions is based on the development and implementation of a long term growth plan.  During the period 2000-2010, the development of the relationship between Shareholders and Policyholders has can only be described as unique. The first partnership agreement was enacted in which the headquarters tower investment project was completed with great success for all involved. Since 2010-2015 a new relationship reached new levels with surplus distribution to customers and profits to shareholders reaching their largest numbers.

 

2. In retrospect, how would you describe the development of the global Takaful industry? And what factors differentiate Takaful in Sudan from other markets?

Takaful was created in Sudan in 1979 and since 1992 has been the only system in Sudan. During the past 37 years, the Sudanese Model has evolved into what is considered the most ‘Islamic’ model currently in the world.

To describe our system in general:

1. We conduct all insurance services under a wakalah model with all operations fees deduct-ed1  and insurance surplus/loss is presented to Policy Holders/customers for their disposal at the end of each calendar year.

2. At least one member becomes a full voting board member and is elected by and from the Policy-holders of the company.

3. All investments of the company are to be invested in Shariah compliant activities or industries under a Mudarabah or Partner-ship2 model, with Shareholders on a pre-agreed profit sharing agreement.

It is similar to a mutual fund in terms of our insurance services with all surplus/loss the sole ownership of the customers but the main difference is we make profits for our shareholders via our investments services.

The two other main models are the Saudi and Malaysian models. The Saudi model conducts all insurance services under a ‘Wakalah’ concept, however the distributed profits to Shareholders are calculated as 90% fees of Insurance Surplus. The issue of shareholders receiving any funds from Insurance services is not acceptable to the Sudanese model as the funds were donated to fulfil claims, and if there are no claims then the rest of the funds must go back to the Policyholders to decide on Surplus distribution.

In the case of the Malaysian model, the insurance services are conducted under the ‘Mudarabah’ system where the insurance surplus is divided between shareholders and policyholders; which has been declared non-sharia compliant by many Islamic scholars.

 

3. How would you describe the most challenging factors facing the Takaful industry in Sudan and the broader region? How concerned are you about further potential economic, political, social and business threats to the growth of your organisation and the broader industry in Sudan?

The issue of international banking and transfers as well as credit rating is our main concern. We are part of the international arena yet Sudan’s unique pariah status is causing serious issues.

In regards to the main issues facing Takaful worldwide, there is a lack of a unified body and the existence of three main models with each country creating its own unique model. There is also a lack of qualified scholars and the adaptability of shariah laws with local laws are all main areas of concern. We need to hold conferences across countries as well across regions. Nations think only locally and make rules that address their viewpoints, and in this case we need a unified cohesion for Takaful to truly grow into its potential. Even within the different models, a general outline that accepts different versions must be created. There are various organizations working to that end and they must be supported and endorsed further.

 

4. How widely are you looking to see how the takaful industry could be disrupted in Sudan? And how are you assessing the impact of increased competition, distribution channels and new technologies to your organisation?


We have no concerns of disruption from international entrants to the market yet. Local players can cause short term disruptions by creating a price war and /or providing inferior services resulting in the lack of trust in insurance companies. In our organization, we are embracing change by first instilling the right principles of Takaful insurance. We also believe that the insurance market is too vast for serious competition and there is more room for collaboration and creation of shared value rather than competition.

For the past three years, our customers have decided to annually distribute 40% of our insurance surplus as a bonus to our staff and as reimbursements to our customers. In regard to competition, we believe in alliances and are focused on creating strategic relationships between our competitors.

As the nature of our business involves reinsurance that is mainly conducted internationally, we have fostered special relationships where we distribute work locally.

 

5. What is your outlook for Takaful in Sudan in the short to medium term? And how will United Insurance maintain a competitive advantage over other operators in an already saturated market?

Our outlook for Takaful is really optimistic for both the short and medium terms. As we develop, we are creating an awareness that can only increase growth in Takaful, not only in Sudan but throughout the world.

In regard to United Insurance maintaining a competitive advantage, we believe corporate governance is key. In 2015 we were the first company in Sudan to create a new organizational chart with the appointment of a Managing Director who is in charge of the Investment Portfolio and the General Manager in charge of the insurance services of the company. We have also created Investment and Compensation committees that are composed of the Managing Director and Policy Holder Board Member and General Manager, as well a rotating Board Member. These committees were all made to create policies and procedures as well as oversight and guidance to all company operations. The inclusion of the Policy Holder Board member is to ensure customers benefit while the Managing Director benefits the shareholders and the General Manager benefits the employees.

In regards to competing in a saturated market, this relates directly to the blue ocean vs. red ocean theory. If we regard the existing market, it is so small that it is insignificant. But when we consider the potential vast blue ocean potential, we are at the tip of the iceberg and only now uncovering how vast it is. We have just recently started health insurance which we believe is one of the pillars of making Africa rise.

We believe our market is not yet saturated and there is an immense opportunity for companies to grow if we are able to spread insurance awareness between small/medium business owners and individuals as well as home owners where more than 90% are either non –insured or inadequately insured.

 

REFERENCES

1. Insurance Supervisory Authority limits all operations expenses to not exceed 15% of turnover of the company
2. United Insurance was first company to create a Partnership agreement with its Policy Holders in the building of it Headquarters Project

ZEP-RE Profit Soars Despite Global Economic Challenges

 

    • Net Profit grows to Ksh1.9 billion (USD 19.9 million), as total income at Ksh12.9 billion (USD129 million)

    • Increase of 10 percent in gross written premiums in financial year 2015 to Ksh13.8 billion (USD138.7 million) over 2014.

    • Proposed dividend of Ksh450 million (USD4.5 million) to be paid.

    • Gross losses amounted to Ksh2.3 billion (USD23 million) while net retained losses stood at Ksh400 million (USD4 million) resulting from the impact of the Nepalese earthquake.

Mombasa: 27 May, 2016 – ZEP-RE (PTA Reinsurance Company) grew significantly in the financial year ending December 31, 2015, recording Ksh1.99 billion (USD19.9 Million) in net profit despite the harsh economic environment.

 ZEPRE AGM270516 Pic1s

 

 

Speaking at the Company’s 25th Annual General Meeting held in Mombasa, ZEP-RE’s Board Chairman Mr. William Erio said: “The year 2015 started with great promise but intervening negative pressures namely a slowdown in China (a key trading partner of the COMESA region), a fall in global commodity prices, uncertainty in the Eurozone (due to the Greek debt crisis) and a strengthening dollar turned the economic environment on its head. The global economic situation negatively impacted economies of the region resulting in slowdowns, reduced consumption and a weakening of local currencies against the dollar.”

 

In addition to the economic slowdown, the Company had to deal with the effects of  two major earthquakes in Nepal, one of its major markets, which resulted in gross losses which amounted to Ksh2.3 billion (USD23 million) while net retained losses stood at Ksh400 million (USD 4 million).

 

“The fact that ZEP-RE withstood such a catastrophe is testament to the Company’s strong financial position and a versatile risk management system that includes an effective reinsurance programme,” the chairman added.

 

Commenting on the company’s performance, the Secretary General of the Common Market for Eastern and Southern Africa  (COMESA), Mr. Sindiso Ngwenya said the company had remained true to its developmental role as outlined in its founding objectives.

 

“I am happy to note that ZEP-RE’s performance is attracting investors from within and outside the African continent. This can only bode well for the company and its growth goals,” Mr Ngwenya said.

 

 

Good performance

Gross written premiums rose by 10.6 percent to Ksh13.8 billion (USD 138.7 million) in 2015, built on the continued and systematic implementation of the company’s strategy of taking service closer to its customers.

 

The total income (net earned premium, investment income, commission earned and other income) for the year 2015 reached the highest level in the company's history. Total assets grew by 21.4% to Ksh31.4 billion (USD310 million) and total equity rose by 18.1% to Ksh16.9 billion (USD169 million) over the 2014 results.

 

“We have recorded growth in our key markets of Kenya, Uganda, Sudan and India supported mainly by growth in infrastructure development in those markets,” ZEP-RE Managing Director Mr. Rajni Varia.

 

Tied to this demand for support of infrastructure development by ZEP-RE’s member countries, is the company’s growing international reputation in underwriting property, casualty, life, marine and motor businesses.

 

The company currently writes over 4000 treaties from 500 companies in 50 countries drawn from Africa, Middle East, and the Indian Sub-continent.  In Eastern and Southern Africa, the company enjoys a greater goodwill as demonstrated by the 10% mandatory cessions being offered by governments of Kenya, Tanzania, Zambia and Uganda.

 

“Our business in the region is not limited to the 10% mandatory cessions as shown by increased additional gross premium we underwrote in Uganda and other markets in 2015,” said Mr. Varia.

 

The company expects to maintain strong growth in 2016 despite fall in oil & commodity prices and terrorism threats. This growth is expected to be driven mainly by a combination of factors including infrastructure investment and the expanding service sector in most member countries.

 

“The renewed business confidence globally coupled with a resilient and steady regional economy should help us consolidate and increase business currently underwritten in our core markets. This should put the ZEP-RE in good stead to achieve its business goals and objectives for the year,” Mr. Varia said.

Key Financial Trends: 2009 – 2015

2009

2010

2011

2012

2013

2014

2015

Gross Premium Written

55,748,911

            59,843,116

63,536,571

81,714,820

100,181,402

125,437,018

138,755,947

Net Written Premiums

  44,266,616

            46,042,768

49,846,359

66,307,584

83,964,961

105,888,455

116,235,351

Net Earned Premiums

  40,214,408

            44,361,208

46,489,807

60,683,391

77,695,433

96,367,104

110,275,997

Investment & other Income

    8,253,469

            10,117,026

11,083,593

15,255,819

14,921,584

17,619,892

18,875,457

Total Income

  48,467,877

            54,478,234

57,573,400

75,939,210

92,617,017

113,986,996

129,151,454

Claims Incurred

  23,437,454

            27,097,758

26,103,374

30,355,413

40,667,775

51,190,046

59,786,689

Commissions & other
operating expenses

  18,602,983

            22,133,214

22,693,198

33,902,114

36,586,089

44,091,207

49,403,820

Profit for the year

    6,427,440

              5,247,262

8,776,828

11,681,683

15,363,153

18,705,743

19,960,945

Dividends Paid
& Capitalized

    1,200,000

              1,311,000

1,573,200

2,359,800

3,226,200

4,115,300

4,500,000

Total Assets

  87,128,548

103,110,370

130,337,123

154,088,372

201,843,403

255,731,818

310,496,459

Total Equity

  44,474,180

            49,987,272

66,656,019

78,774,839

105,728,865

143,586,785

169,683,104

 

********************

About ZEP-RE: 

ZEP-RE (PTA Reinsurance Company) is a regional organization charged with the task of promoting trade, development and integration within the COMESA region through trade of insurance and reinsurance business. ZEP-RE was created by an Agreement of Heads of State and Government of the COMESA region on 21st November 1990 in Mbabane, Swaziland.

 

The Company has been in operation since 1993 and is headquartered in Nairobi, Kenya. ZEP-RE also operates regional offices in Douala, Cameroon; Lusaka, Zambia; Harare, Zimbabwe, Abidjan, Cote d’Ivoire and a Retakaful Window in Khartoum, Sudan.

 

 

http://www.zep-re.com/

       

AWARDS & RECOGNITIONS


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The Takaful Summit is the largest gathering of Takaful Companies in the world. The theme of the 15th Annual Conference was “Pathways for Matching Islamic Finance Assets to Takaful” in which we participated on Session IV Africa Panel – The Emerging Prospects of Takaful in Africa” as Platinum Partners.

 

 

TAKAFUL INSURANCE IN THE NEW SHARED WORLD ECONOMY

 

This presentation explains the Sudanese Model of Takaful insurance and use United Insurance as an example of a company; To discuss Takaful in the Developing World; To get feedback from this forum and be able to contribute to the future growth of Takaful Insurance Worldwide.

Presentation Contents:

  • SUDAN TAKAFUL MODEL - HISTORY
  • UNIQUENESS  SUDAN TAKAFUL MODEL
  • THE UNITED EXPERIENCE
  • PERSONAL EXPERIANCEIEPresentationBanner1
  • TAKING IT FURTHUR AT UNITED
  • CONVERGENCE
  • PROBORTUNITY
  • PESTAL ANALYSIS
  • CHALLENGES
  • OPPURTINITIES
  • TAKAFUL FOR THE WORLD
  • THE REAL MEANING OF TAKAFUL
  • TAKAFUL & THE NEW SHARED WORLD ECONOMY

 

 Get more dtails - Download\View Full Presentation (PDF Format)

  • Mr. Babiker H. Dirar Al Amarat - Khartoum
    E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
  • Mr. Zuhair Subahi

    Al Amarat 41 Khartoum

  • Mr. Waleed Maysara

    Al Riyadh Khartoum

  • Ms. Muna Ali

    Al Mamoura - Khartoum

  • Mrs. Mahasin Al Abid

    Khartoum South

  • Mr. Asaad Mubarak

    Omdurman

  • Mr. Imad Nasr

    Al Rawda - Omdurman

  • Mrs. Mawahib Hassan

    Khartoum Bahri

  • Mr. Ahmed Abdelrahman

    Wad Medani

  • Mr. Ahmed Al-Emam

    Al Managil

  • Mr. Al-Faki Marzoug

    Al Hasahisa

  • Mr. Asim Abdel-Hamid

    Port Sudan

  • Mr. Salah Yousif

    Kassala

  • Mr. Yasir Hamid

    Al-Obeid

  • Mr. Al Geili Hamdan

    Sinnar

  • Mr. Nazar Abo-Zaid
  • Mr. Osama Hadi Bloula

    Sajjana

  • 1
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