Global Investment House "Global" announced today that it is to launch Al Fajer Retakaful Insurance Company KSCC (Al Fajer) as a Reinsurance Islamic Company with a paid up capital of 50 million Kuwaiti Dinars (KD), the first licensed Retakaful Company in Kuwait and the second the Gulf region.
Mr. Omar El-Quqa, Executive Vice President at Global said that the Takaful Industry is witnessing growth at a fast pace and large scale and AlFajer aims to seize this opportunity on the regional and international levels.
“International Takaful industry, AlFajer’s market, is expected to generate annual premiums of USD3-3.5 billion. This new industry is expected to grow at 15-20% per annum over the next 10 years and is projected to grow 2-3 folds over the next five to eight years, depending on industry and currently not much competition is evident.”
He pointed that Global, on behalf of Al Fajer, has appointed HSBC Insurance Brokers Limited to act as business advisors for Al Fajer. HSBC Insurance Brokers Limited will advise Al Fajer in various aspects of operations of the company including identification of new business opportunities, and provide assistance with recruitment of key members of the management team, development of internal reporting systems, formation of underwriting and claims handling function, training of staff members and capital management including retrocession.
Al Fajer is proposed as a Closed Kuwaiti Shareholding Company, registered and established under the regulatory guidelines of the Kuwait Ministry of Commerce to provide Islamic reinsurance in observance with the Islamic law.
It will invest the company’s surplus funds in portfolios with leading Islamic investment companies and products in accordance with provisions of Islamic law.
“Al Fajer will aim to get listed on the Kuwait Stock Exchange in three years time, in accordance with Kuwaiti Corporate Law,” said El-Quqa.
The management of Al Fajer will be drawn from a pool of local talent and international expertise. The management will have personnel who understand the Arab region and culture practices, judicial system, administrative system, as well as maintaining good relationships with government authorities. It will also employ personnel's with international experience who will bring with them knowledge of the world’s best practices in the reinsurance industry.
Based on the expected demand in the Retakaful market, financial assumptions made an initial capital outflow of KD50million and an Equity IRR for Al Fajer estimated at 16.3%.
El-Quqa expects the opportunity in the Reinsurance industry to grow at a fast pace that will benefit Al Fajer from this potential growth. Other reasons for the progressive growth in the insurance industry include increased public awareness on the difference between traditional and Islamic insurance, a high percentage of non-insured public in the Arab world, a growing need and demand for Takaful insurance in the region, in addition to increased demand on all type of insurance.
The Global Takaful and Retakaful industry witnessed a growth at a fast pace (estimated at 15-20% per annum) an industry with a lot of potential. As Muslims across the world, become more and more aware of the non-Shari’a compliant nature of conventional insurance and reinsurance products, and Islamic companies start offering competitive Shari’a compliant products.
The gross insurance premium as a percentage of GDP for the Arab region is 1% compared to 9.4% for the USA, and in terms of the value USD26 per capita compared to USD3755 for the USA (data for 2004) indicating the enormous potential that exists in this business and in the region.
Coming to the current scenario, about 2/3 of the total reinsurance business in the Middle East goes to reinsurance companies outside the region due to lack of local reinsurance capacity. Takaful companies in the region are forced to go to conventional non-Sharia compliant reinsurance companies due to lack of retakaful capacity in the region. This also indicates the lack of competition in the regional market today, which the new company would be well positioned to exploit. Moreover, the region has seen the establishment of quite a few Takaful companies in the last 3 years an indicator of the market potential.
There are various factors which will drive the demand for insurance and reinsurance (both Islamic and conventional) in the region. On the macro front, the GCC economies are expected to grow at a high rate in the next couple of years, owing to high oil prices and increased government and private sector spending. This feel good factor will encourage higher spending on Takaful products.
Population in the GCC has grown at 4.2% for last four years, which augurs well for family Takaful. With the burden on governments increasing, social security systems in the region are bound to leave their citizens more dependent on individual savings and family Takaful. Non-life Takaful would be helped by the massive project opportunities in a number of sectors like oil and gas, power generation, telecommunications and transportation, as a consequence of privatization and the opening up of the economies. Health insurance and third party motor insurance are being made compulsory in the region.
Thus, we see that opportunities for the insurance and reinsurance industry, both conventional and Islamic, are tremendous. More so for Takaful and Retakaful, because this industry is growing at faster pace in the region. Al Fajer would be helped by all these factors in its quest for fast and sustainable growth.
Global Investment House (Global)
Global Investment House (Global) is a Kuwaiti shareholding company established in June 1998 under the supervision of Central Bank of Kuwait. The current capital of Global is KD70.6 million (~USD243 million). Headquartered in Kuwait, Global has offices in Bahrain, Dubai, Abu Dhabi, Qatar, Jordan, India and Yemen. Global provides a wide range of investment banking products and services including corporate finance, portfolio management, equity research, brokerage service and investment funds. Global currently has more than USD6.3 billion in funds under management. Global is listed on Kuwait, Bahrain and Dubai stock exchanges.
Since inception, Global Investment House has grown rapidly to become one of the leading investment banking institutions in the Middle East. Over the years, Global's achievements have been exceptional. Global has raised over KD1.66 billion (USD5.6 billion) from the regional investment community in IPOs / private placement deals (KD740 million, i.e. USD2.5 billion), bond issuance (KD320 million, i.e. USD1.1 billion) and Islamic financing (KD600 million, i.e. USD2 billion). The company has managed 35 IPOs / private placements out of which 15 were launches of new companies. Global has more than 4,000 clients and its Kuwaiti database of clients reads like a veritable 'Who’s Who’ of the GCC Region.
