Companies

Kenya Re introduces reinsurance policy for Muslims

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Kenya Re chair Nelius Kariuki during the launch of the sharia window at Serena Hotel, February 27, 2013 DIANA NGILA

Kenya Reinsurance Corporation introduced Re-Takaful, the first reinsurance package for Muslims on Wednesday as part of the underwriter’s expansion and growth strategy.

This comes at a time when Kenya Re is positioning itself to tap into new markets and respond to ever changing needs of the clientele.

Mr Sammy Makove, Commissioner of insurance and CEO Insurance Regulatory Authority (IRA) attributed the success of establishing the new business venture to an enabling regulatory environment.

“As regulator, our aim is to build a better, stronger and more stable insurance and Takaful sector that will give more confidence to the consumers and empower insurance companies and their intermediaries to deliver more relevant, affordable and creative services to their customers,” he said.

Re-Takaful, an alternative to conventional reinsurance, is an Islamic insurance concept founded on the cooperative principle where policyholders pool resources to help each other in times of need.

Under this regime, funds and operations of shareholders are separated from those of policyholders in tandem with Sharia, Islamic religious law which advocates for individuals to cooperate and protect each other.

In 2006, the number of Takaful operators stood at 80 with 120 Takaful windows and 12 Retakaful providers translating to a cumulative premium income of up to Sh255 billion (three billion dollars).

By 2010, Takaful operators had increased to 168, Retakaful windows to 200 and Retakaful providers to 20 which generated Sh468 billion (5.5 billion dollars), marking an 84 per cent increase in premium income.

Last year, Re-Takaful premium totalled Sh96 million and the underwriter projects a 10 per cent growth (Sh106) by the end of the year.

Speaking at the launch, Mr Jadia Mwarania, Managing Director, Kenya Reinsurance, said Kenya Re had made deliberate strides towards establishing a fully compliant Re-Takaful window.

“We are confident Re-Takaful will enable us increase our market share and bring about sustainable financial growth, receive high return on our investments, increase company’s shareholder value and enhance investor confidence in Kenya Re,” Mr. Mwarania said.

Mr Mwarania disclosed of the recent rollout of political risks cover for the Kenya insurance market. We have continued to partner with Insurance companies as they design products for micro-finance as well as agricultural insurance. He added that Kenya Re was angling to tap into the oil and gas reinsurance market in future.

Sharia Supervisory Board, an oversight body, has been put in place comprising of eminent personalities wisely selected from among Muslim scholars and the Muslim community.

The four-member board, chaired by Mohamed Badamana is mandated to guide, monitor and supervise the Re-Takaful business and ensure compliance with Sharia rules and principles.

Mr Badamana noted that in the past there has never been a local re-insurer to cover the various Takaful products in the Kenyan growing market. He outlined three models in their approach of Re-Takaful business.

Wakalah Model is fee based and Kenya Re acts as both an agent and the administrator. The fee, the sum of administration and investment fee, remains fixed annually and all surpluses belong to policyholders.

The second, he added, Mudharabah involves pooling of funds for the purpose s of profit sharing. Here, Kenya Re acts as the entrepreneur and the participants provide the capital. Profits and losses are shared between the firm and the participants in a pre-arranged ratio.

The third, Re-Takaful hybrid model is a combination of the two. “We have reasonably and adequately engaged Kenya-Re on the aspects of our Islam-based financial systems and have structured the Re-Takaful window accordingly,” Mr. Badamana observed.

In Kenya today, there are two Sharia compliant banks, Gulf Bank and First Community bank, although there are several other commercial banks with Takaful compliant windows.

The underwriter which has maintained its financial rating of B+ BY A.M best rating agency and, an AA rating by Global Credit Rating (GCR), becomes the third African country after Sudan and Tunisia in offering Re-Takaful.