Islamic insurer sends out refund cheques to claim-free customers

Takaful Insurance of Africa Chief executive Mr Hassan Bashir. Photo/FILE
Takaful Insurance of Africa Chief executive Mr Hassan Bashir. Photo/FILE  NATION MEDIA GROUP

Takaful Insurance of Africa Thursday paid Sh15.6 million to 30 policy holders who did not make any claims on their covers.

The Shariah-compliant insurer paid the amount from the Sh26 million net profit the firm made in 2011 out of Sh178 million-worth of premiums.

Paying policy holders who do not make a claim is part of the Shariah principle of sharing risk and reward between the policy holder and the provider, which in this case translates to 60 per cent of profits being distributed to accident-free customers.

“They were selected from all our branches across the nation, to represent all those who were to receive the surplus profit cheques,” said Takaful Insurance chief executive Hassan Bashir.

Policy holders who did not make a claim in 2012 will be paid in the first quarter of 2014 when profits from Sh426 million-worth of premiums underwritten are declared, he added.


The larger share of the premiums, 60 per cent or Sh107 million was from motor vehicle insurance and the Sh71 million remainder was from other lines of businesses.

Indirectly, charities such as children’s homes were also beneficiaries of profits made in 2011.

Industry regulations require that at least 10 per cent of premiums are invested in Treasury bills, but Shariah prohibits investing in interest-bearing securities such as bills, bonds and bank deposits. Takaful, therefore, had to give out income earned from government securities.

“We used that money to support the needy in society,” said Mr Bashir.

Shariah also prohibits investing in companies in the alcohol, gambling, tobacco, pornography, arms and non-Shariah compliant finance industries.

This limits the choices for investment for firms listed at the Nairobi Securities Exchange (NSE), but Islamic insurers and unit trust vendors have been pushing regulators to allow flexibility to invest a bigger portion in Shariah-compliant offshore and unquoted equity investments.

The Capital Markets Authority (CMA) has said that the country’s four million Muslims make up a market that is untapped despite its potential to deepen the pool of capital available.

“The Authority is particularly keen to see the take-off of the market for Islamic Investment products given the strong correlation between these products and infrastructure financing for which the nation is in heavy demand for,” said acting CMA chief executive Paul Muthaura early last month.

Takaful Insurance mostly invests in real estate and in Islamic banks, which allows for trade financing.

Takaful plans to introduce a Shariah-compliant pension scheme in January 2014 after getting approval from the Retirements Benefits Authority. It also plans to expand to Djibouti, Somalia, Uganda and Ethiopia, requiring the insurer to raise additional capital.

“We plan to raise Sh5 billion within the next two to three years,” said Mr Bashir.

Shareholders will determine whether capital raising will be from their pockets, a rights issue or through a strategic partner.