Building awareness and education crucial in the Takaful industry

Exclusive interview with Faizal Karbani, CEO of Insure Halal UK, where he talks about Islamic finance and Takaful.

What is your experience in the field of Islamic economics and finance and especially in Takaful?

In 2005, to supplement my BSc Economics from LSE and my qualification as a Chartered Accountant, I trained as a Wealth Manager & Financial Adviser specifically to work in the Islamic Finance industry to advise Private Clients on Shariah Compliant financial planning & investments.

So for the last 12 years I’ve been working in the UK in this capacity. During this time I’ve also worked as a Finance Manager for QIB UK, I train professionals on Islamic Finance and have written a book on Islamic Finance entitled “Mastering Islamic Finance” published by Pearsons. Regarding Takaful, it has been very obvious for a long time that there has been a dire lack of options in the UK and the West generally. So for the last 5 years I have been working in the background with Sharia scholars and professionals with the aim of bringing Takaful products in the market.

What inspires you?

Providing authentic Shariah compliant options to Muslims and the wider market is what drives me; if I can play a role doing this, I hope my Lord will be pleased with me.

What are the main challenges you face when implementing your mission?

Building awareness and educating the Muslim retail market is a pre-requisite to the market accepting and buying the product. Many Muslims are unaware about what makes conventional insurance impermissible and what the halal alternative is. Hence a lot of effort has to be put into building awareness and education.

The other challenge is to find quality insurance capacity providers who are prepared to work with us and have a Shariah compliant window to serve this niche market.

What are the Takaful covers that Insure Halal offers?

Currently we provide Halal Home & Landlord Insurance. We are looking to expand into Travel, Mosque and SME in the next phase God Willing.

Can you tell us which model is widely used in the UK market?

It is the Wakala model currently (there is no investment management component currently).  One of the great features of our proposition is that we have a state of the art digital offering – whereby the consumer buys directly online. The pricing mechanism is such that the consumer chooses the risks he/she wants cover for, each risk is priced and the overall price reflects this. The policy wording has been designed to be clear, straight forward and conscise.

What would you see as areas for improvement and what would be the means to achieve these objectives?

We have only launched on 22nd Dec so it is very early days. Our early impression/learnings are that it is imperative we focus on engaging with the Muslim audience up and down the country – building awareness and educating them.

The perception of Takaful is that its products and services are targeted to Muslims only; we know that Takaful institutions cater to all religions, or to every customer, so how do you think we should market Takaful products and services to Muslims and non-Muslims in Europe?

Very good and important question. In our venture we decided to brand our product as Insure Halal – the idea was to first market to the Muslim audience – this would give us focus and serve a market that was in desperate need of Takaful products. Once we have established this, we intend to create a brand that will appeal to those looking for a more ethical product. For this segment, the marketing needs to bring out the ethical features of takaful.

Do you have some advice for entrepreneurs who want to implement Islamic finance and Takaful in Europe?

Understand the environment – the constraints, the opportunities, the demand. Work in a smart way – with the conventional sector if required, to provide solutions in the areas required. If it helps, the branding doesn’t have to be Islamic – as long as the substance is authentically Sharia compliant, then it can be marketed on its ethical features and for the Muslim audience you can signify that it is Shariah compliant.

We have Europe on our radar, so we intend to look at the French market soon insha’Allah. We are happy to talk to potential strategic partners.

This article was first published in Islamic Finance news Volume 15 Issue 11 dated the 14th March 2018.

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More than just brand building

Takaful industry bears an additional responsibility than the conventional insurers and other industries to propagate values besides brand building and marketing.

Branding and marketing are essential to enhance the reputation and propagate the values of takaful industry, giving it a positive image. Being well-known is a prerequisite to image building, but it is not sufficient to develop a positive brand image. Any marketing approach has to be based on a triple vision: cultural, organizational and strategic. Marketing must reflect the institution’s atmosphere; it must have the purpose of maintaining coherence of actions and ensure veracity of speech. As in all key areas of the institutions, the commitment of leaders is essential. Marketing is essentially the effort to help organizations adapt to competitive markets in order to influence the behavior of the public on which they depend, by an offer whose perceived value is higher than that of the competitors. Marketing involves having a customer-oriented mindset. It is the set of techniques that enables the meeting of products and services intended to satisfy the expectations and needs of consumers. Today, the power of customers is growing thanks to the development of blogs, forums and social networks. It is possible to inquire before a purchase, to testify as a result of good or bad experiences, to propose improvements products, etc. The institutions must learn to consider this in a transparent and respectful manner.

A successful marketing strategy for takaful institutions includes:

  • Taking into account technical and management constraints without cannibalizing marketing;
  • Integrating the network dimension into product design and marketing actions;
  • Addressing brand communication and communication in synergy;
  • Integrating the internet and ICT dimension into all strata of the institution;
  • Ensuring a good coherence between the marketing actions and the environment of the institution;
  • Ensuring a good mix and consistency over time of marketing actions; and
  • Determining pricing policy that takes into account existing offers on the market.


The use of branding is to give takaful institutions a positive image. Whilst being well known is essential to building a positive image, it is not sufficient. Branding efforts need to transmit the values of the takaful institutions, especially in respect to Shariah compliance. In addition, the choice of products’ names is integral to branding and needs to reflect the products’ Islamic values.


Merchandising is the marketing of the products and involves advertising and distribution to capture the customer’s attention. The challenges of merchandising takaful are to: interest the prospect, sensitize visitors, exploit the traffic of the branches and ensure that the purchase meeting space is optimized to prioritize the sales objective and is comfortable for the customer.

Communication and media plan

The establishment of a communication strategy involves various stakeholders: marketing, consulting agency and the executive management. To ensure the effectiveness of the communication strategy, it is essential to communicate on social networks by being transparent and sincere, and integrate all media in the campaigns. Communication should provide information and advice to clients, convince them of the benefits of the offer and give them the desire to subscribe.

It will play a major role in the development of the institution’s marketing mix by integrating variables as part of a holistic overall strategy. A takaful institution will have to focus on a strategy of differentiation. The axes on which insurers are positioned are generally identical: proximity, solidity and service, they try to be different, credible and attractive. It is necessary to avoid certain misunderstandings while having a positive impact on the perception of clients towards the takaful institution and its products, taking into account their economic and social situation and their way of life.

The means of communication must not concentrate solely on advertising. It is essential to turn to original channels via new information technologies and not hesitate to organize events such as conferences and use sponsorship.

Intermediaries also play a central role in communication because they represent the interface between the takaful institutions and their customers. It is necessary to develop both mass communication and proximity communication. The effectiveness of the external field depends on the implementation of an internal communication shared by all components of the takaful institutions.

Campaigns will use all or part of:

  • Existing media: public relations, sponsorship and patronage;
  • Media: TV, billboards, press, radio;
  • Non-media campaigns: direct marketing, emails, SMS, promotional tools, pamphlets, brochures, documentation, sales assistance tool and the internet.

Pricing policy

In insurance, the price is a part of the product offer, the price must always be competitive, and its determination is carried out according to a two-fold approach:

  • Objective: determined by actuaries and lawyers on the basis of technical characteristics such as technical components, performance and associated services; and
  • Subjective: determined by consumer perception such as product concept, positioning and brand.

The price factor is decisive in order to capture the shares of this concentrated market. Demand is elastic and low switching costs allow consumers to easily change providers. The offer may also try to play on other parameters such as service, quality and highlight its religious compliance through awareness campaigns.

The seven “Ps” of the takaful marketing mix

  • Pedagogy: The more knowledge a person has about takaful, the more takaful will interest him. Consequently, if the takaful company wishes to increase the degree of his interest, it is necessary to increase the degree of his knowledge.
  • Pureness (Shariah compliance): Companies must build trust through honesty, transparency and sincerity and must participate in social and educational activities. Shariah scholars must validate proposed contracts and surpluses must be allocated between companies and participants.
  • Price: Affordable prices must be sought without seeking to take advantage of the absence or weakness of competition to increase them, at the risk of creating mistrust that would be perceived as a misappropriation of religious values of solidarity and mutual assistance for pecuniary ends.
  • Product: To ensure successful commercialization, the products offered must meet real needs arising from cultural, religious, social and economic factors.
  • Professionalism: Takaful companies’ credibility depends on the professionalism of their representatives, who must be competent, honest and focused on meeting customer needs.
  • Place: One of the main challenges is distribution where it must be optimized so that the tariff can be competitive with the conventional offer. Marketing should be in tune with the spirit of these types of Islamic products that unfortunately are badly perceived as using aggressive sales techniques.
  • Promotion: Develop viral marketing to demonstrate the solvency and solidity of the takaful company by communicating both on compliance and on the quality of products and services.

Digitalization is a factor that should allow takaful institutions to realize their full potential with its ability to disrupt existing business models, transform and reinforce product innovation, transparency, service, cross selling, engagement and customer experience. The strategy of meeting the needs requires an adaptation to the evolving expectations of the customers. A defensive strategy would be to copy the products of other conventional players in the market. Strategically, it is best to use an approach that adapts, improves and creates new products that meet the needs and socio-cultural values of individuals. It is therefore necessary to establish a differentiation strategy, based not only on compliance but also on the embodiment of the alternative values offered.

This article was published in the Middle East Insurance Review January 2018.

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Market opportunities in Europe for Takaful

The eurozone experienced solid growth in 2017 with less unemployment and a low inflation rate in the third quarter, with growth at 2.4% exceeding that of the UK and the US. This general economic context should benefit the western European insurance industry, which in 2016 accounted for US$1.4 trillion in cumulative premiums.

There will be opportunities in the French market in 2018. This is shown by firstly, the abolition of the social security scheme for students. This scheme allowed mutual insurance companies to manage students’ social protection and their health insurance; however after the abolition, students’ social protection and their health insurance will be managed by health insurance organizations. This measure is a real shockwave for student mutual insurance companies that will have to reorganize themselves and adapt to the new scenario. It is within this framework that Takaful health insurance will allow student mutual insurance companies to reorient themselves and redeploy their offerings as part of a differentiation strategy allowing them to retain their workforce that previously worked on the management of the compulsory scheme and to conquer new market shares.

On the side of payment protection insurance, the market is full of effervescence following the evolution of the legislation which will allow subscribers of mortgages to change annually their insurance attached to their loan. Since the 1st January, this will be possible on each anniversary date of the contract, thanks to the provisions of the Bourquin amendment.

Insurers, brokers and some insurtechs are looking forward to launch and grab market share from banks, which through their subsidiaries hold nearly 85% of the market. Insurers are generally more competitive than bankers, as stated by the Macif group president who also added that their rates are lower. Insurers are competitive because in the context of low interest rate, payment protection insurance became, for the bankers, their only source of profit in the area of personal loans.

It has to be said that today in France, Shariah compliant home financing is achieved without payment protection insurance. This situation has resulted in banks that offer this type of fi nuancing reducing the duration of financing and making conditions for more selective personal contributions. Takaful payment protection insurance could both enable insurers and brokers to meet the needs of banks and clients while benefiting from a favorable environment.

This article was first published in Islamic Finance news Volume 15 Issue 4 dated the 25th January 2018.

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Mutual insurance companies to carry out Takaful operations in Europe

In France, the Insurance Code allows mutual insurance companies to practice both General Takaful and Family Takaful while remaining faithful to the principles of mutualism and philanthropy.

Mutual insurance companies fulfill the conditions of the Takaful cooperative model (non-profit, solidarity, variable contributions, recall and contribution rebates) and they are also essentially in keeping with the spirit of Waqf.

This specificity enables the possibility of creating a Takaful fund in the French legal framework of mutual insurance, with a fund established in the form of a Waqf. Thanks to the European passport, the company, once created, is able to offer its covers throughout the European market.

By creating a mutual insurance company and investing its assets in accordance with the rules of Islamic finance, and with a Shariah supervisory board as recommended by AAOIFI and IFSB standards in force, a model with a consensus on its compliance can be obtained, allowing consumers to have greater confidence.

The term ‘sustainable development’ was first mentioned in 1987, as defined by the United Nations World Commission on Environment and Development in the Brundtland Report: « Forms of development that meet the needs of the present without compromising the ability of future generations to meet theirs. » This concept is reminiscent of the Maqasid Shariah that seeks to promote everything that contributes to the preservation of creation.

In this respect, the Takaful company, which will wish to perfect its implementation in Europe, will also have to apply these principles and be at the cutting-edge of corporate social responsibility (CSR). In addition to being certified in accordance with European law and Shariah law, it will also need to ensure that the recommendations of ISO 26000, which specifies the integration of social responsibility, governance and ethical standards, are implemented within organizations.

As an example of Islamic financial institutions that have integrated the principles of CSR into their management, we can mention Saudi asset manager SEDCO Capital which integrated the environmental, social and governance (ESG) criteria into two of its equity funds; and Arabesque Asset Management, which also incorporated the ESG principles that allow its funds to be marketed to socially responsible investors.

 To be at the forefront of CSR, Takaful companies of European law will also have to make investments that are both in accordance with the rules of Islamic finance and those of socially responsible investment, in a way that not only respects the letter of the Islamic law but also embodies the spirit. This will appeal to people who are attracted by Muslim ethical compliance and those who are looking for an alternative model closer to the values of solidarity, sharing and responsibility.

This article was first published in Islamic Finance news Volume 15 Issue 1 dated the 3rd January 2018.

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Golden Belt Sukuk : BNP Paribas perd son procès face à deux fonds spéculatifs new-yorkais

La Haute Cour de justice du Royaume-Uni a estimé, jeudi 8 décembre, que BNP Paribas avait fait preuve de négligence en concluant une transaction sukuk – Golden Belt Sukuk – de 650 millions de dollars (550 millions d’euros) rendue invalide et inapplicable en vertu de la loi saoudienne. Un verdict qui donne à deux fond spéculatifs (hedge funds) new-yorkais le droit de recouvrer les dommages causés, selon Islamic Finance News.

Le papier islamique d’une maturité de cinq ans, émis en 2007 pour Saad Trading Contracting & Financial Services Company, a fait défaut deux ans plus tard lorsque le gouvernement saoudien a gelé les actifs de Saad Group détenu par son fondateur, le milliardaire Maan Al-Sanea, embourbé dans des allégations de fraude. Bien qu’il cherchait à échapper à la justice et à devoir de grosses sommes d’argent à ses créanciers, Maan Al-Sanea a été arrêté en octobre 2017 juste avant que le prince héritier Mohammad Ben Salmane mène une purge anti-corruption à l’échelle du royaume saoudien.

La banque française a été traduite en justice par l’administrateur de Golden Belt Sukuk ainsi que par Fortress Investment Group et Cyrus Partners, des hedge funds américains qui ont acheté les sukuk à des prix fortement réduits entre 2009 et 2011 suite au gel des comptes de Saad Group, lorsque des allégations de fraude et de falsification contre Maan Al-Sanea ont fait surface.

Fortress et Cyrus Partners ne pouvaient pas faire valoir le billet à ordre devant les tribunaux saoudiens, car il n’avait pas été signé d’une manière jugée conforme à la loi saoudienne : le document ne portait pas une signature manuscrite de Maan Al-Sanea, qui donnait également sa garantie personnelle au Golden Belt Sukuk, un contrat sursouscrit par des investisseurs en Europe, au Moyen-Orient et en Asie.

Les plaignants ont fait valoir que BNP Paribas avait « laissé tomber » l’exécution du billet à ordre, faute de s’assurer qu’il était dûment signée au nom de Saad Group, surtout à la lumière des accusations de blanchiment d’argent portées contre son fondateur. La justice a convenu et a décidé que la banque avait manqué à l’une de ses obligations contractuelles.

Un nouveau procès en vue pour évaluer le préjudice subi

« Les porteurs de titres ont le droit de recouvrer au titre de préjudice la différence entre le recouvrement, le cas échéant, qu’ils auraient effectué si le billet à ordre avait été valide et le recouvrement, le cas échéant, auquel ils seraient parvenus en fait », a souligné le juge Stephen Males.
L’évaluation du préjudice subi par les porteurs sera traitée lors d’un nouveau procès. Cette décision favorable pourrait soulager les acteurs du marché qui surveillent de près les suites légales des cas de défaut de sukuk, qui ont ébranlé la confiance des investisseurs dans les instruments islamiques, notamment après que le cas du producteur d’énergie de Sharjah Dana Gas ait conduit à l’invalidation d’un sukuk de 700 millions de dollars sur la base de sa non-conformité islamique.

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Quel bilan et quelles perspectives pour l’assurance Takaful en Europe ?

Dans plusieurs pays d’Europe, l’assurance Takaful, un segment de la finance islamique qui répond à un certain nombre de critères éthiques, suscite un intérêt croissant. Les perspectives s’annoncent prometteuses pour 2018, avec une offre de produits qui s’élargit pour s’adresser à une clientèle non seulement musulmane mais aussi non-musulmane.

La finance islamique est un compartiment de la finance éthique. Elle recouvre l’ensemble des transactions et produits financiers conformes à l’éthique musulmane, qui repose sur cinq piliers : interdiction de l’intérêt, réalisation d’investissements aléatoires et incertains, spéculation hasardeuse, obligation de partager les pertes et profits et investissement exclusif dans l’économie réelle et tangible. A ces règles, s’ajoute l’exclusion de certains secteurs d’investissement nocifs à la vie humaine tels que par exemple le tabac, l’alcool, la pornographie et les jeux d’argent. L’assurance Takaful est l’équivalent islamique de l’assurance conventionnelle, offrant à la fois des produits d’assurance-vie (appelés « famille ») et d’assurance dommages.

Un contexte démographique et culturel favorable

En Europe, les musulmans représentent plus de 16 millions d’habitants avec un taux d’équipement bancaire et assurantiel à être parmi les plus élevés du monde. Ils sont donc dans le monde parmi ceux qui disposent du plus grand nombre de services bancaires et de couvertures d’assurances en comparaison aux musulmans d’autres pays où les services bancaires et assurantiels sont nettement moins développés. Ce taux de pénétration de l’assurance élevé peut contribuer à l’essor de l’assurance Takaful en Europe. En outre, il existe de nombreuses formes de sociétés d’assurance prévues par les juridictions européennes qui permettent de pratiquer l’assurance Takaful en restant fidèle aux principes mutualistes et philanthropiques.

Les négociations officielles sur le Brexit entre Londres et l’Union européenne ont débuté le 19 juin 2017 à Bruxelles. Comme prévu par les traités, les négociations doivent être achevées en mars 2019. Les conséquences politiques du Brexit pour l’Union européenne tout comme les conséquences économiques pour le Royaume-Uni sont imprévisibles. A ce jour, la sortie de l’Union européenne n’a pas encore eu lieu et malgré la chute de la livre sterling dans les mois qui ont suivi le référendum de juin 2016, il est encore difficile de mesurer les effets du Brexit sur l’économie britannique, et une grande incertitude demeure. Malgré cela, et en ce qui concerne l’assurance Takaful, la place de Londres n’est pas en reste, bien au contraire.

La place de Londres s’est dotée d’une institution de lobbying

Récemment, l’assureur américain AIG, en collaboration avec le courtier londonien Cobalt Underwriting, a présenté sa première police d’assurance Takaful pour la zone MENA (Moyen-Orient et Afrique du Nord). Cette couverture protège les investisseurs réalisant des fusions et acquisitions dans cette zone et les couvre contre tout risque de dépréciation d’actifs lié à leur mauvaise évaluation. La place de Londres s’est également dotée d’une institution de lobbying : l’association d’assurance islamique de Londres (IIAL) dont l’objectif principal est la promotion du marché londonien de l’assurance Takaful. L’IIAL a été créée pour disposer d’un organe représentatif pour soutenir le travail des acteurs du marché de l’assurance et de la réassurance Takaful au Royaume-Uni.

D’autre part, le développement de la place doit se poursuivre avec une nouvelle capacité Retakaful offerte par Lloyd’s Dubaï. La création de cette plateforme offre potentiellement une capacité Retakaful pour les risques commerciaux et permet à Londres d’augmenter son aura au Moyen-Orient et en Asie du Sud-Est.

En Europe continentale, des offre commencent à se structurer en Allemagne, en Espagne et en France, répondant aux besoins et à la demande des différentes populations musulmanes de ces pays.

Dès 2004, l’Allemagne a été le premier pays occidental à avoir recours aux marchés financiers islamiques. Disposant de la plus grande économie d’Europe et comptant une population musulmane importante, l’Allemagne possède de nombreux atouts pour assurer la croissance de son secteur financier islamique. En 2017, la première banque islamique d’Europe continentale KT Bank a ouvert une nouvelle succursale à Cologne, et INAIA Finance a lancé une nouvelle solution Takaful famille en partenariat avec l’assureur FWU.

En Espagne, Mussap a signé un accord avec Coophalal, principale coopérative espagnole de services financiers islamiques. Grâce à cet accord, l’entité offre différents produits Takaful assurés par Mussap et Previsora.

En France, la distribution passe par un réseau de courtiers

En France, en raison d’une population nombreuse et disposant d’un pouvoir d’achat important, le marché de la finance islamique et de l’assurance Takaful est une niche à fort potentiel de croissance : afin de trouver des relais de croissance et de conquérir de nouvelles parts de marché, les opérateurs sont intéressés pour développer ces nouveaux segments mais en raison des risques d’islamophobie craignent un risque pour leur image. C’est une des raisons pour laquelle le modèle de distribution français de l’assurance Takaful repose sur des réseaux de courtiers permettant le transfert du risque de réputation des porteurs de risques vers les distributeurs.

En 2017, les réseaux de courtiers ont poursuivi leur croissance avec l’ouverture de nouvelles agences pour Noorassur et l’émergence de nouveaux courtiers indépendants tels que Coveris Assurance, Dine Assur, Ethical Capital, MKSS, NCC, Courtifi et Keen Finance. Rappelons que d’après Les Echos Etudes, le chiffre d’affaires potentiel de l’assurance Takaful en France est estimé à 3,5 milliards d’euros, soit 1,70% du marché de l’assurance.

Un développement qui doit se poursuivre en 2018

Avec de fortes demandes intérieures, un pouvoir d’achat important et des taux de pénétration élevés, le marché européen de l’assurance Takaful va continuer à se consolider. Londres conservera une longueur d’avance tant que les autres places financières européennes – restées au point mort en la matière – ne réagiront pas.

Dès avril 2018, en réponse à l’invitation du Centre d’Etudes et de Recherches en Economie et Finances Islamiques (CEIEFI), des chercheurs et des professionnels se réuniront à Barcelone pour la deuxième édition du Forum de Finance Islamique consacré à l’assurance Takaful. Ce forum sera l’occasion pour les opérateurs européens de se rencontrer, d’échanger sur les bonnes pratiques développées sur leurs marchés respectifs, et de renforcer les liens existants.

L’industrie Takaful ne devrait pas avoir trop de difficultés à se développer en Europe, car les forces du marché européen sont certaines avec une cible importante, des compétences pointues avec une expertise de haut niveau et de nombreux acteurs petits et moyens malgré un manque d’investissement et de communication. L’adoption de la digitalisation est un facteur qui doit permettre à l’assurance Takaful de réaliser tout son potentiel. En raison de sa capacité à transformer et à renforcer l’innovation produit, la transparence, le service, la vente croisée, l’engagement et l’expérience client, la digitalisation a la capacité de modifier les modèles existants.

Opter pour une stratégie de différenciation

La stratégie de satisfaction des besoins des clients nécessite une adaptation à leurs besoins et à l’évolution des leurs attentes. Une stratégie défensive consisterait à copier les produits disponibles offerts par les acteurs conventionnels du marché. Stratégiquement, il est primordial d’utiliser une approche permettant l’adaptation, l’amélioration et la création de nouveaux produits qui répondent aux besoins et aux valeurs socioculturelles des individus. Il est donc essentiel d’opter pour une stratégie de différenciation, basée sur la conformité mais aussi sur l’incarnation des valeurs alternatives proposées. Par conséquent, l’assurance Takaful doit également être disponible pour les non-musulmans. Il y a plus de non-musulmans que de musulmans en Europe et beaucoup d’entre eux pourraient apprécier la nature éthique, transparente et équitable de cette nouvelle forme d’assurance.

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European Takaful emergence

Muslims now number 16 million in the EU, with one of the highest rates of banking and insurance penetration in the world. Muslims in Europe are among those with the most bank accounts and insurance coverage. This high penetration rate can benefit the Takaful boom in this zone. In addition, there are many forms of insurance companies provided by European jurisdictions to practice both General and Family Takaful while remaining faithful to the principles of mutualism and philanthropy.

The official Brexit negotiations between London and the EU started on the 19th June 2017 in Brussels. The negotiations should be completed in two years, on the 29th March 2019, as provided by the treaties. The political consequences of Brexit for the EU are difficult to predict and the economic consequences for the UK are also unpredictable as the experts are unable to speak with one voice. The exit of the EU has not taken place yet and the UK economy has not suffered damage despite the fall of the pound sterling in the months following the referendum in June 2016.

Nonetheless, the London market of Islamic Takaful insurance has not been left out and in Europe, countries like Germany, Spain, and France are beginning to structure their offers in order to meet the demand of their Muslim populations.

Review of 2017

Recently, US insurer AIG, in collaboration with London broker Cobalt Underwriting, presented the first Takaful insurance policy for the MENA zone. This policy protects investors making mergers and acquisitions in this area from any risk of asset depreciation related to mispricing.

The London office also has a lobbying institution: the Islamic Insurance Association of London (IIAL) whose main objective is to promote the London Takaful insurance market. The IIAL has been formed to create a truly representative body to support the work of those in the UK reinsurance markets who are transacting Islamic finance.

Development must continue with a new re-Takaful capacity offered by Lloyd’s Dubai. The creation of this platform potentially offers a re-Takaful capacity for business risks and allows London to increase its footprint in the Middle East and Southeast Asia.

Germany was the first western country to tap the Islamic capital markets in 2004. With the largest economy in Europe and a large Muslim population, Germany has everything to see its Islamic financial sector grow. In 2017, the first Islamic bank in continental Europe, KT Bank, opened a new branch in Cologne and INAIA Finance launched a new Family Takaful product brought by FWU.

In Spain, Mussap signed an agreement with CoopHalal, Spain’s leading Islamic financial services cooperative. Through this agreement, the entity will offer different Takaful products from Mussap and Previsora.

In Europe, the market for Islamic finance and insurance remains a niche: conventional operators fear a risk for their image.

In France, this is the main reason why the Takaful distribution model is based on brokers’ networks allowing the transfer of reputational risk from risk-bearers to distributors. In 2017, brokers’ networks continued to grow with the opening of new branches for Noorassur and the emergence of new brokers such as Coveris Assurance, Dine Assur, Ethical Capital, MKSS, NCC, Courtifi and Keen Finance.

Preview of 2018

With strong domestic demand, substantial purchasing power, and a high penetration rate, the European Takaful market will continue to consolidate and London has a considerable lead over other European financial places which have remained at a standstill in this area.

The key elements that can allow the development of a strong Takaful market in Europe are multiple. First, it is important to demystify in order to convince institutional operators of the considerable growth reserves offered by this segment. Secondly, it is necessary to carry out promotional and information campaigns in the media to stimulate demand.

Finally, supply must help create the market. To achieve this objective, human, financial and information technology resources must be invested in the design and management of new products adapted to the needs of compulsory insurance, and must be able to cope with rapid growth.

Takaful insurance players must improve innovation and broaden the scope of the offers through multi-distribution while offering high-quality service. This is why European players in 2018 will continue to design and offer new solutions.

In France, SAAFI as a wholesale broker should deliver to the market new Takaful offerings including funeral and credit insurance. According to Les Echos Etudes, the potential turnover of Takaful in France is estimated at EUR3.5 billion (US$4.13 billion) or 1.7% of the market.


The Takaful industry should not have too much difficulty in developing itself in Europe, because the European market is more welcoming in terms of the adoption of tax instructions and the development of the Halal market, and also has high level expertise with advanced skills and many small and medium
players despite a lack of investment and communication.

The adoption of digitalization is a factor that should allow Takaful to realize its full potential in Europe. Digitalization has the ability to disrupt existing business models, because of its ability to transform and reinforce product innovation, transparency, services, cross-selling, engagement and customer experience.

A strategy to meet the needs requires adapting to the needs and evolution of the expectations of customers. A defensive strategy would be to copy the products of other conventional players in
the market.

Strategically, it is mandatory to use an approach that adapts, improves and creates new products that meet the needs and sociocultural values of individuals. It is, therefore, necessary to establish a differentiation strategy based on compliance and on the embodiment of the alternative values offered.

Takaful must also be available to non-Muslims. There are more non-Muslims than Muslims in Europe and many of them would appreciate the ethical, transparent and equitable nature of Takaful.

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Searching for the optimal Takaful model in Europe

The young Islamic finance industry, which began in the early 1960s, continues to grow, although it takes time for the population to learn and be aware of it. Nobody anticipated the extraordinary growth, more than 350% in 10 years, with assets that have jumped, according to Thomson Reuters, from US$462 billion in 2006 to more than US$2 trillion in 2016.

The fact that ‘only’ 40 million Muslims, out of the 1.8 billion in the world in 2012, are today customers suggests an exponential growth reserve that should bring, according to Thomson Reuters, the assets of this industry to US$3.54 trillion in 2021.

The growth of the Takaful industry is now considered to be a key factor in the development of Islamic finance, particularly through its capital-raising power, like conventional insurance. Islamic banks are investing in three sectors when they explore new business opportunities: Takaful insurance, investment funds, and Sukuk. Takaful companies are likely to grow alongside Islamic banks. As is the case in conventional systems, Islamic banks can start promoting their own Takaful products or their own Takaful businesses through bancaTakaful distribution.

The Takaful industry faces its own set of institutional, legal and regulatory issues with a central dilemma: some legal systems in many countries do not accept a mutual or cooperative form without social capital and when such a mutual entity can be created, it may be difficult to obtain sufficient capital to meet regulatory requirements.

In Europe, there are many forms of insurance companies provided by the European jurisdictions that allow the practicing of Takaful insurance while remaining faithful to the principles of mutualism and philanthropy. Moreover, Muslims represent more than 16 million inhabitants in Europe with an insurance penetration rate that is among the highest in the world. They are therefore among those globally who have the largest insurance coverage compared to Muslims in other countries where insurance is significantly less developed. This high insurance penetration rate can contribute to the rise of Takaful in Europe.

When we look at the potentialities of Takaful and the European market, it may be wise to develop a consensus-based Takaful model that aligns the interests of all stakeholders in line with the standards advocated by AAOIFI, the IFSB, and the European insurance law.

In Europe, the market for Islamic finance and insurance remains a niche: conventional operators fear a risk for their image. To date, there are no General Takaful solutions in Europe, which represents a considerable shortfall in an area where there is a large number of mandatory non-life insurance policies, and where the insurance needs of the population are numerous. Europe, thanks to its insurance law, is able to offer the long-awaited model by the global Takaful industry.

This article was first published in Islamic Finance news Volume 14 Issue 47 dated the 22nd November 2017.

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Interview with Prof Dr Mohd Ma’sum Billah

PROF DR MOHD MA’SUM BILLAH is a professor of insurance and finance at the Islamic Economics Institute of King Abdul Aziz University in Saudi Arabia who has been serving both academic as well as corporate industries for more than 20 years with management, teaching, research, provision of solutions and the sharing of strategic and technical thoughts toward the advancement of Takaful in particular and Islamic finance in general besides Halal standards. In addition, he was also affiliated with corporate, academic and financial industries besides NGOs in his capacity as a member of the board, advisor and strategic decision-maker, among others, with strategic solutions.

As a renowned scholar who has inspired many researchers, academics, industrialists, and professionals, can you tell us more about your experience in the field of Islamic economics and finance and especially in Takaful?

The experiences that I had been having for the past 25 years in the fi eld of Islamic economics, finance and Takaful in my humble capacity as a teacher, researcher, motivator, presenter, viewer, advisor, assessor, trainer and publisher in diff erent jurisdictions among both Muslims and non-Muslims had indeed been promising with encouraging factors. Nevertheless, numerous shortcomings had been encountered in the progress of the total system due to misconception, foreign influence, the lack of Shariah knowledge and Shariah-compliant applied mechanisms and insufficient specialized and quality research on required issues.

Takaful is perceived as products and services targeted to Muslims only; we know that Takaful institutions cater to all religions, or to every customer. How do you think we should market the Takaful products and services to both Muslims and non-Muslims in Europe?

Takaful is a commercial entity aiming at risk management within the Shariah principles and the divine ethics with its universal character to serve all (as to one’s life or property) regardless of one’s religion, gender, color or even status. It is thus a misconception to advocate that Takaful is meant for Muslims only. Therefore, Takaful products and services should be designed for and promoted among both Muslims and non-Muslims so that everyone is encouraged to participate in and benefit from the holistic model of Takaful. In Europe or any non-Muslim jurisdiction, the idea of Takaful should not be a subject of confusion as to whether it is a religious entity for the interest of Muslims only while discouraging non-Muslims to participate in or otherwise. Hence, an effective public awareness about the truth of Takaful should be made by establishing the fact that Takaful is a Shariah alternative insurance model which offers products and services for all regardless of one’s religious background.

What inspires you?

In a conventional insurance practice, the relationship between the insurer and the policyholder is purely a commercial one with buying and selling, liabilities and rights and based on a non-transparent culture. Takaful is, on the other hand, a Shariah alternative insurance model enshrined with divine ethical principles of mutual cooperation and solidarity within the holistic spirit of brotherhood. Thus, the inspiring factors of Takaful include, among others: it is formalized based on a mutuality with a shared responsibility against risks and catastrophes, the whole transaction is transparent, a Shariah compliant investment return is available for participants and there is no risk of misappropriation or gaining opportunity at the expense of others. It promotes a universal character in caring for all humanity besides creating a platform for participants to be charitable through contributing to the risk management pool, which cares for all fellow participants in the event of unexpected catastrophes.

How do you see the worldwide development of the Takaful industry?

Even though the growth of Takaful worldwide is slower compared to other components of Islamic finance, yet its annual growth rate has been increasing gradually at 39% while its fund size (contributions) is about US$20 billion. In total, there are 82 companies with five of them operating as windows. Takaful has a bright prospect worldwide with greater appreciation from both Muslims and non-Muslims. Thus, to achieve a better goal, the products and services should be more dynamic with less rigidity but friendlier within the standard Shariah principles. Customer services, marketing, claims, and benefits should be competitive, complementary and attractive with professional treatment.

What are the main challenges this industry faces?

Among the challenges faced by the Takaful and re-Takaful industries globally are:

• A lack of trained professionals with the required Shariah knowledge, whether in regulation, decisionmaking, supervision, management, operation, marketing or technical knowledge.
• Poor Takaful technology to compete in the contemporary global market.
• Confusion over multiple models.
• Traditional misconception particularly about Family Takaful products.
• Insufficient regulatory frameworks, guidelines, policies, and standards.
• The dispute among the Ulamas as to the validity of certain products and services.
• Limited products and services, thus failing to meet the demands of the market.
• A lack of reviews on products, services, corporate governance or regulators.
• A lack of public awareness.
• A lack of cooperation among Takaful operators due to undesirable competition.

What are the areas for improvement and what would be the means to achieve these objectives?

The following are among the components to be improved to allow the Takaful industry to be a successful alternative provider in the global environment in both Muslim and non-Muslim jurisdictions:

• To review, redesign and rediscover the products and services of Takaful and re-Takaful by considering the market niche and needs with a competitive model.
• Regulatory and supervisory standards should be upgraded to meet the global socioeconomic and advanced technological requirements but with total Shariah compliance.
• Standard professional development with Shariah and Takaful-related knowledge for regulators, decisionmakers, managers, operators, technical groups, marketers, support groups and facilitators should be seriously considered.
• Standard professionalism in decisionmaking, operation and customer services should be cultivated.
• Corporate competition among Takaful operators may be tolerable in order to create a better market with greater prospects, but undesirable competition with jealousy among operators resulting in harm to each other should not be an acceptable culture in the Shariah-compliant financial industries.

This article was first published in Islamic Finance news Volume 14 Issue 45 dated the 8th November 2017.

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KT Bank, première banque islamique d’Europe continentale, s’installe à Cologne

KT Bank AG, première et unique banque islamique d’Allemagne et de la zone euro, vient d’ouvrir sa quatrième agence à Cologne après Francfort, Berlin et Mannheim.

L’agence est stratégiquement placée dans le complexe de la mosquée centrale de l’Union des affaires culturelles turco-islamiques (DITIB), et marque une nouvelle étape dans le développement des affaires de la banque. L’ouverture de l’agence a coïncidé avec la « Journée portes ouvertes des mosquées », qui a vu la participation d’un millier de lieux de culte musulmans à travers l’Allemagne mardi 3 octobre. C’est aussi ce même jour qu’a été inaugurée la galerie commerciale de la mosquée centrale à Cologne, inauguration ayant été présidée par le maire de la ville, Henriette Reker.

La galerie commerciale du complexe est un lieu de rencontre pour les visiteurs de la mosquée et les habitants de Cologne. Des boutiques de vêtements, des restaurants halal en passant par les produits bancaires islamiques de la KT Bank, on y trouve toutes sortes de biens et de produits conformes à l’éthique de l’islam.

La Rhénanie du Nord-Westphalie, une région à fort potentiel

« Le potentiel de la banque islamique en Rhénanie du Nord-Westphalie est important, compte tenu de la forte concentration de la communauté turco-musulmane dans ce Land », a déclaré le président du conseil d’administration de KT Bank, Ahmet Kudsi Arslan.

Avec un 1,5 million de musulmans, la Rhénanie du Nord-Westphalie dispose en effet de la plus forte communauté musulmane d’Allemagne. Les quelques 950 000 personnes d’origine turque constituent le groupe d’immigrés le plus important du Land le plus peuplé et le plus riche d’Allemagne. De plus, la majeure partie des associations d’entrepreneurs turcs et germano-turcs, des sociétés gérées par des musulmans et des organisations caritatives se trouvent à Cologne.

L’affluence des visiteurs à la « Journée portes ouvertes des mosquées » a été importante, avec plus de 6 000 invités de toutes confessions et origines qui ont afflué vers le complexe de la mosquée centrale de Cologne dont une bonne partie a pu se familiariser avec les services offerts par la banque islamique KT.

« Dans l’agence de Cologne, la banque offre des produits et des services bancaires certifiés pour les particuliers, les entreprises et les institutionnels. Nous offrons des comptes courants gratuits sans découvert, des opportunités d’investissement rentables basées sur le principe de la participation aux bénéfices, du financement immobilier, des prêts à tempérament, des prêts d’investissement pour les d’entreprise et voulons être une banque locale éthique ouverte à tous sans distinction », a fait savoir Ahmet Kudsi Arslan.

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