Takaful move to benefit millions: Pakistan Economy Watch

Islamabad: The Pakistan Economy Watch (PEW) on Sunday said SECP’s move to push Sharia compliant risk coverage in Pakistan is to benefit millions.

The move may triple insurance density and penetration in which Pakistan ranks lowest in the region. Islamic insurance can benefit those who do not subscribe to the conventional insurance forbidden by the Sharia law, said Dr. Murtaza Mughal, President PEW.
Takaful, the Halal risk mitigation has been growing 15 per cent annually, however it grew 31 pc in 2011, he added. Unlike conventional insurers who charge money to cover the risks, Takaful spread the risk and rewards among all participants, he informed.

Dr. Murtaza Mughal said that approval Draft Takaful Rules 2012, plan to set up a central Sharia board, and allowing conventional insurers to initiate Takaful operations are the steps which were long due. Pakistanis spend Rs 48 billion on life insurance per annum which put per head contribution to Rs 266. Similarly, per capital expenditure on nonlife insurance stands at Rs 327, he said. The combined life and nonlife insurance spending for each person stands at Rs 593 or Rs 106,740,000,000 that is an obstacle in the national development, he informed.

Dr. Murtaza Mughal said that current insurance penetration in Pakistan stands at around 0.7 per cent while insurance density is recorded at 6.13 dollars, one of the lowest in the world. He said that share of Takaful is 1 per cent of the global insurance market while it enjoy 2 pc of the market in Pakistan which is to get a boost as the top ten companies having 93 per cent of the market share in country are preparing to exploit the potential.

Presently, there are 7 life, 35 nonlife, 3 Takaful, 2 family Takaful and 1 reinsurance company operating in Pakistan while Malaysia which presents best model has 12 Takaful and 4 Re Takaful operators.
SECP should supervise and ensure cost-effective and competitive financial protection to the people, push companies to focus small cities and towns and initiate efforts for flow of information aimed at community development, Dr. Mughal demanded.

”This may help rural communities in Pakistan who suffered losses worth billions because of inadequate coverage”, he said. According to Ernst & Young, global Takaful contributions which were $9.15 billion in 2010 and $12 bln in 2011are expected to touch $25 bln by 2015.

Contributions per Takaful operator in Malaysia are at $115.8 million, GCC at $63.5 m, subcontinent at $16 m, Africa at $11.8 m and around $4.3 m in Turkey, Syria, Lebanon, Palestine, and Egypt, he informed.

He said that insurance penetration in Taiwan stands at 18.4 per cent, Switzerland 17.7 pc and India 5.1 pc while Luxembourg, Ireland, Denmark and France top the list of average spending on insurance. Increased focus on Islamic insurance can save the insurance industry from distress financial in case of any global financial crisis, he noted. He said Muslims are 20 pc of the world’s population but Takaful has 1pc share that underline the need for immediate legislation and ambitious penetration.

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