Zurich Aims to Enter Takaful Market in Saudi Arabia, Malaysia

In the world of Islamic insurance, the three great pillars of the market are Iran, Saudi Arabia and Malaysia. Zurich Financial Services, like the majority of the insurance world, will not enter Iran, but Saudi Arabia and Malaysia are two countries where the insurer plans on establishing a takaful presence, according to Geoff Riddell, Zurich's chairman of global corporation and chief executive officer of Asia-Pacific and the Middle East.

"We certainly believe we need to be entering takaful. We're looking at different ways of doing it," Riddell told BestWire at the 2010 Risk and Insurance Management Society conference in Boston. "We're looking at how we would enter Saudi Arabia. We're looking at how do we get a license in Malaysia. We will continue to develop our capabilities and understanding of takaful, and we think it will be a significant part of these markets."

Takaful is compliant with Islamic Shariah law, which bars interest, uncertainty, and gambling. Risk, Riddell said, is considered a "bad thing" under Islam, but takaful is similar to a mutual insurance company in that the risk is pooled and shared. Riddell said the main difference between takaful and a traditional insurance product is certain nuances in the claims process, the investment process, and product design.

"It's actually a good concept," Riddell said. "The concept of Islamic insurance is very much about risk sharing and risk pooling, and of course, risk pooling is what our business is all about. You're not gambling. There's huge capital efficiencies for everyone involved when its done well."

Takaful is not always a cheaper offering, sometimes, because of the rules and regulations involved, he said. However, even when it is more expensive, it has a market.

"What we're seeing is a difference depending on how religious a country is, where people will buy takaful, even if it is more expensive than a traditional offering," Riddell said. In less religious markets, it will still be preferred if its price matches the price of competing traditional insurance offerings, he said.

When takaful was first being launched, "it was a voyage of discovery for everybody. It was a case of trying to sit down with Shariah experts, with insurance experts and find a way to create something that looked like a traditional insurance product that was acceptable," he said.

Now there is a pool of experienced takaful hands to be drawn upon. But the market is still coming into its own, he noted.

"I think when life will get interesting is when takaful is mature enough that you start getting products that are takaful-designed, as opposed to traditional products being converted," Riddell said.

Zurich recently expanded its global life insurance team to focus on expanding its Asia-Pacific life business (BestWire, April 13, 2010). While Zurich has had a "good life operation" in Hong Kong and a "nice little" niche business in Japan for sometime, Riddell said the company's focus will be on Indonesia and Malaysia.

"We're looking to grow our presence in both of those areas," he said, while noting the company is continuing to expand in Hong Kong and Singapore too. Vietnam, which is rapidly evolving, is also being watched and weighed as a market for Zurich.

The next wave of expanding Asia markets is coming, Riddell said, and includes Cambodia. However, he said he believes that will be something for the next generation of Zurich to deal with.

To listen to the interview with Geoff Riddell, go to http://www.ambest.com/audio .

To watch video of Geoff Riddell discussing the takaful market, go to

http://www.ambest.com/media/media.asp?RC=171994

(By Rick Cornejo, managing editor, BestWeek: [email protected])