Takaful

There have been some folks in the actuarial community in the U.S. who have been concerned about the threat of some of the profession’s duties being outsourced to a hypothetical bumper crop of new actuaries coming in south or southeast Asia.

However, I wonder if those concerns might be a bit premature, given that The Star is reporting about a lack of credentialed actuaries available to support Malaysia’s booming insurance and takaful industry:

More actuaries are urgently needed to ensure the successful implementation of the risk-based capital framework (RBC) and other regulatory policies in the insurance industry, Actuarial Society of Malaysia president Raymond Lai said. [...]

According to Lai, of the 51 actuaries currently registered with the society, 42 are working in Malaysia. In the next five years, it expects to register 100 more actuaries.

He said the number of actuaries in Malaysia was very small compared with other countries. For example, Hong Kong had more than 1,000 actuaries and Australia about 3,000.

Seen in an Insurance Journal article reporting on S&P’s assessment of the creation/expansion of takafuls (insurance entities operated in accordance with Halal principles) into the Persian Gulf region:

“The opportunities for increased uptake of takaful in the GCC are positive because the considerable economic growth in the region, coupled with a sizable, underinsured population, means that there are substantial prospects for further development of personal lines cover,” explained S&P credit analyst Jelena Bjelanovic. “The ability of the industry to demonstrate the need for and benefits of insurance, as well as to successfully meet customer demands, remains unproven, however.”

The report also indicates that “if the world average insurance premium of $550 per capita is achieved and applied to the Gulf states, the GCC insurance market has a potential size of $20 billion (currently $4.6 billion).

Someone’s going to find a way to make a profit, I think.

I’ve received email occasionally from Muslim students interested in the actuarial profession. Among those folks, there’s a special concern due to the prohibition against riba — the charging of interest. Whether actuaries run afoul of that prohibition in mainstream insurance depends on whose fatwa you read, and what type of insurance you’re considering.

However, in Muslim nations there is an shariah-compliant equivalent to insurance companies: takafuls. I’ve been seeing an increasing number of news blurbs regarding takafuls over the past couple of years, including this one from the Khaleej Times:

The Islamic insurance industry in the region is projected to grow at 20 per cent per annum during the next decade, senior industry executives said at the World Takaful Conference (WTC), which opened in Dubai yesterday.[...]

Takaful is one of the fastest growing sectors of the insurance industry representing around 20 per cent of the annual premiums collected. Global Takaful premiums are estimated at $3 billion, of which 60 per cent is general takaful and the remaining is family takaful. While Middle East accounts for 36 per cent of premiums, about 56 per cent is generated in South East Asia.

The regulators and industry participants at the WTC said the fast growing Islamic insurance market in the UAE and the region should come under risk based regulations while the Shariah based compliance issues should be left to Islamic scholars or the respective Shariah boards of companies.

Interesting.