Potential new market for cooperative and mutual insurers

The following ruling by the European Council for Fatwa and Research directs Muslims to purchase their statutory insurance requirements from cooperatives and mutuals when no Islamic Insurance (takaful) schemes exist in the country.

“Commercial insurance is originally haram as agreed upon by most contemporary scholars. It is well known that in most non-Islamic countries there are cooperative and mutual insurance companies. There is no harm from the Shari'ah point of view to participate in these services. So, it is unlawful for a Muslim living in a country where there is such a cooperative insurance company to make an agreement with a commercial insurance company. But, if a cooperative insurance company is not found one may enter into a contract with a commercial insurance company only by way of necessity. If a person is forced by law to insurance or by way of need, it is obligatory for him to be content with the minimum proportion of insurance that covers his need or to the minimum of such transaction he’s being forced to carry out.”

There are still no Takaful operators in many ICMIF member countries some of which have large and fast growing Muslim populations.

*Source: guardian.co.uk

The ruling by the European Council provides a platform for cooperative and mutual insurers to begin collaborating with their local Muslim communities and be the first to satisfy the insurance needs of this niche market.

The enclosed paper provides information on the takaful concept and outlines the considerations that need to be made if a member decided to provide these products to the Muslim population in their own country.

Some of our ICMIF members have already started Takaful ventures in Non-Muslim countries:

Ansar & Islamic Co-operative Housing Corporation. The First Islamic Housing Cooperative pioneered in North America in 1980, followed by Interest-Free Islamic Investment opportunities for Muslims, RRSP etc.  In 2005 Ansar Cooperative Housing became a member of the International Co-operative & Mutual Insurance Federation (ICMIF). Since the principles of Takaful are closely aligned with co-operative and mutual principles, negotiations started with fellow ICMIF member, the Cooperators for a Property Takaful for Islamic Ansar and Qurtuba Housing members. After over two years of rigorous work, several meetings to understand each others positions, Shariah requirements of Takaful and conducting demographic and risk reviews, The cooperators offered only Property Takaful to Housing members in 2007, followed by Auto in 2008. The Cooperators is the Second Largest Cooperative Insurance Company in Canada. Almost 35% of Insurance companies, in Canada are either Cooperative or Mutuals.

Unique Life Assurance Company Limited (Ulife) is a worker-oriented company which was established in Ghana in 2007 to underwrite the life business of Unique Insurance Company Limited. The concept of Takaful was accepted by the Board because it is compatible with Ulife Values of mutuality and cooperation and because it is an ethically based product.

Despite the challenges such as market understanding of the concept of Takaful insurance; the Regulators reaction, the necessity to carry out a proper product description and development, operational guidelines (marketing, underwriting, claims, finance), etc. Ulife successfully launched the Family Takaful Plan recently, designed to assist Muslims to protect themselves against financial loss arising out of death, personal accident, hospitalisation and critical illness whilst ensuring that this is done in line with the principles of Shariah.

Takaful Insurance of Africa, the first fully Shari'ah-compliant insurance company in Kenya, was licensed and launched in Nairobi in early 2011. The company was founded in 2008 and registered by the Kenyan industry regulator, Insurance Regulator Authority and is backed by the Cooperative Insurance Company of Kenya Limited (CIC), the 3rd largest life insurer in Kenya, and the Majority shareholders of Takaful Insurance of Africa (TIA). Both companies share the same essence, the same principles & values and they both focus on the bottom of the pyramid. Through insurance, CIC represents the aspirations of thousands of co-operators in Kenya whereas TIA represents the concept of insurance based on mutual co-operation and solidarity of people by participating in a Takaful scheme.

Kenya's population is put at 39 million, out of which more than 10 per cent is Muslim. The potential market for Takaful products is projected to be around 25 per cent of the estimated four million Muslims in the country.