Retakaful under-capacity – growth opportunity for conventional reinsurers?

Retakaful under-capacity – growth opportunity for conventional reinsurers?


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Speaker(s): Nina Ndebele (Institute and Faculty of Actuaries)

The purpose of this presentation is to discuss how the current limited capacity in the ReTakaful (Islamic-compliant reinsurance) industry presents an opportunity for conventional reinsurance providers across the globe to achieve growth in an otherwise soft reinsurance market. This presentation also explains what ReTakaful is, how it operates and how actuaries can lend their expertise. Finally, this presentation touches on the opportunities presented by the relatively untapped Islamic-compliant alternative risk transfer market, such as Takaful insurance linked securities.

Over the years, Takaful has grown as an Islamic-compliant form of insurance with global Takaful gross written premiums amounting to c. US$15 billion[1] in 2015 and double-digit growth in some countries anticipated to continue into 2017[2]. Whilst Takaful insurers can use conventional reinsurance under circumstances of "extreme necessity", Retakaful is preferred.

Concerns about a soft reinsurance market set the stage and increase reinsurers' drive for alternatives to conventional reinsurance and ReTakaful presents conventional reinsurers with an opportunity to attain growth. In particular, with the Takaful industry growing faster than the conventional insurance industry in some countries[3], there is a potential for ReTakaful to follow a similar trend. Additionally, this would enable reinsurers to gain marketshare in the Gulf Counties and South-East Asia which dominate the global Takaful industry. Actuaries in turn can provide their expertise in product development, pricing, assessing reserve adequacy and capital requirements of the ReTakaful units of conventional reinsurance firms.

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