By Douwe Miedema
ZURICH (Reuters) - The fledgling Islamic insurance industry needs stronger backing by sharia-compliant reinsurers, Swiss Re (RUKN.VX: Quote, Profile, Research, Stock Buzz) said, in order to help it open new markets and sell its products to more clients.
Insurance is not nearly as commonly sold in the Middle East as in the West, studies show, and insurers hope their sharia-compliant products known as Takaful will persuade more Muslims to buy policies.
But the industry also needs a robust safety net from reinsurers, which help insurers cover the risk of costly events such as earthquakes or epidemics, Swiss Re said.
"The two go hand in hand. Without the access to the capacity, the expertise and the global reach of the reinsurance market, the Takaful industry itself will be constrained," said Chris Singleton, who heads a Swiss Re Takaful unit.
Sharia boards have long allowed Takaful companies to buy traditional reinsurance cover, because Islamic products did not exist, he said. But reinsurers are now offering their products on a fully compliant basis.
The concepts of sharia-compliant insurance -- where risk and reward are shared between policyholder and insurer -- are not new, Singleton said, harking back to mutual insurance, one of the oldest contract forms in the industry.
"It is not innovative in a financial aspect ... the innovation lies with the ability to provide products which comply with the laws of Islam," he said.
"There is no doubt it will increase insurance penetration in the Middle-East and the Gulf States in particular." Continued...
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