KUALA LUMPUR, Nov 16 (Reuters) - Malaysian Islamic reinsurer MNRB Retakaful expects gross contributions from its overseas businesses to exceed that of domestic operations in five years, its chief executive said.
The firm, a subsidiary of Malaysian reinsurer MNRB Holdings (MNRB.KL), sees growth opportunities in Indonesia, Brunei, Sri Lanka and Pakistan as the sharia reinsurance industry grows, said Ismail Mahbob.
“I am talking about 70 overseas and 30 Malaysia,” Ismail said in an interview, referring to gross contributions.
MNRB’s overseas businesses are in 14 countries, including Indonesia, Saudi Arabia and Kuwait. They account for about 31 percent of gross contributions.
Retakaful contributions in Malaysia grew by nearly 50 percent to $162 million in 2008, but the expansion is largely confined to the retail sector, such as fire or motor insurance, since the industry is still young.
MNRB Retakaful is also looking at business opportunities in the Middle East, especially in the United Arab Emirates, Kuwait, Saudi Arabia and Syria.
“You cannot ignore the Middle East market,” Ismail said. “It’s highly fragmented but I can see areas that can be developed or which we are developing now,” he said.
He said a key problem in the Middle East was the lack of homogeneity in the pool of assets underwritten by takaful providers, making it difficult for retakaful firms to assess and assume the risks.
“They [takaful operators] need an overview of their underwriting business,” Ismail said.
Global premiums in Islamic insurance, or takaful, total about $2 billion to $3 billion and are expected to reach more than $7 billion by 2015, industry figures show.
The industry is relatively small and many takaful firms currently cede part of their risks to conventional reinsurance firms because there is a lack of Islamic reinsurance capacity.
The Islamic reinsurance market is worth $1 billion, industry estimates show.
Islamic insurance works on the basis of mutual help, with members contributing to a pool of funds, which is used to indemnify participants who suffer a loss.
The funds are invested according to the sharia which avoids interest-bearing loans and gambling, pork and alcohol-related activities. Profits made are distributed among members. (Click on [ID:nISLAMIC] for more Islamic finance stories and ISLAMIC for a speed guide) (Reporting by Cecile Lefort; Editing by Neil Fullick)