Adamjee Life to enter Islamic insurance market next year

Adamjee Life is going to enter the Islamic insurance market by March next year, company CEO Fredrik de Beer told The Express Tribune in a recent interview.

“We will complete the business plan to seek the board’s approval by the end of October. We are hoping to launch Takaful products by the end of the first quarter of 2015,” Beer said.

The third largest private-sector life insurance company in terms of total gross premiums last year, Adamjee Life follows Jubilee Life Insurance and EFU Life Assurance that have already announced their plans to enter the Shariah-compliant segment of life insurance.

Pakistan’s insurance industry has seen a sudden flurry of activity of late, as both life and non-life entities have shown interest in setting up Islamic window operations.

Takaful Rules 2012 became effective in May after the Sindh High Court lifted the stay order that kept conventional insurance companies from opening window Takaful operations for almost two years.

“We are fortunate that the regulator is not requiring conventional insurance companies to set up a separate entity for Takaful operations, as it would lead to an initial investment in excess of Rs500 million,” Beer said.

A conventional insurance company was initially required to establish a stand-alone subsidiary by setting aside Rs500 million if it wanted to enter the Islamic insurance business.

But Takaful Rules 2012 allowed insurance companies to start Islamic window operations without making any provision for the paid-up capital.

This resulted in bitter opposition from existing Takaful players who challenged the new set of rules in court. After a two-year-long legal battle, all stakeholders reached a compromise whereby insurers are now bound to allocate Rs50 million to their Islamic window operations.

Although Beer stopped short of stating the exact figure that Adamjee Life is setting aside for its Islamic operation, he said the company will make a provision that is ‘comfortably double’ the amount required under the law.

He added that the company is expected to add 35 to 50 new jobs as part of its expansion into the Islamic insurance market. Established in 2009, Adamjee Life is partly owned by Hollard International, the largest private insurance group in South Africa. The rest of the shareholding rests with its non-life arm, Adamjee Insurance, which is backed by the Nishat group of industrialist Mian Mansha.

The company has increased its footprint in the life insurance industry rather quickly. From Rs267.13 million in 2010, its total gross premiums grew to Rs4.47 billion in 2013, the latest year for which data is available. This shows average growth rate of 155.86% per year between 2010 and 2013.

Beer attributes the ‘exponential growth’ in premiums partially to the company’s strong partnerships with banks.

“An insurance company in Pakistan is only as good as its distribution i.e. its partnerships. If you don’t have strong partnerships, you might find it difficult to compete in the insurance market,” he said.

Indeed, Adamjee Life could achieve such rapid growth mainly because it is part of the same business group that owns MCB Bank, which was Pakistan’s third largest commercial bank by net assets in 2013.

No wonder, up to 95% premiums of Adamjee Life originate from alternative distribution channels.  While Adamjee Life has remained heavily dependent on MCB Bank for the sale of its policies until now, the company has recently set up its own agency distribution channel.

“We are now expanding our agency distribution footprint and will have 200 agents on board by the end of 2014. We will scale it dramatically in 2015. Then we’ll start effectively competing with the likes of Jubilee Life and EFU Life,” Beer said.

Published in The Express Tribune, October 17th, 2014.