IGI Life Insurance to enter Takaful business
The country’s fourth largest conventional life insurance company in the private sector announced on Wednesday it is setting up a window Takaful business.
The board of directors of IGI Life Insurance has approved the commencement of family Takaful business, which is the Shariah-compliant counterpart of traditional insurance, according to a notice sent to the Karachi Stock Exchange (KSE).
Total gross premiums of IGI Life amounted to over Rs1.8 billion at the end of the first nine months of 2014. It makes IGI Insurance smaller than Jubilee Life, EFU Life and Adamjee Life in terms of total gross premiums, but bigger than Asia Care Health and East West Life.
In April last year, IGI Insurance acquired a 69.7% stake in American Life Insurance Company Pakistan (Alico) for Rs732 million. The establishment of the window family Takaful operation is accompanied with the allocation of Rs50 million for this purpose.
The SECP replaced Takaful Rules 2005 with Takaful 2012 two years ago, which allowed conventional insurance companies to set up Islamic windows to conduct Shariah-compliant business.
In addition, Jubilee Life, EFU Life and Adamjee Life have also expressed their intention to establish Islamic window operations recently.
“The decision has been taken on the basis of the potential in the family Takaful business in Pakistan. The board believes that this investment shall lead to an increase in shareholders’ value in the long-term,” the company said in its announcement.
With the current level of insurance penetration in Pakistan – measured at 0.9% of the gross domestic product (GDP) – the potential market for Takaful appears to be substantial. Total premiums of life insurance players, excluding government-owned State Life Insurance, were in excess of Rs40 billion at the end of 2013. The share of the Takaful segment, however, was less than 5% in the overall insurance industry.
Published in The Express Tribune, January 8th, 2015.