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A.M. Best seeks comment on plans to rate Takaful insurers


November 19, 2007   by Canadian Underwriter


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A.M. Best is seeking public comment on its plans to rate and assess Takaful insurance companies, which operate in compliance with Islamic Sharia principles.
In its report, Draft: Takaful (Sharia Compliant) Insurance Companies, A.M. Best notes that Takaful insuranceis clearly on the rise, particularly in the Middle East and Malaysia. In addition, at least one Takaful insurer is currently in the process of negotiating a presence in Canada, in consultation with The Co-operators and the International Co-operative and Mutual Insurance Federation (ICMIF).
A.M. Best describes Takaful Insurance as essentially a co-operative risk-sharing program designed not to generate profit, but to uphold the Oslamic principle of bear ye one anothers burden.
In compliance with a restriction against usury, Takaful insurers typically feature the establishment of two separate funds one for policyholders and another for the operators or shareholders. The operators have no direct recourse to the underwriting deficits and surpluses accrued by the policyholders fund.
In a draft report, A.M. Best notes that despite the rapid growth of the takaful sector throughout the world, rapid growth has not been experienced in all product lines, as the expansion of general or non-life business has outpaced that of the family or life product line.
As a result, one of the main challenges going forward for Takaful insuramce companies is the development or more robust life insurance platforms, and compulsory lines such as motor third-party liability and health within the non-life business (in particular countries), A.M. Best notes.
Feedback to A.M. Best on the report, can be sent by email to: rating.methodology@ambest.com


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