The UK has the potential to become an important hub for Sharia-compliant insurance, or Takaful, and we can expect to see growth in this space, according to several experts in the field.
Insurer AIG, which issued the first Sharia-compliant Warranty and Indemnity (W&I) insurance policy in the London M&A insurance market last year, hosted a panel discussion yesterday on the challenges and opportunities presented by Sharia-compliant insurance.
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The panellists told Insurance Business that while the uptake of Takaful policies in the UK has not happened as quickly as some would like, there is large scope for future growth.
Key markets for Takaful are currently in the Middle East and Southeast Asia, with Saudi Arabia and Malaysia leading the way – but the London Market’s status as a global financial hub means it has a role to play in exporting business globally.
“With the City of London being the home of the insurance market, we are known for exporting intelligence and human capital, and regardless of what goes on with Brexit we still have a very strong financial market here in the city,” Davide Barzilai, partner at Norton Rose Fulbright, said.
London is already acting as a centre of Islamic finance for many doing business across the world, Barzilai continued.
“There are companies big and small using London as a base to do that, and the growth therefore is not just about the local UK market, it’s about the UK’s role in exporting into the global market – and I think there’s still room for further growth and innovation,” he said.
Stella Cox CBE, managing director of the DDCAP Group and chair of the Islamic Finance Market Advisory Group, said that there is good reason to believe that the UK’s engagement with Takaful will develop positively, just as it has with other Sharia-compliant financial products.
“I’ve seen the market turn to the UK because of its established infrastructure, and because of a legal environment that is very compatible with the tenets of Sharia,” Cox commented.
“We have an enabling regulatory infrastructure, because we have markets that support Islamic capital market origination and issuance.”
Sheikh Bilal Khan, partner at Dome Advisory and a Sharia scholar, described the UK’s landscape as a “blank canvas” when it comes to the growth of Takaful products, adding that the active status of several Islamic banks is a good basis for potential growth.
“The UK is definitely seen as a country, around the world and even in Muslim-majority countries, that is a kind of flag-bearer, and a standard for other countries,” Khan said.
However, he stressed that the view of Takaful products should be expanded to allow for that growth.
“It’s about using those avenues and not just focusing on motor insurance… I think it’s about opening the canvas and looking at different opportunities.”