This document discusses the history and development of Takaful (Islamic insurance) globally and in Pakistan. It provides the following key points: 1. Takaful first emerged in the 1970s as an alternative to conventional insurance that is compliant with Islamic principles. The first Takaful company was established in Sudan in 1979. 2. Takaful gained regulatory recognition and support in the late 1980s and 1990s in countries like Malaysia. Pakistan introduced regulations for Takaful in the 2000s and the first Takaful operators launched there in 2004-2007. 3. The Wakalah and Wakalah + Waqf models are the most commonly used operational models for Takaful

1. PERVAIZ AHMED
SAARC Conference
16th April, 2014, Karachi
T A K A F U L
Shari’ahCompliantAlternative
to Conventional Insurance

3. Development of Modern Takaful- Global
 19th Century- Western socio-economic, political, and legal orders
overshadowed Islamic and traditional local norms
 1950- Muslim Revival and Renaissance began around the world on
multiple fronts after getting out of colonialism.
 1970- development of Islamic Banking framework started
 1975- The first commercial Islamic bank, was established in UAE
 1979- First Takaful company was established in Sudan as need for a practical
risk mitigation mechanism grew with the growth of Islamic banking
 1987- Central Bank of Malaysia issued first ever Takaful Rules
 1990- Formation of AAOIFI
 1990- Rapid development of Islamic Banking all over the world
 2000- Many Takaful companies were launched in Malaysia and GCC
 2010- Regulator issued Takaful rules in many territories

4. Development of Modern Takaful-Pakistan
 2000- SECP repealed Insurance Act 1938 and issued insurance Ordinance
which has the mention of word “Takaful”
 2002- SBP issued license to First Commercial Islamic Bank in Pakistan
 2003- Ijtimah of scholars in Darul Uloom Karachi to review current Takaful
modals all over the word and suggest modal which is suitable for the
Pakistan market. Wakalah Modal was adopted with addition of Waqf
 2004- Incorporation of First General Takaful company in Pakistan
 2005- SECP issued Takaful Rules for dedicated Takaful companies. Windows
were not allowed
 2007- Incorporation of First Family Takaful company. Total number of Takaful
operators reached to Five
 2012- SECP issued Takaful rules 2012, allowing conventional companies to open
Takaful windows

5. Takaful Operational Models
Mudarbah Practiced earlier, it is no longer in use.
Wakalah This is the most prevalent model
Wakalah+Waqf
This model was suggested by Shari’ah Scholars
in Pakistan.
Cooperative
Modal
This modal is used only in Saudi Arabia and
many scholars around the glob question it
acceptability as Shariah compliant.
• Takaful operational modals have been a source of debate since
inception of Takaful which is still going-on with recent introduction
of Saudi Cooperative Model

6. (USD) BILLON
187
# of Takaful
Operators in
2012
Approx.
48
Window
Operators
15
Irani
Operators
>18
Re-Takaful
Operators Global Market Size of Takaful
Source E&Y Report 2013
Worldwide Takaful Developments & Growth
4.2
5.4
7.1
8.3
9.4
10.9
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012

7. Geographical Distribution of Global Takaful
Volumes
51%
25%
16%
2%
5%
1%
Saudi Arabia
ASEAN
GCC
South Asia
Africa
Levant
Source E&Y Report 2013
2012- Total Industry Size
US$ 11 Billion

8. Gross Premium of Private sector Life Insurers/
Family Takaful operators - Pakistan
EFU, 34%
NJI, 35%
ALICO, 12%
East West,
1%
ADAMJEE,
7%
PQFT, 10%
DFT, 2%
EFU
NJI
ALICO
East West
ADAMJEE
PQFT
DFT
Company
Market Share
2012
JLI 35%
EFU 34%
ALICO 12%
East West 1%
ADAMJEE 7%
PQFT 10%
DFT 2%
2012- Total Industry Size
RS. 34 Billion

9. Financial Performance- Average ROE
Source: E&Y Global Takaful insight 2013

10. SWOT Analysis- Takaful Industry in Pakistan
Source: E&Y Global Takaful insight 2013
Strengths Weaknesses
• Boom in Life insurance, double digit rise in
premium
 Limited number of player in the market
 Higher acceptability of Takaful in general
public as Shariah complaint alternate to
insurance
• Under developed Life and General
Insurance Market
 Intense competition in many General
Insurance lines.
 Financial performance of most of the
current Takaful operators is not upto the
expectations
Opportunities Threats
 180 Million predominantly Muslim
population
 Very low insurance penetration. Over 90%
population is uninsured
 Rapid growth of Islamic Banking and
Government’s willingness to grow this
sector further
 Overall business environment is not
conducive for the growth or to attract
international players
 Competition from Window Takaful
 Insurance penetration is unlikely to
increase substantially in near future
 Some Shariah scholars are still not
convinced with current Takaful modal

11. Like Islamic Banking, Takaful is a reality
which is here to stay
FUTURE
Takaful has the tremendous potential to grow
exponentially in highly underinsured Muslim population
provided it is done with its true sprit and whole heartedly
supported by all the stakeholder

12. Jazaakum Allahu Khairan