Several insurers are ready to offer Shariah-compliant products that complement Islamic banking as Morocco’s central bank aims to allow Islamic banks to begin business early next year.
This is despite the fact that insurance companies have yet to be informed about regulations governing takaful, reported Morocco Today.
Specifically, insurers plan to offer comprehensive home takaful to house buyers who borrow from Islamic banks to finance their home purchase. Mr Hakim Bensaid, Project Manager of Takaful at RMA Capital, indicated that Islamic financing for home buyers will be offered to consumers if they are accompanied by comprehensive home takaful.
In the dark
One challenge facing insurers eager to jump on the Islamic finance wagon is the scope of takaful regulations. Mr Bensaid said: “One does not have (yet) a clear idea of the scope of takaful, whether it is limited to life and savings products or whether it will extend to products such as comprehensive home cover.”
Mr Zeroual Koudama, Project Director General of Takaful at Wafa Assurance, said: “Nevertheless, it remains possible to move forward on our projects by relying on a set of assumptions, knowing that some products must necessarily exist in the market.”
Another challenge is customer awareness of takaful. As it is, the insurance penetration rate is relatively low in the current conventional insurance market. Much more effort would be required by Islamic banks to introduce consumers to new takaful products. “Conventional insurance already is not known enough, what about takaful?” asked Mr Koudama.
In addition, insurers are still in the dark about investment rules, reporting requirements for takaful and Shariah supervision. The ecosystem of Islamic finance is still very new. For instance, there is no sukuk market currently.
Sukuk is necessary because takaful operators would be required by regulations to place 30% of their reserves in these instruments, said Mr Fouad Bendi, Deputy Managing Director of Maghreb Securitisation, which structures such investment products in Morocco.
Demand exists for sukuk, especially since they are also attracting interest from conventional investors, said Mr Bendi. But the introduction of these instruments seems to have come to a standstill. Regulations governing sukuk were the first set of rules to be issued in Islamic finance. This was in 2013 when the state was planning to launch its first sovereign sukuk at the time. But nothing has been done to date, he said.
Finance professionals want the government to step up the development of sukuk in order for Islamic finance, including takaful, to take off.