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Takaful products have huge potential; insurance sector needs more support

Interview with Muhammad Nasir Ali Syed – CEO, Pak-Qatar Family Takaful Limited


After completing his master’s in Biochemistry from University of Karachi, Muhammad Nasir Ali Syed pursued ALMI from LOMA, USA and PGD in Islamic Banking & Takaful from Center of Islamic Economics (CIE, a division of Jamia Darul Uloom Karachi). He has been associated with Life Insurance & Takaful industry of Pakistan for about 25+ years. His area of expertise has always been ‘Operations’. He is presently serving as CEO of Pak-Qatar Family Takaful Limited and was one of the founding members of the company. He joined PQFTL in February 2007 as the Head of Operations. He was primarily responsible for establishing and evolving effective systems and procedures to successfully run the entire Takaful operations. Later, in 2012, he was given higher responsibility by the BoD to look after the affairs of the company as CEO.

About the Takaful landscape in Pakistan:

The Securities and Exchange Commission of Pakistan (SECP) permitted the formation of Takaful companies and windows after the notification of Takaful rules in 2005. Pak-Kuwait Takaful Company Limited was the first Islamic insurance company in Pakistan. Takaful Pakistan Limited, Pak-Qatar Family Takaful Group followed in 2006 (Pak-Qatar Family Takaful Limited was the first Family Takaful company of Pakistan), and finally, Dawood Family Takaful started operation in 2007. No new Takaful companies have been founded since 2007. However, many Insurance companies have opened Takaful window operations across Pakistan.

Pak-Qatar Family Takaful Limited (PQFTL)

is the first and largest dedicated Family Takaful Company in Pakistan. PQFTL is a progressive and a technology-driven Shariah Compliant company providing innovative Takaful solutions since 2007. PQFTL is the fastest growing Family Takaful operator in the country. Incorporated in 2006, and beginning operations in 2007, the company is registered with, and supervised by, the Securities and Exchange Commission of Pakistan (SECP). An independent Shariah Advisory Board chaired by Mufti Muhammad Taqi Usmani certifies all products and operations for Shariah compliance. The company is rated “A+” (having Stable Outlook) by JCR-VIS Credit Rating Co. Limited and Pakistan Credit Rating Agency (PACRA). The Company’s paid-up capital is in excess of Pak- Rs. 1.3 billion, which is highest in the industry. PQFTL has a vision of providing financial protection through Takaful to everyone. The company’s shareholders include some of the strongest financial institutions in the state of Qatar such as Qatar Islamic Insurance Company (QIIC) and Qatar International Islamic Bank (QIIB). The company is further strengthened by its Re-Takaful arrangements with Munich-Re and Hannover Re. Pak-Qatar Family Takaful Limited has strategic BancaTakaful alliance with FWU AG, a leading life insurance company based in Munich (Germany), for distribution of Takaful policies through banking channels.Pak-Qatar Family Takaful Limited has one of the largest Takaful branch networks across Pakistan (over 70 branches in 60 cities), in addition to over 3,500 bank branches in over 200 cities that provide BancaTakaful products. With more than 550,000 covered members and over 1100 corporate members, the company believes in technological advancement and has presence on all digital mediums thus enabling the customers to keep in touch 24/7 via modern web portals and mobile applications. Pak-Qatar Family Takaful Limited is recipient of several domestic and international awards and nominations including ‘Best Takaful Company’ by Global Islamic Finance Awards in London 2018, ‘Brand of the Year’ at the FPPCI Awards in Karachi 2018, ‘Best Takaful Operator’ by IFN Awards in 2017,  ‘Best Takaful Operator in Pakistan’ award at the 10th International Takaful Summit London 2016 and ‘Best Takaful Company in Pakistan’ for the year 2015 at ‘RTC Islamic Banking & Finance Awards’ ceremony in Islamabad.

PAKISTAN & GULF ECONOMIST had exclusive conversation with Muhammad Nasir Ali Syed about the insurance sector. Following are the excerpts of the conversation:

The insurance sector has undergone a massive change overlast two decades. The most important development was introduction of Takaful sector in this industry. The SECP issued Takaful rules in 2005 and the first Life Takaful company established in 2007 was Pak-Qatar Family Takaful Limited. At the time of partition, there used to be around 70 Life Insurance companies working in Pakistan. Out of these, 68 to 69 were multinationals. After the nationalization in 1970s, this insurance sector became a national entity. In the year 1995-96, when Moeen Qureshi was the Prime Minster of Pakistan, the insurance sector was reformed and the private companies were introduced in the country. Later, the SECP worked on the regulatory framework of the insurance sector and seriousness was observed followed by developments still in the stage of infancy.

Out of 210 million of population, around 0.7% comes under the umbrella of Takaful penetration whereas in our neighboring country India, it is about 4.5%. This indicates that we are the lowest in the region. If we talk about general insurance companies, the penetration is even low 0.4% (drastically low). If we see the risk factor, the insurance sector can play a very significant role in order to mitigate the financial risk. Still, we are in the development phase and are striving to promote it. After the introduction of Takaful and its acceptance followed by success, the conventional insurance companies are now offering Takaful operations. The Takaful model is very appealing to the masses for its transparency. At present, there are 41 non-life insurers operating in the market, including three general Takaful operators and one state-owned insurer. There are 9 Life insurers, including two Family Takaful operators, and one state-owned insurer in the Life insurance sector. The SECP also allowed one life and three non-life insurers to transact window Takaful business during the year, after which, the total number of conventional insurers authorized to conduct window Takaful operations has risen to 21.


The Takaful industry comprises of five dedicated Takaful operators and 21 Askari Window Takaful Operators.

Over the years, the SECP took a number of initiatives for regulation and development of Islamic finance across the sectors it regulates. Among them are:

  • Tax neutrality for Sukuk
  • A new concept of Shariah-compliant company
  • A holistic Shariah governance framework
  • Facilitating the issuance of Sukuk
  • SECP Shariah Advisory Board meetings
  • Futures exchanges to promote Shariah-compliant products
  • Establishment of financing centers and outreach
  • Development of a comprehensive database of Shariah advisors
  • Awareness and capacity building

The above initiatives taken by the SECP have been instrumental in the growth of the industry in Pakistan.

The biggest issue facing this industry is lack of awareness. Masses don’t know the benefits of insurance or what exactly it is. Masses perceive insurance as an investment vehicle and compare with other investment opportunities available in the country like AMCs, Mutual Funds, etc. Due to this, the real benefit (Protection) of Insurance/Takaful is unheard of. The purpose is hence, defeated.Insurance is basically a risk-mitigation tool where people pay certain amount to transfer risk to avoid financial loss. In Takaful, we share the risk instead of transferring. The core difference between Takaful and Insurance is in the terms of contract. The Takaful contract is based on the Tabbarru concept, while the insurance contract is based on the sales & purchase concept. According to Shariah rules the item being sold or purchased should be physically present, thoroughly evaluated, well-documented and the buyer should be able to see the merchandise. The elements of; uncertainty, gambling and interest involved in the insurance contract, make it non-compliant with the Shariah principles.

A commoner is only attracted by insurance on the basis of savings whereas the insurance company has to deduct certain amount for his/her protection to invest further. Later, when he comes to know that the amount he paid has not earned that much, it leads to confusion/distrust. To overcome this issue, the SECP and SBP have taken several measures among which educating the customers by holding awareness sessions is in full swing unlike in the past.

After the introduction of Takaful rules in 2005 by the SECP, confidence was observed amongst the masses. Although people invested on the basis of savings which lead to ignorance of protection offered by the Insurance/Takaful company.

The prospects of insurance in Pakistan are very bright and a lot of measures can be taken for its improvement. In the year 1995-96 when SECP introduced the private sector, we witnessed competition in the country. The recent government’s initiative to launch Health cards in KPK as a pilot project has sparked awareness regarding health facilities to the masses. To cover financial risk, Insurance is the only sector considered to provide service all over the world which needs support from government policies.

There are few policies which are not supportive for the private sector for e.g. recent Sales Tax in Sindh (13%) and in Punjab (16%). A common person does not have to pay tax if he gets treatment on his own. But if he avails the same treatment through Insurance/Takaful, he will have to pay the additional amount in form of taxes. This will discourage the masses to opt for Insurance/Takaful. The imposition of taxes is bringing a negative impact on the industry. It has come to my knowledge that tax will also be imposed on the savings products in future which will again be a burden for the prospective customer and will negatively affect the industry.

Takaful is a community-pooling system based on the principles of brotherhood and mutual help wherein participants contribute in a fund to help those who need it most in times of financial difficulties. Historically, the world’s first Takaful Company was established in 1979 in Sudan. In 1985, the ‘Grand Council of Islamic Scholars’ formally allowed the use of Takaful as the Islamic alternative to conventional insurance. Takaful is using the best ethical practices (Shariah compliance), which favors the customers and is acceptable for everyone. Takaful business is based on a vast pool of finances, where a large number of customers are contributing for the protection and rehabilitation of the few unfortunate participants who suffer any losses, some unpleasant incident or a tragedy. Takaful funds are sufficient enough to fulfill the needs and commitments of such unfortunate participants. The financial pool is considered as a sacred “Amanat” (Pledge) and is treated with utmost transparency. Instead of a fixed rate of interest, Takaful companies distribute the actual earned profits rationally among all the customers/contributors.

The Takaful products are absolutely competitive, more rewarding and flexible for the customer, compared to the traditional insurance products. So it is competing in the market purely on merit, without indulging in the interest-based financing models.

The Takaful products have also won many prestigious international awards. These products cover all kinds of basic needs like; Child Education Saving Plan, Death Benefits, Share & Care plan, Investment plans, etc. The Takaful model offers; Individual, Group and Banca products and within the Group, it offers Group Life and Health protection. The conventional insurance companies have also recognized its potential and created their own Takaful divisions to tap this growing market.

The recent trends in the market indicate that there is a huge potential for Takaful products. People are looking for protection as per Shariah principles. Islamic banking has also created a great push for Takaful products. Keeping in view, the age of Takaful industry, the growth has been very impressive and the untapped market is a great opportunity for the Takaful players yet to be explored. In order for Takaful companies to grow, they must focus on customer centricity, the innovation of new products/services, adhering to the customer’s needs, and the implementation of technological enhancements within the organization that allows for accurate assessment of risks, while at the same time maintaining the core Islamic values on which Takaful is built. To overcome the challenges, all key stakeholders need to devote efforts toward raising awareness about the unique aspects of Takaful with both customers and professionals.

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