ACII, MCIT, Master Mariner
CEO, Takaful Pakistan Limited
June 23 - 29, 2008

Ever since its inception, Takaful Pakistan Limited has been striving to create country-wide awareness of the fair and equitable system of Islamic insurance called TAKAFUL that is one of the fastest growing sectors not just in the Islamic world but also on a global basis.

Set up as a joint venture of prestigious institutions, both local and foreign, Takaful Pakistan Ltd. has quickly moved to fill up the vacuum by creating country-wide awareness and providing Shariah compliant Islamic insurance products to the general public that are not only at par with the commonly used insurance policies but in many ways are even more comprehensive in the scope and nature of coverage. Besides, there is an attractive provision of even a return of the balance amount paid by the Participants (Policy holders) along with even the investment income earned thereon. Such a unique advantage is not offered by the conventional insurance companies.

Starting-off in the late seventies simultaneously from Sudan and Bahrain, the system has proved commercially so viable that there are now around 150 Takaful companies operating in more than 40 countries of the world. Yet the appetite for this form of business is so lucrative that even the non-Muslim investors and multi-national business institutions have been attracted to invest and benefit from this mushroom growth. For instance Munich Re, the world's leading reinsurance company established for over a hundred years, has set up a ReTakaful subsidiary in Kuala Lumpur. Similarly Hannover Re, Swiss Re, Tokio Marine, the world's leading insurance and reinsurance giants have set up ReTakaful operations in regions like Bahrain and Singapore. Takaful companies are also already operational in Russia, South Africa and even Luxembourg whereas new Takaful companies are also being envisaged in U.K., India, China, U.S.A. and Canada by sponsors and investors interested to tap these potential markets.

One important aspect of this system is that even non-Muslims are increasingly opting for this form of insurance; so much so that almost 40% of the business volumes in Sri Lanka and Malaysia are derived from non-Muslims. Obviously theirs is not a faith-driven decision, rather it is purely based on the commercial benefits and the extensive insurance protection afforded that spurs them to prefer this form of insurance for their business and personal needs rather than going for the conventional form of insurance.

Pakistan is among those few countries where the per capita spending on insurance is extremely low. This penetration of insurance, both General and Life combined, is around 0.8% of our GDP compared to that of around 2.5% for Bangladesh, 4% for India, 8% for Malaysia and upwards of 14% in case of the developed economies of Japan, U.S. and Europe.

Apart from the affordability issue, a significant reason for such low penetration is lack of awareness of the availability of insurance as a viable support arm for all commercial activities and its important role in bringing economic stability and benefiting society at large.

Another reason is the general perception (and rightly so!) that insurance, as is being practiced by blindly following the West, is un-Islamic and hence "Haraam". This factor is even more pronounced in the case of "Life" Assurance.

Due to the above factors, people generally tend to opt for insurance coverage only where it is either mandatory by law, as in the case of Motor Third Party Insurance, or when it is one of the requirements of the lending institutions like banks and DFIs. Even in those cases, it tends to be regarded as a necessary evil and the ensuing "additional" cost involved is invariably resented.

Thus, a considerable vacuum exists in the country that can only be filled once the generally negative perception about insurance is removed and people are made aware of the benefits of insurance to the national economy in general and to their own personal wellbeing in particular. Unfortunately, not much work has been done by the contemporary "conventional" insurance professionals in this direction where probably short-term vested interests take precedence. On the other hand, several "malpractices" have been introduced and encouraged over time that have resulted in virtually obliterating the distinction between what is ethical and what is not. Inevitably, it is not the common man but large corporate "influentials" who benefit from inflated claims, kick-backs for placement of their insurances, etc. ? all at the cost of the common man who bears the brunt by a subsequent increase in insurance rates at renewals.

The above dismal scenario can be rectified by the introduction in the country of the pristine concept of "Takaful" as a viable Shariah-compliant alternative to the conventional insurance. If properly introduced by professionals who are not only competent but also fully committed to the cause, there is no reason why this relatively new concept will not achieve wide spread acceptability. In fact, Takaful insurance would be ideally positioned to infiltrate far and wide and create awareness and demand for insurance products that not only are tailored to the specific needs of the businesses and personal lines" segments but are also in full compliance with the Shariah. Even now, there are currently a significant number of insurance consumers who are obtaining insurance coverage from the conventional insurance companies simply because they have no choice of an Islamic alternative. Once such option is there, and provided it is competitive and equally comprehensive, they will willingly switch over. A parallel in this matter can be drawn from the phenomenal success achieved by the recently established Islamic banks in the country. Once people's confidence was built up looking at their respective Shariah Boards, innovative riba-free Islamic products based on Ijarah, Musharikah, Murabaha and the like, they lost no time in switching over their deposits and their financial transactions through these banks.

Takaful likewise, can build up public's confidence and once that is achieved, people will voluntarily opt for the various Takaful options in their individual as well as collective interests. Society as a whole will benefit as huge funds currently blocked up to hedge against fortuitous losses, will be willingly released and utilised in the growth of various businesses. Needless to mention, Takaful concept discourages spread of malpractices and does have a viable and unique alternative in the form of "Surplus sharing" as described earlier.

It is hoped that the government of the Islamic Republic of Pakistan shall seriously consider fixing a time-line, say, of 14th August 2012 by which date all the banking as well as insurance companies should be required to fully convert themselves into Shariah compliant Islamic mode of business. When a new bank and a new Takaful company can be raised from scratch to full fledged country-wide operations within a period of twelve months, there is no reason why this dead-line could not be met by the existing conventional insurance and banking sector who have all the infrastructure and manpower available but lack the will and the incentive to do so.


One important, and a very sensitive, aspect that needs to be carefully understood here is that there can be no provision for the so-called "Takaful windows" for the conventional insurance operators. For one, it will confuse the minds of the general public who would like to have a clear, defined distinction and freedom to choose between the products offered by a dedicated Shariah-supervised Takaful operator and such equivalent products that are offered by the conventional insurance companies that have been unequivocally rendered by all the Shariah scholars as non-Shariah compliant. Certain vested interests are currently lobbying for being allowed such "windows" so that they can hood-wink their existing clientele as well as the public at large that they too can cater to their choice. There is a clear provision in law ? "Takaful Rules 2005 that allows any existing conventional insurance company to completely switch over its existing business into Takaful mode in a non-reversible way. Furthermore, any institution or even a conventional insurance company can set up an entirely separate Takaful company under the law with the requisite Capital. Thus when there is not even one but two doors open to welcome the conventional companies to enter in this attractive arena, why still insist on jumping in through the window?

Such an ill-advised move will kill the very purpose of presenting Takaful as a Shariah-compliant alternative to the conventional insurance and will also be a violation of the clear Quranic injunction:

"And mix not the Right with the Wrong; and hide not the Truth when you know it!" < Al- Bakra>

Secondly, there is a fundamental, irreconcilable difference in concept between the two since conventional insurance, by its very definition, is a risk-transfer mechanism. This mechanism, again, is unacceptable in Islam since:

"Every bearer of burden shall bear his own burden".

Takaful, on the other hand, is a risk-sharing mechanism that allows for a transparent arrangement of cooperative sharing of risks by pooling individual "contributions" for the benefit of all and hence eliminates the basic ingredients that are prevalent in the conventional insurance rendering that un-Islamic. These are "Gharrar" ? meaning "uncertainty", "Maiser" ? meaning "gambling" and "Riba" ? meaning "usury". Such basic conceptual difference is not there in case of banks, except only "Riba" which is specifically avoided in the Islamic banking operations.

Furthermore, whereas a very high Capital, i.e. Rs. 6 Billion, is required to set up a new bank, a separate Takaful company can be set up with only Rs. 300 million in case of General Takaful business and Rs. 500 million in case of Life/Family Takaful. Thus Capital is not a constraint for the cash-rich conventional insurance companies in setting up separate Takaful companies as their subsidiaries instead of seeking permission for "Takaful window" operations within their existing setup.

Similarly, there is no dearth of professional manpower in the insurance industry as is being given out. It is only due to relatively slow career progression opportunities in the contemporary insurance circles that forced several of their young, energetic employees to seek better opportunities in the Middle-East and elsewhere. Had these companies provided conducive growth environment by way of streamlined succession planning, such young insurance professionals would not have left. A similar situation existed for aspiring banking professionals some ten years back. Eventually, when more opportunities started becoming available by opening of new banks in the country, several such professionals returned from the Middle-East and joined them bringing with them enriched experience of a rapidly developing economy. Likewise, there are currently a number of our insurance and Takaful professionals working in the Gulf who will willingly return and avail the new opportunities created. Even otherwise, there are enough middle-management insurance professionals in the country many of whom have joined the recently established insurance companies. A large number of such professionals are just waiting for an opportunity to work and earn their income through an Islamic insurance company. Probably this prospect of loosing such employees scares those companies further and they are therefore looking for "short-cuts" in order to keep their employees ? and their clientele too!

Another aspect that needs to be taken into account is the possible adverse impact on the potential foreign investors in case the so-called "windows" are allowed to the conventional insurance companies. These foreign investors are keen to invest in new Takaful ventures since they were assured that no "windows" would be allowed and the same has been specifically stated in the "Takaful Rules 2005 enforced in September 2005. Now, if the government reverses that decision under influence of those vested quarters, this will send negative signal to those interested foreign investors about the inconsistencies of the government's policies.

It is hoped that the government, and the regulators whose prime motive no doubt is to safeguard the interests of the general public rather than that of the conventional insurance industry, will defy all moves in the direction of such "window" operations and instead, will encourage emergence of dedicated Takaful companies in the country. It is my ardent desire to contribute my humble bit towards ensuring that one day, the ONLY form of insurance allowed in the Islamic Republic of Pakistan shall be Takaful ? the equitable and the right form of insurance!.


Takaful Pakistan Limited was incorporated in June, 2006 with its registered head-office in Karachi. With an authorised capital of Rs. 300 million, all fully paid-up, the Company is sponsored by reputable financial institutions both local and foreign.

Managed by a team of qualified and experienced professionals and supervised by a distinguished Shariah Advisory Board of international repute, Takaful Pakistan Limited has the capacity to underwrite risks in all avenues of General Insurance namely, Property (Fire & Engineering), Marine, Motor, Liabilities, bonds & guarantees, etc. In addition, the Company has the expertise and arrangements with overseas ReTakaful operators enabling it to offer comprehensive coverage for large infra-structure projects, specialized risks and umbrella/blanket covers specifically tailored for Islamic banking operations as well as for large corporate groups. The Company currently operates with a network of branches in seven major cities in the country.

Takaful Pakistan Limited aims to lead the contemporary insurance/Takaful market ensuring that its operations are riba-free and are in line with the cardinal Islamic principles. Takaful Pakistan Limited also offers a unique option of return of surplus to its clients whereby any balance remaining in its Waqf-Fund shall be returned to the Participants in proportion to their original contributed amount.

Rating: Takaful Pakistan Limited has been assigned "A- rating with STABLE outlook by JCR-VIS. It is currently the only rated Takaful Company in the country and one of the few amongst contemporary insurance companies that have been assigned A ratings.

Sponsors: Takaful Pakistan is sponsored by the following institutions:

1. House Building Finance Corporation The largest house financing organisation in the public sector.

2. Emirates Global Islamic Bank Limited A dedicated Islamic bank offering Shariah-approved financial products.

3. Emirates Investments Group LLC (U.A.E.) ? A leading investment company of the United Arab Emirates.

4. Mal-Al Khaleej (U.A.E.) One of the companies of the prestigious Al-Rajhi Group.

5. Al-Buhaira National Insurance Company (U.A.E.) ? One of the leading insurance companies of U.A.E.

6. Arif Habib Securities Limited ? The fastest growing financial services provider in Pakistan.

7. Sitara Chemical Industries Limited The market-leader in Chlor-Alkali products in Pakistan; committed to developing Islamic financial products.

Shariah Board: The Company's Shariah board comprises of the following:

1. Prof. Dr. Anis Ahmad Chairman

2. Mufti Mohammad Mohibul Haq Member & nominee of Justice (R) Muhammad Taqi Usmani

3. Mufti Khalil Ahmad Aazami Member

As an emerging venture, Takaful Pakistan Limited strives to be the trend-setter in the contemporary insurance market in the country by providing a viable Islamic alternative to the conventional insurance. The Company intends to maintain its services par excellence backed by efficient clients" servicing and an innovative approach by its dedicated team of professionals; thereby providing the best possible coverage for the protection of risks for its valued clients.