www.thejakartaglobe.com - Malaysia’s biggest Islamic insurers plan to expand in Indonesia, taking advantage of industry growth that is almost three times the pace of their home market and increasing wealth in the world’s most populous Muslim country.
Mayban Ageas, the nation’s largest insurer, is considering an acquisition in Indonesia, chief executive Hans De Cuyper said in a March 6 interview. Syarikat Takaful Malaysia, the second-biggest, estimates its Indonesian unit will generate 50 percent of its profits, from less than 10 percent now, managing director Hassan Kamil told reporters in Kuala Lumpur on March 7, without giving a timeframe. (source)
Indonesia’s Muslim population of 213 million compares with 17 million in Malaysia, US government data show.
Shariah-compliant insurance, known as takaful, rose 48 percent in Indonesia in 2010 to 4.5 trillion rupiah ($490.5 million), while Malaysia’s market expanded 17 percent in the first seven months of last year to more than 10 times that size. Indonesia has the equivalent of $7 billion of corporate Islamic bonds outstanding, compared with $76 billion for its Southeast Asian neighbor, according to data compiled by Bloomberg.
“Indonesia is a very hot market,” said Kuala Lumpur-based Cuyper, whose company is the insurance unit of Malayan Banking, the nation’s top lender. “The growth potential is significant.”
Southeast Asia’s biggest economy had five takaful companies in addition to 35 booths offering Shariah-compliant insurance at non-Islamic operators as of September, according to the Jakarta-based Indonesian Shariah Insurance Association.
Rising wealth in Indonesia makes it an attractive destination for Malaysian insurers amid increased domestic demand, Syed Moheeb Syed Kamarulzaman, chairman of the Malaysian Takaful Association in Kuala Lumpur, said in an e-mail on March 9.
Indonesia’s per capita gross domestic product increased an estimated 6.8 percent to $4,700 last year, according to US government data. Muslims account for 86 percent of Indonesia’s total population of 248 million and 60 percent of the 29 million people in Malaysia, the data show.
Takaful is based on the Koranic principle of mutual assistance, where policy holders contribute a sum of money to a common pool managed by the company. Funds are used to pay for claims and any excess is returned to customers.
Global takaful growth has been hampered by the limited supply of Shariah-compliant debt, which pays returns on assets to comply with Islam’s ban on interest. Operators have been calling for more sukuk maturing beyond 10 years to help them better manage their longer-term liabilities and roll out new products.
Malaysia’s government is taking measures to address the shortage with plans to sell its first 15-year Islamic bonds in June to help meet demand from insurers and banks, according to the central bank’s debt-auction calendar.
Global sales of Shariah-compliant bonds totaled $9.4 billion this year, compared with $4.8 billion in the same period of 2011, according to data compiled by Bloomberg. Offerings reached a record $36.3 billion last year.
Source: http://www.thejakartaglobe.com/business/malaysian-islamic-insurers-eyeing-indonesian-market/504993 - March 15, 2012
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