What has been the added value of Watania to the takaful segment?
Watania established strong relationships with a few Islamic financial institutions in the UAE, and we believe that there is still room for us to deliver products within this niche market in which we operate. Our main proposition has always been to cater in the medium to long term to individuals and SMEs, while initial focus remains on corporate clientele. We believe that the targeted markets of SMEs in the UAE are growing and are a part of our approach and strategy. We need to find a niche where we can build a network with these businesses and grow with them over time.
Watania achieved profitability in 1H2014. To what do you attribute this positive financial result?
There is great potential in the market, as well as difficult challenges ahead for the company. Our portfolio has a balance between different lines of businesses; it has not skewed toward a line that is more risky than others. We have worked hard as a team to deliver on the distribution of the portfolio. The underwritten business has been profitable on the technical side. We have been prudent with our investment strategy and we made some money along the way as well. While the technical side of our business is profitable, the majority of income is still being generated from the investment returns; the challenge is to balance our sources of income. This is how we will ensure the company is viable to continue its course without being largely dependent on investment income.
The insurance authority is creating a National Sharia Committee. What else can be done in order to strengthen the regulatory bodies in the UAE?
One of the challenges that the takaful industry has is not having a unified body that regulates its operations. Sharia scholars help find solutions for takaful and Islamic finance at large. In order for a regulator to have an in-depth and scientific view of the industry, where it can manage multiple operators, it should enact unified regulations. The regulatory body should closely consult sharia scholars in order to bring about proper processes, procedures, and governing laws for the industry. The appointment of a higher committee for the sharia to operate at industry level was an integral part of the takaful rules issued by the UAE Insurance Authority in 2010. The IA is working on forming the higher sharia committee, and we hope this will bring uniformity to the rules and regulations that govern the takaful operators. This will not only impact positively the takaful operators, but also the insured. I am hopeful that the formation of the higher sharia committee will go through. The other major hurdle the committee must overcome is the interaction with several other sharia committees at company level in order to bring uniformity to the market. In addition, issuance of investment guidelines should take priority and must be clearly defined; we are anticipating the insurance authority introduction of the new financial regulations in respect of the investment and financial guidelines for the industry, which has been long awaited. The investment and financial guidelines should be addressed from a sharia compliance perspective. The higher sharia committee should address the audit processes of operators.
What would be your recommendations to investors who are interested in takaful?
When it comes to investing in a takaful operator, existing or green field, the investor should be aware that such investment should not be considered a short or medium term investment in any portfolio. It should not be done on speculation either. Investment in takaful operators should be long term due to the nature of the business. The industry still shows tremendous potential, and I am a believer of its viability in the long term.