GCC investors plan first Islamic insurer in Britain

British Islamic Insurance Holdings, a company with $38mn of capital provided by Arabian Gulf investors, plans to be the first stand-alone insurer to offer UK Muslims cover that complies with their religious beliefs.

 

London-based British Islamic has applied to the UK Financial Services Authority for a licence to start writing policies for Islamic insurance, or Takaful, in the first quarter of 2008.

 

At present, although the UK’s 2million Muslims can buy Takaful insurance for their home, no one offers such cover for life or health.

 

Insurers hoping to target the market by branding conventional life and private medical policies with the word “Takaful” will find that these products, and the investment approach of the insurer, do not comply with Islamic law.

 

Several leading UK insurers have investigated Takaful health and life policies, and found it much more complex than they thought. The main drawback is that the law forbids investments in a wide range of industries – including armaments; and most health and life insurers cannot control where their parent companies invest funds.

 

A new ‘stand-alone’ insurer does not have to untangle existing investment arrangements.

 

The market will not be left to new small insurers, as international players such as AIG and Allianz have overseas subsidiaries learning about the concept and processes. AXA and Prudential are also investing in Takaful insurers overseas.

 

Lenders competing for business from UK Muslims include HSBC Holdings and Lloyds TSB Group, which have units and products complying with Islamic law.

 

British Islamic’s insurance company will announce its chief executive officer soon and plans to sell shares to the public on London’s Alternative Investment Market in the first quarter of 2008.

 

The insurer is in talks with potential partners to help it sell its products and start writing life insurance, or Family Takaful, in the first half of 2008. Takaful health and other products will follow.

 

British Islamic raised $38mn last year from Gulf founders including al-Jomaih Group, Dubai Bank, Gulf Ventures Corp and International Investment Bank. Some well-known UK insurance names are on the board to offer their expertise of the UK market.

 

A survey British Islamic conducted among British Muslims found that half would buy Takaful products as long as cover and price were compatible with existing products.

 

Takaful is based on the Qur’anic principle of mutual assistance and is similar to mutual insurance in that members are the insurers as well as the insured. Conventional insurance is prohibited under Shariah because Muslim scholars judge it to involve speculation and interest payments, both forbidden.

 

Takaful products could also appeal to a non-Muslim market who see the concept as more ethical than conventional insurance, particularly from a new insurer operating on an ethical basis.