The London market has taken a significant step in its ambition to establish a meaningful capacity for Islamic reinsurance and retrocessional cover after the Indonesia regulator told the market the country is looking to enhance the level of capacity it is seeking to source.
International Underwriting Association CEO Dave Matcham (pic) was in Jakarta with senior members of the Islamic Insurance Association of London, the organisation which was founded to drive the establishment of sharia- compliant capacity in the London market, to meet with the regulator, the Otoritas Jasa Keuangen (OJK), and senior market figures.
Matcham addressed an event which included OJK, the Indonesian Sharia Insurance Association (AASI), the CEO of the Malaysian Takaful Association, the Islamic Financial Services Board (IFSB) and the National Sharia Council (DSN).
As part of the event the IIAL and AASI signed a memorandum of understanding which will see London and Indonesia work together to enhance not only co-operation but efforts to enhance training, and closer ties as Indonesia looks to solve a shortage of sharia-compliant reinsurance and retrocessional capacity for its fast-growing takaful sector.
The country is emerging from the COVID pandemic and the economic downturn with continued economic growth and with it has come greater affluence and demand for insurance in the world’s most populous Islamic nation. The country has over 200 million Muslims, which present 87% of its population. It has 15 fully fledged takaful companies and 45 sharia insurance windows and is the fourth largest takaful market in the world.
CEO of non-bank financial institutions supervision and member of the board of supervisors at the OJK, Ogi Prastomiyono said the time was right for Indonesia to look to attract more capacity from outside of its borders to support its ambitions for continued growth.
“This event can provide useful dialogue on the required steps and actions which need to be taken to promote the Indonesian takaful and retakaful sector as part of our insurance ecosystem,” he explained. “Indonesia has been blessed with strong economic growth.”
Prastomiyono added: “We have seen relative stable economic growth in the face of the economic challenges, and we now see a higher capita per person in the population and this requires more insurance, however penetrations levels are still low.”
He said the opportunities were extensive with commercial insurance penetration in the country standing at 1.6% in 2021, compared to its neighbours, Thailand at 5,8%, Malaysia at 5.3% and India at 4.2%.
“The OJK is promoting the insurance industry’s role to support the future growth of the economy,” added Prastomiyono.
However, he said at present there remain a lack of sharia compliant reinsurance and retrocessional capacity and it was an issue that needed to be addressed.
Matcham said: “London has been working hard for a number of years to put in place the foundation that will allow the market to offer sharia compliant commercial insurance and reinsurance covers.
“The Indonesian market is looking at how it can continue its growth and the demand for reinsurance will continue to grow. London is keen to support the market with its ambitions and the MoU signed between the IIAL and AASI is an incredibly positive step, and we hope it is the start of a long and positive partnership.”
Erwin Noekman, executive director at the AASI said: “I very much hope this event will be an ‘eye opener’ for Indonesian takaful and retakaful operators, that collaboration across borders is an inevitability for, future business.”