Ajmal Bhatty
Promoter of Ethical Financial Solutions
Founder of World-Of-Takaful

The global Takaful industry, spanning over 34+ countries, has witnessed significant growth in recent years, driven by increasing demand for Shariah-compliant insurance solutions. However, despite this growth, a critical gap exists in the availability of rated security for underwriting and retrocession arrangements that adhere to Shariah principles. Establishing a Lloyd’s Syndicate in a Box (SIAB) dedicated to Takaful (TSBL: Takaful Syndicate in a Box @ Lloyds) can play a transformative role in addressing this gap and strengthening the global Takaful ecosystem.

Key Challenges in the Takaful Industry

1. Lack of Rated Security:

  • Many Takaful operators struggle to access highly rated reinsurance and retrocession providers that offer Shariah-compliant solutions. This limits their ability to underwrite large and complex risks, particularly in sectors like energy, aviation, shipping, and infrastructure.

2. Limited Shariah-Compliant Retrocession Options:

  • Retrocession, the process of reinsuring reinsurance risks, is a critical component of risk management for Takaful operators. However, the availability of Shariah-compliant retrocession providers is scarce, leaving operators with limited options to manage their exposures effectively.

3. Fragmented Market:

  • The Takaful industry is highly fragmented, with operators often relying on local or regional reinsurers that may lack the global reach, financial strength, and ratings required to support large-scale underwriting.

4. Need for Global Standardization:

  • The absence of a globally recognized platform for Shariah-compliant underwriting and retrocession has hindered the industry’s ability to scale and attract international investors and participants.

How a Lloyd’s Takaful Syndicate Can Bridge the Gap

1. Rated Security Backed by Lloyd’s:

  • Lloyd’s is the world’s leading insurance and reinsurance marketplace, renowned for its financial strength and global ratings. A Takaful syndicate at Lloyd’s would provide operators with access to rated security, ensuring confidence in underwriting and retrocession arrangements.
  • Lloyd’s current rating (A+ by Standard & Poor’s, AA- by Fitch, and A by AM Best) offers unparalleled credibility, which is critical for Takaful operators seeking secure and reliable partners.

2. Shariah-Compliant Underwriting and Retrocession:

  • A dedicated Takaful syndicate at Lloyd’s would focus on providing Shariah-compliant solutions for both primary underwriting and retrocession. This would enable Takaful operators to manage their risks effectively while adhering to Islamic principles.
  • The syndicate could introduce innovative Shariah-compliant products tailored to sectors like energy, aviation, shipping, and infrastructure, addressing the unique needs of Takaful markets.

3. Global Reach and Expertise:

  • Lloyd’s global network spans over 200 territories, providing access to diverse markets and risks. A Takaful syndicate at Lloyd’s would enable operators to underwrite risks across GCC, Malaysia, Turkey, Iran, Pakistan, Africa, and other emerging markets, while benefiting from Lloyd’s expertise in risk management and underwriting.

4. Credible Disruption to Traditional Practices:

  • The TSBL / SIAB model encourages innovation and differentiation, allowing a Takaful syndicate to disrupt traditional insurance practices by introducing Shariah-compliant solutions that meet the needs of modern businesses and consumers.

5. Strengthening the Takaful Ecosystem:

  • By providing rated security and Shariah-compliant retrocession options, a Lloyd’s Takaful syndicate would strengthen the global Takaful ecosystem, enabling operators to scale their operations, attract international investors, and underwrite larger and more complex risks.

Strategic Benefits for the Takaful Industry

  • Enhanced Risk Management: Access to rated security and Shariah-compliant retrocession options would enable Takaful operators to manage their exposures more effectively, reducing reliance on unrated or non-compliant providers.
  • Increased Credibility: A Lloyd’s Takaful syndicate would enhance the credibility of the industry, attracting new participants and investors while fostering trust among policyholders.
  • Global Standardization: Establishing a Takaful syndicate at Lloyd’s would set a global standard for Shariah-compliant underwriting and retrocession, driving consistency and scalability across the industry.
  • Innovation and Growth: The syndicate would introduce innovative products and solutions, addressing the unique needs of diverse markets and unlocking new growth opportunities for the Takaful industry

Conclusion

The establishment of a Lloyd’s Takaful syndicate is not just an opportunity—it is a necessity to address the critical gaps in rated security and Shariah-compliant underwriting and retrocession within the global Takaful industry. By leveraging Lloyd’s financial strength, global reach, and innovative SIAB model, a Takaful syndicate can provide operators with the tools they need to scale their operations, manage risks effectively, and deliver Shariah-compliant solutions to policyholders across 34+ countries. This initiative would not only strengthen the Takaful ecosystem but also position Lloyd’s as a leader in supporting the growth of Islamic finance and insurance globally.