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The pioneer in Takaful insurance

Article - March 7, 2013
In 2000, First Takaful Insurance Company was established as the first of its kind in Kuwait. Market penetration remains low for the insurance sector in general, but First Takaful is raising the bar for quality and service
Due to an extremely generous welfare and social security system, Kuwait currently has the lowest insurance penetration rate in the whole of the GCC region. Nevertheless, there are various insurance companies operating in the country, offering Kuwaitis obligatory products such as vehicle insurance, as well as recommended policies, including homeowner’s insurance and medical travel assistance. 
First Takaful Insurance Co. (FTIC) was founded 13 years ago by various Islamic financial groups interested in a Shariah-compliant insurance firm. Chairman Khalil Ibrahim M. Al-Shami  says that it has not been easy capturing customers, owing largely to a lack of awareness of insurance in general, and more specifically, of takaful insurance, which is similar to mutual insurance.
“The people here do not have an insurance mentality. When it comes to insurance they only think about premiums and the cost of the policy. They don’t think about whether it is Sharia compliant or not. That’s why it hasn’t been growing for the past 11 years. Most of the takaful insurance companies are working like normal commercial insurance companies,” he laments. 
Consequently, FTIC has moved into neighboring countries to capture more clients. 
“We are limited to a small market in Kuwait and we cannot do that much business, so we went to Saudi Arabia and set up a company which is now listed on the stock exchange and is doing well. We went to Turkey and we established another company there, which is also doing well,” says Mr. Al-Shami. 
The insurance sector in Kuwait is stagnant, he highlights, because the country still has “a 1960s way of thinking”. Mr. Al-Shami is encouraging the Ministry of Commerce to regulate the sector adequately in order to improve loss ratios and eliminate the existing problems. 
Licensing, he says, is too easy a process – an applicant can receive a license before having even completed a feasibility study. As a result, there are at least 10 takaful insurance companies in operation in Kuwait. 
Despite all this, FTIC’s chairman is an insurance specialist and professional who believes in providing his employees with proper training – not only to expand knowledge and raise the quality of service in the industry, but also to benefit the entire private sector.  
“We’re trying to emphasize human resource development. If you train Kuwaitis, they can go and do business in other companies in the country,” he says. “You will find that most people working in the insurance sector were trained by me. I gave them full support.” 
Standard & Poor’s doesn’t share Mr. Al-Shami’s pessimism for the sector. In a statement released in spring 2012, S&P said: “We believe the medium-term growth outlook for Kuwaiti insurance is stronger than that in some of the other Gulf markets.” 
The rating agency’s credit analyst, Ali Karakuyu, said that they even predict that, over the long term, the Kuwaiti insurance market will grow faster than the European and North American markets. S&P does concur, however, that there has been overcrowding – particularly in takaful insurance – which has led in part, to lower average premium rates in the retail business.  
Takaful observes the rules and regulations of Islamic law, in so far as that it is a non-profit, co-operative system where clients are reimbursed from common funds into which they have made regular contributions.