Nov 27 (Reuters) – The Islamic Insurance Association of London (IIAL) said on Tuesday it had launched a set of guiding principles covering sharia-compliant insurance, or takaful, seeking to address capacity constraints in the sector.
The IIAL, an industry group launched in 2015, said its framework would help underwriters to create their own Islamic windows, through which they would be able to deliver both sharia-compliant insurance and reinsurance cover.
The move would help London’s insurance market to address a lack of capacity for takaful firms, which have their core markets in the Gulf and southeast Asia.
“The Principles have been designed to deliver a certainty to both those operating in the market and, more importantly, Islamic clients across the world,” said IIAL Chairman Max Taylor.
“This is not only a huge opportunity for London to access new risks, and new markets, but also it has wider implications.”
Takaful firms, which have their core markets in the Gulf and southeast Asia, held a combined $46 billion worth of assets globally in 2017, according to Thomson Reuters data.
Takaful firms, which are based on the concept of mutuality, have been limited in their ability to take on large commercial risks partly because of a lack of scale.
Reinsurance options are also scarce, with some firms forced to reinsure through conventional lines, a practice allowed under the concept of necessity.
Industry scholars, however, are increasingly challenging whether such exemptions are still applicable in the growing market and are encouraging alternatives. (Reporting by Bernardo Vizcaino; Editing by Rashmi Aich)