One year and a half after Morocco officially introduced a comprehensive regulatory framework for Islamic finance, or what it calls “participation banking,” the north African country goes a step further and is now in the process of officially embracing Islamic insurance, or takaful.
This is seen as a big step for the Moroccan Islamic finance industry. While a first takaful law was passed as early as in 2015, respective regulations for the insurance market had not been finalised since then, no licences has been granted and no official timeline for the launch had been set, which has led to considerable confusion in the commercial insurance industry, as well as for social security authorities which see takaful as an important vehicle for state insurance provisions.
But as of February 5, 2019, a draft bill that would regulate takaful operations in Morocco has been agreed upon unanimously by the lower house of parliament in Rabat. In a next step, the bill will be sent to the House of Councillors, the upper house, for approval.
Once the bill has come into law, regulatory authorities will process necessary applications for takaful and retakaful licences. Separately, there will also be standards set for takaful accounting, solvency regulations, corporate governance and taxation. If everything goes according to plan, the first takaful providers could commence operations later this year.
The core specification of the Moroccan takaful law is that, unlike in the country’s banking sector, insurance companies seeking to operate in the takaful industry will be obliged to offer Islamic products exclusively. This means that besides full-fledged Islamic banks and financial institutions, conventional insurers will be required to launch standalone takaful companies.
As for products, the bill provides for insurers to offer products such as family takaful and takaful insurance for assistance and loans, mortgage takaful, as well as general, property, accident and casualty takaful. It will also open up the Islamic savings market through takaful investments, including bancassurance of bancatakaful, which are customised long-term Shariah-compliant savings plans based on insurance products comparable to a life insurance.
The bill also allows for the possibility of takaful and retakaful transactions by insurance intermediaries such as insurance brokers and agents provided they are qualified to act as such.
It is also expected that the new takaful law will bring more competition to the insurance market in Morocco and also increase insurance penetration which currently stands at 3.6% as per premiums to GDP. Five insurance companies are currently representing almost 70% of the market, which is valued at a total direct insurance premium volume of around $4bn as of 2017.
The top five companies are Wafa Assurance with a market share of 20.8%, Royale Marocaine d’Assurances (16.7%), Saham Assurance (12.5%), AXA Assurance Maroc (11.2%) and Mutuelle Attamine Chaabi (7.8%), according to figures by the Autorite de Controle des Assurances et de la Prevoyance Sociale, the Moroccan insurance supervisory authority. Of the top five, AXA has shown interest to enter the takaful market with a separate Shariah-complaint organization.
Another potential player is Atlanta Insurance and Reinsurance Co, which has plans to launch an Islamic subsidiary backed by an investor from Qatar.
Overall, there is enough room for growth for the Moroccan insurance industry. According to Bachir Baddou, director general of the Moroccan Federation of Insurance and Reinsurance Companies, the industry is expected to almost double premium income to $7.6bn by 2023, while the premium ratio should reach as much as 10% of GDP. New takaful operators would also have the opportunity to expand their services across Africa where Islamic finance is currently thriving.