Global starts Takaful Insurance service

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(Photo: Anteneh Aklilu)

Global Insurance Company has become a pioneer to introduce Takaful Insurance service in the country that aims to address those who were excluded from the insurance sector.
Despite the industry has been opened for Takaful insurance after the amendment of the Insurance Businesses proclamation early this year that followed by a directive issued in June, Global Insurance, which is one of the oldest insurers since the free market was introduced in the country about 25 years, becomes the first insurer to introduce this service that goes with Islamic principles.

(Photo: Anteneh Aklilu)

The company that was formed in 1997 said that Global Takaful plan is designed to provide once marginalized business community and individuals with financial flexibility based on their affordability and needs.
According to Ahmed Sherief, Chair of Board of Directors at Global the new service is an instrument for realization of financial inclusion and included those who were idle because of religious reasons.
According to Munir Adem, who is a Board of Director at Global, the insurance company has been considering to introduce the business to address the segregated group of the society but it was not fruitful because of different reasons including legal frame works.
He told Capital that since the board decided to undertake the project about a year and half ago the feasibility study has been conducted.
“Under the study we have understand that significant number of the society in the Muslim community does not have a clue about such kind of insurance besides that we identify that huge amount of finance deposited under interest free banking (IFB) at banks could not be able to be disbursed as a loan because there is not Takaful insurance, which is relevant to give guarantee for interest free based credit,” he added.

(Photo: Anteneh Aklilu)

Currently under IFB, which was allowed about a decade ago to operate on window but now opened to run independently, about 46 billion birr is deposited.
“Now our Takaful will support the financing sector,” Munir says “the latent demand will be performing because of introducing such operation that is expected to be grown with short period.”
Experts in the insurance sector and financing business in Islamic principles stated that such kind of business is a tool to accelerate the financing business under the scheme of IFB.
Ahmed said that the introduction of Takaful will have significant role for economic development because it is related with IFB.
He underlined that the government and relevant stakeholders should focus on Islamic finance education to produce ample professionals for the sector.
Global Insurance Company is working with Africa Re’s Retakaful and others for its Retakaful operators as partnership.
In the first year the company has targeted to mobilize close to 30 million birr as a fund from participants.
In the Takaful business policyholders (participants) agree to guarantee each other and, instead of paying premiums, they make contributions to a mutual fund or pool. The pool of collected contributions creates the Takaful fund.

(Photo: Anteneh Aklilu)

The amount of contribution that each participant makes is based on the type of cover they require, and on their personal circumstances. As in conventional insurance, the policy (Takaful Contract) specifies the nature of the risk and period of cover.
The Takaful fund is managed and administered on behalf of the participants by a Takaful Operator who charges an agreed fee to cover costs.
Any claims made by participants are paid out of the Takaful fund. But differently from conventional insurance business remained surpluses fund under Takaful insurance after making provisions may be distributed to the participants in the form of cash dividends or distributions, alternatively in reduction in future contributions.

(Photo: Anteneh Aklilu)