Oumar N’doye is the managing director of Takaful Mali Assurance Islamique (TMAI), the first exclusively Islamic insurance company in the CIMA zone (Conférence Interafricaine des Marchés d’Assurances).
In this interview with Africa Ahead, N’doye explains the difference between Islamic insurance and traditional insurance, as well as the issues, challenges and opportunities for the development of Islamic insurance in Africa, especially in the CIMA zone.
In his view, despite the lack of much investor interest in this segment, Islamic insurance has a bright future and could help to raise the level of insurance development in the CIMA zone countries. The CIMA zone is a region comprising 14 Francophone countries in West and Central Africa.
N’doye is also the former chairman of Comité des Compagnies d’Assurances du Mali (CCAM), the umbrella organisation for insurers in Mali.
What is the fundamental difference between traditional insurance and Islamic insurance?
The fundamental difference between traditional and Islamic insurance is that the latter strictly complies with Sharia norms.
The characteristic features of Islamic insurance are:
- Separation of policyholders’ (participants’) funds from the shareholders’ funds so that shareholders may not draw on the policyholders’ funds in any way. They must limit themselves to the commissions paid by policyholders, known as ‘wakala’ commissions.
- Compliance with Sharia standards in how it operates, such as the ban on term deposits (TDS), investments in breweries, gambling or the pornographic industry.
As a result, Islamic insurance offers the following advantages:
- Policyholders are the real ‘insurers’ (true owners of their funds, unlike traditional insurance which shareholders own) and the Takaful company is merely an agent to manage on behalf of the mutuality of policyholders, i.e. the mandators;
- It is a co-operative model designed to benefit policyholders rather than enrich shareholders: surpluses from the participants’ fund are returned to the latter in the form of rebates or reductions in the cost of their insurance cover on renewal;
- The investments made by the Takaful operator are eminently ‘ethical’;
- The speed with which claims are settled is guaranteed more than elsewhere thanks to the separation of participants’ funds from those of shareholders.
As its name suggests, is Islamic insurance reserved exclusively for Muslims?
Islamic insurance is open to people of all faiths, without any discrimination. In fact, at TMAI, we have participants (policyholders) who are Christians, the main thing being not to call into question the principles of Islamic insurance that we have just described.
Traditional insurance comprises two branches, namely life insurance and property and casualty (P&C) insurance. Is the same true of Islamic insurance?
In traditional insurance, the principle of specialisation is enshrined, i.e. the same company cannot offer both life and non-life (P&C) insurance. In Islamic insurance, regulations allow this combination (General Takaful branches and Family Takaful branches), provided a request is made when the application for approval is submitted.
What are the main insurance products offered by Islamic insurance? And what distinguishes them from traditional insurance products?
Islamic insurance products are virtually identical to traditional insurance products. There are no differences at this level, at least as far as CIMA regulations are concerned, i.e. the non-life insurance products of traditional insurance are the counterpart of the General Takaful branches and the life insurance products of traditional insurance correspond to the Takaful Family branches of Islamic insurance.
What is your assessment of the development of Islamic insurance in Mali and the CIMA zone in general?
Although Africa is the cradle of Islamic insurance, given that the first Takaful insurance company was set up in Sudan in 1979, the emergence of this type of insurance is mainly due to the countries of the Middle East and Malaysia.
In the CIMA zone, the company I currently manage is unfortunately the only one entirely dedicated to this niche, even though Takaful windows exist in certain traditional companies in Senegal and Côte d’Ivoire.
Despite the particularly low penetration rate, we believe there is great potential and that the years to come will tell us more about the opportunities offered by this insurance model, which truly meets the needs of our populations for solidarity and mutual aid.
Is there thus a real potential market for Islamic insurance in Mali and the CIMA zone in general?
As we have just said, Islamic insurance meets the solidarity needs of our populations, and there is no doubt that there is a potential market to develop this insurance model. In a country like Mali, where most of the population is Muslim, it is clear to us that Islamic insurance has a bright future ahead of it.
Given the low number of Islamic insurance companies in the CIMA zone, why is there so little investment in Islamic insurance despite the potential?
The scarcity of investors in Islamic insurance despite the potential market reflects how insurance in general is an unknown sector.
The same is true of traditional insurance, which is struggling to attract investors despite a low penetration rate and undeniable development potential, as the figures and results in our various countries amply demonstrate. Investors are unfamiliar with this field, which some consider to be rather complex in its modus operandi.
Additionally, the return on investment generally takes time, as this is a veritable industry with fairly high start-up costs that can only be paid off and made profitable after several financial years without dividends distribution. However, it is a truly structuring project that has a positive impact on our countries’ economies, and one in which a long-term vision is essential.
You run the first company exclusively dedicated to Islamic insurance in the CIMA region. What insurance products do you offer customers?
TMAI was licensed on December 20, 2021 to underwrite the following classes of insurance: Accidents, sickness, land vehicles, transported goods, fire and natural elements, other property damage, land vehicle motor third party liability and general third-party liability.
Compared with traditional insurance, our company operates exclusively in the non-life insurance field, also known as P&C (In French, ‘IARD’: Fire, Accident and Miscellaneous Risks).
In Africa, traditional insurance is underdeveloped due to a lack of insurance culture among the population. Aren’t you afraid that Islamic insurance will suffer the same fate?
The low insurance penetration rate should not be seen as inevitable in Africa. Islamic insurance could actually help to raise the level of insurance development in our countries because it has been wrongly assumed that insurance is incompatible with religion. However, Islamic insurance clearly indicates that its model is truly compatible with religion.
In the CIMA zone, is there a legal framework regulating the development of Islamic insurance?
Since October 2019, CIMA has issued a special regulation in Book IX of the Insurance Code that considers the specific features of Takaful insurance. There is no doubt that this regulatory framework will encourage the growth of Islamic insurance in the coming years.
According to the CIMA regulations, what are the conditions for setting up an Islamic insurance company?
Approval to operate in the insurance sector is granted by the Minister in charge of the insurance sector in the country where the company is established, after receiving the assent of the Regional Insurance Control Commission (CRCA), which is CIMA’s supervisory body.
Prior to this, a technical study of the application is carried out locally by the supervisors of the Direction Nationale des Assurances (DNA) and at the supranational level by CIMA’s supervisory commissioners based in Libreville, Gabon.
To obtain approval, the supervisory authority essentially takes into account the following criteria:
- The proposed technical and financial resources and their appropriateness to the company’s business plan;
- The good repute and qualifications of the persons responsible for conducting the business;
- The distribution of capital if the insurance company is a public limited company (SA) or the arrangements for setting up the formation fund if the company to be formed is a mutual company.
Compared with traditional insurance, the minimum capital required to set up an Islamic insurance company is CFAF 3 billion, instead of CFAF 5 billion for non-life operations. Finally, the CIMA regulator requires the creation of a Sharia Supervisory Committee made up of at least three high-level specialists in Islamic finance, who scrupulously monitor the compliance of operations with Sharia standards.
How do you see the future of Islamic insurance in Mali and the CIMA zone?
Given the size of the Muslim population in West African countries and Cameroon, we believe that Islamic insurance in the CIMA zone has enormous development potential, especially as the field is virtually untapped at present.
What are the challenges facing the development of Islamic insurance in the CIMA region?
The main challenge facing Islamic insurance is communication, as this model is largely unknown to the general public.
This communication needs to be extended to intermediaries, especially insurance brokers, who will help raise awareness in our various countries. I believe this work is currently being done in Mali, where Takaful Mali Assurance Islamique (TMAI) is organising training sessions for insurance brokers in this market.
The Association Professionnelle des Assureurs Conseils du Mali (AP-ACM) recently pledged to support Takaful Mali Assurance Islamique (TMAI) so that the first Islamic insurance company in the CIMA zone to be set up in Mali can be a real success and serve as a model for other countries in the region.
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