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Tuesday, 30 July 2013

Malaysia: Takaful operators to use Islamic Financial Services Act (IFSA) grace period to ensure growth

PETALING JAYA: Takaful operators like Syarikat Takaful Malaysia Bhd and Takaful Ikhlas Sdn Bhd, a unit of MNRB Holdings Bhd, are aggressively strategising their operations to ensure profitable growth and taking advantage of the five-year time frame given to composite takaful players to fully comply with the new Islamic Financial Services Act (IFSA).
Under the Financial Services Act (FSA) and IFSA, which came into force on July 1, composite insurers and takaful players would be, among others, required to split their life and general insurance businesses under separate licences.
Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil told StarBiz that as takaful operators are given the five-year time frame by Bank Negara to fully meet the terms of the new Act, the company would be devising and evaluating an array of potential options to achieve more efficient solutions from the capital management and shareholder return perspectives.
“We would review and evaluate all this. Hence, it is unlikely for the changes to materialise in the current financial year. The takaful industry players have yet to digest the full breadth of the IFSA to decide what would work best for them, going forward, especially towards sustainable growth of the takaful markets. This would definitely take time, as financial institutions need to better understand the application of the IFSA,” he added.
On whether the Act would take a hit on Takaful Malaysia’s bottomline in view of the split in operations of its family (life) and general businesses, Hassan said although there would be potentially higher cost initially due to start-up costs, in the long run, it would benefit the company and consumers as a whole, as the company would be more focused in terms of strategic planning, management, cost control and enhanced customer service. The capital position too would be further strengthened, he noted.
RHB Research, in an earlier report, said that the new ruling to split the life and general insurance businesses could have a “huge impact” on insurance firms, especially takaful players like Syarikat Takaful Malaysia and Takaful Ikhlas.
It added that the impact would be felt more deeply in the takaful industry due to the higher number of composite licences issued to them compared with their conventional insurance counterparts.
Meanwhile, Takaful Ikhlas president and chief executive officer Abdul Latiff Abu Bakar said while the split timeline given to comply was within five years, the company was looking more towards compliance with the other requirements first, of which the deadline for compliance was within a year.
“We are currently at the gap/impact analysis stage. As far as business is concerned, Takaful Ikhlas would continue to focus on enhancing its family agency business, of which new investment link products were just recently launched. It is too premature to comment on the capital and profitability.
(The Star Online / 23 July 2013)

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