INTRODUCING TAKAFUL IN NON - TAKAFUL

MARKETS: THE CIC KENYA EXPERIENCE Presenter:

Steve MuiaBusiness Development Manager

The Co-operative Insurance Company of Kenya Limited (CIC Insurance)

Kenya, East AfricaEmail: muia@cic.co.keWebsite: www.cic.co.ke

Summary of Presentation

About KenyaDemographicsOverview of Insurance Industry in KenyaCIC KenyaTakafulChallengesOpportunitiesConclusion

About Kenya

Location: Eastern Africa, bordering the Indian Ocean, between Somalia and Tanzania

Area:Total: 582,650 sq km Land: 569,250 sq km Water: 13,400 sq km

Coastline:536 km

Demographics

Population: 39,002,772Age structure:

0-14 years: 42.3% 15-64 years: 55.1% 65 years and over: 2.6%

Median age:total: 18.7 years male: 18.6 years female: 18.8 years (2008 est.)

Demographics

Population Growth Rate: 2.691% (2009 est.)

Birth rate: 37.89 births/1,000 population (2008 est.)

Death rate: 10.3 deaths/1,000 population (2008 est.)

Sex ratio:Under 15 years: 1.01 male(s)/female15-64 years: 1.01 male(s)/female65 years and over: 0.84 male(s)/female

Religions

Protestant 45% (17.6 m)Roman Catholic 33% (12.9m)Muslim 10% (3.9m)Indigenous beliefs 10% (3.9m) Other 2% (780,000)Note: A large majority of Kenyans are

Christian, but estimates for the percentage of the population that adheres to Islam or indigenous beliefs vary widely

Economy

The regional hub for trade and finance in East Africa

GDP grew an estimated 2.1% in 2008 – projection 7%

Overview of Insurance Industry

Players: 43 companies (2008)Gross industry premium Kshs. 48.1 billion

(2007)Assets Kshs. 130 billion (2007)

Insurance Companies in Kenya

Regulatory Framework

In Kenya, the insurance industry is governed by the Insurance Act Cap 487 , regulated and supervised by the CEO of the Insurance Regulatory Authority (IRA) . The mandate of the Authority is to ; Regulate, supervise and develop the insurance

industry in Kenya. Administer the Insurance Act and advise the

government on policy matters insurance. Protect the interests of policyholders.

The policy and regulatory framework has no provisions pertaining to Islamic Insurance.

Act is neutral

CIC Kenya

Established in 1978Staffing - 151Branches - 14Asset base - Kshs. 3 billionGross premium: Kshs. 2.4 billionCIC is the 6th largest insurance company in

Kenya

Takaful

Idea Conception

Idea mooted in 2004.Little/No progress madePicked up in 2005 with formation of a

technical team from CIC Kenya and a consultant

Concept developmentNetworkingDocumentsModelSystemsStaffing

Key Issues

Understanding the conceptGauging regulator’s reactionModel developmentIslamic Leaders – Supreme Council of Kenya Muslims

(SUPKEM) and COIResearch on viability – target areas with large pop of

Muslims – fear of leakage to competitors/cost/Takaful Advisory BoardOperational guidelines – underwriting, finance,

investmentRetakafulMarketing Plan/Strategy/DistributionPolicy documentationSystems – IT and operational

Model

Challenges

Lack of regulatory frameworkShariah compliance CIC BoardCapital requirementsWindow or fully fledged takaful companyNew concept – profit sharing, etcLanguage/TermsReligious and cultural – polarization (Islam

phobia)Technology

Challenges

Operational issues – investment vehiclesStaff trainingBoard/Advisory panelAccounting modelAcceptanceRetakafulWhich model?RatingAnticipated competition

Opportunities

New conceptLarge population that is not insuredAlternative – Kenyans always ask why

insurers never refund premiumIslamic bankingRegional expansion – EAC, Somalia, Ethiopia,

Djibouti

Country Figures (2009 est) - Opportunities

Country/Year

2009 Population(in Millions)

Kenya 39.002

Tanzania 43.739

Uganda 32.710

Rwanda 9.998

Burundi 8.303

Ethiopia 82.545

Djibouti 0.502

Somalia 8.863

Current Status

CIC is partnering with local investors to set up a Takaful insurance company.

Partnering with local investors to purchase 30% stake in a newly registered venture - Takaful Insurance of Africa

Conclusion

CIC is optimistic that the Takaful concept will pick well in the market and that our partnership with Takaful Insurance of Africa will bear fruit to the co-operative movement.

We shall bank on the international co-operative community to give us the necessary support in rolling out Takaful in Kenya.

Thank you and may God bless you