Posted on Jan 31, 2011 by Sergio Ulloa
Malaysia's AIA AFG Takaful Bhd has set its sights on growth in the Malaysian takaful insurance market by expanding its reach in the Southeast Asian country. The Kuala Lumpur based joint venture is taking positive steps to penetrate the growing takaful bancassurance business in Malaysia.
AIA AFG Takaful Bhd is a 70:30 percent joint venture between American International Assurance (AIA) and Malaysia's Alliance Bank dedicated to providing takaful savings, protection and investment products.
AIA was recently granted a family takaful license from the Malaysian central regulators Bank Negara Malaysia. AIA's local partner - Alliance Bank Malaysia Bhd - is one of Malaysia's leading lenders in one of the largest takaful insurance markets in the world.
The takaful insurance market is increasingly becoming an important market for insurers searching for new sectors of growth. Currently Malaysia is ranked second in terms of the provision of takaful insurance products in the world and the AIA AFG Takaful Bhd venture is designed to strengthen the insurer's foothold in this rapidly expanding sector of the insurance industry.
AIA - the Asian insurance arm of the multi-national company AIG - floated on the Hong Kong Stock Exchange in late 2010 after a failed acquisition bid by the major British insurer Prudential. AIA is now aiming to strengthen its presence in the Asia-Pacific region of the world, which has seen exceptional growth in the demand for insurance products with the takaful insurance sector becoming an increasingly important brand geared to Islamic based nations.
AIG has been restructuring its global operations in order to repay the United States government
US$182 billion as part of its bail-out in 2008 following the crises affecting the world's financial industry. This has included the divestment of its interests in insurers including Alico, AIG Star Life Insurance and the AIG Edison Life Insurance
Co to MetLife
and Prudential Financial respectively; it is currently planning to sell its Taiwanese subsidiary Nan Shan
as the insurers looks to generate further capital to repay the government loan.
AIA is regarded as the crown jewel in AIG's global network, recognizing its significant presence in the Asian region and the new venture with Malaysia's Alliance Bank will augment the insurer's position in this emerging market. The Alliance Bank has a well developed network of over 90 banking outlets in Malaysia and, as part of the joint venture with AIA, the workforce will be increased threefold to 60 dedicated posts in order to strengthen its competitive position in the takaful insurance market.
As global insurers look for new opportunities to offset a slow-down in growth in traditional international markets, takaful insurance is growing in importance with multi-national insurers taking action to penetrate the market. Demand for takaful insurance products - geared towards Muslim populations - has increased significantly in recent years, encompassing countries in the Middle-East
and Africa regions - most prominently in Malaysia, Indonesia, Qatar, and the United Arab Emirates.
Renowned consultancy firm Ernst & Young reported that the Malaysian takaful insurance market was worth US$889 million in 2008 - making it one of the key nations for takaful products; Ernst & Young also predict that the total market for takaful insurance will amount to US$ 7.7 billion by 2012.
The Malaysian government has been strongly supporting the development of the takaful insurance sector by encouraging insurers to accelerate growth across the country to meet the needs of both the urban and rural Muslim populations. The Malaysian government's support for foreign and local insurers in the supply of takaful insurance products resulted from difficulties within the Islamic insurance industry in developing appropriate insurance products to meet emerging, specific market demands.
Bank Negara Malaysia (BNM), Malaysia's central bank, granted four new licenses for family takaful joint ventures in 2010, which entitled foreign and local insurers and financial providers to enter the market and offer takaful insurance products in Malaysia. Along with the AIA permission, Great Eastern Holdings Ltd, ING Groep NV and AMMB Holdings Bhd were the other foreign firms given permission to start offering takaful insurance in Malaysia.
The takaful industry in Malaysia was established in 1985 after the enactment of the Takaful Act 1984 and has developed to become the second largest takaful market in the world after Saudi Arabia. Bank Negara Malaysia, predicts that the Malaysian takaful market will grow between 15-20 percent annually. The takaful insurance market plays a key role in the overall Islamic financial system, with the major players in the sector being Prudential BSN Takaful Bhd and the Mayban Fortis owed Etiqa Takaful.
Insurance Companies Mentioned:
The AIA Group is a leading life insurance organisation in Asia Pacific that traces its roots in the region back more than 90 years. It provides individuals and businesses with products and services for life insurance, retirement planning, accident and health insurance as well as wealth management solutions. Through an extensive network of more than 320,000 agents and approximately 23,500 employees across 15 geographical markets, the AIA Group serves the customers of over 23 million in-force policies in the region. The AIA Group has branch offices, subsidiaries and affiliates located in jurisdictions including Australia, Brunei, China, Hong Kong, India, Indonesia, Macau, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
AIA AFG Takaful Bhd
AIA AFG Takaful Bhd. is a joint-venture company between American International Assurance Bhd. and Alliance Bank Malaysia Berhad, a wholly owned subsidiary of Alliance Financial Group Berhad.. AIA AFG Takaful Bhd. aims to create and introduce innovative and competitive Shariah-compliant solutions respecting the needs of the Muslim community and service quality demands of all Malaysians.
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
Great Eastern is the oldest and most established life insurance group in Singapore and Malaysia. With $50.9 billion in assets and 3.8 million policyholders, it has two successful distribution channels - the tied agency force and bancassurance. The Company also operates in China, Indonesia, Vietnam and Brunei.
ING provides banking, investments, life insurance and retirement services and operates in more than 50 countries. It serves more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia.