Takaful Insurance: The Missing Link in Islamic Finance

Anticipated for years by participating banks that constantly complain about the lack of this important financial link, takaful insurance is meant to revitalize Moroccan financial markets with the arrival of new companies with significant financial ambitions.

Despite the unfavorable economic context and the absence of an insurance component, equity banks nevertheless arouse noticeable enthusiasm among Moroccans. In March 2022, these institutions, whose launch has sparked controversy, issued loans worth around AED 20 billion, of which more than AED 17 billion was in the real estate sector. Many experts believe that enthusiasm is likely to intensify with the approvals that have just been granted by the Insurance Supervisory Authority (ACAPS), which is dependent on the Treasury Department.

Among the new structures recently authorized is Takafulia Assurances, created by the Holmarcom group, which has joined forces with three other Moroccan and foreign partners, including CIH Bank and two banks from Qatar. The new company officially launched with an immediate offer from Takaful Family and Takaful General. Takafulia Assurances intends to develop a diversified insurance offer in accordance with Sharia principles.

Insurance fund management
The company aims to actively contribute to the development of takaful insurance in Morocco and, more generally, to the development of the national equity financing ecosystem. The Insurance Supervisory Authority has also just issued a circular establishing a new Islamic insurance regime. The first chapter of this circular is devoted to the takaful insurance contract and the rules for managing the insurance takaful fund. The second chapter is devoted to takaful insurance and reinsurance companies. In particular, it establishes the administrative regime of these companies, as well as the financial system of the takaful insurance fund, and also regulates the activities of companies engaged in exclusively reinsurance operations, as well as their management system. The presentation of takaful insurance transactions is discussed in Chapter 3.

Financially, takaful companies will bring new money to the capital market. Takaful insurance is indeed organized in the image and likeness of the asset management sector. Thus, in takaful, there is a distinction between takaful funds and a takaful company. The circular shows that the investment world of takaful funds is rather limited, which is less true for the technical reserves of companies. A Takaful Fund can have multiple asset classes. An example is real estate built in urban perimeters.

But each of these types of investments should not exceed 10% of the fund’s investments. The fund may also hold sukuk certificates, which are identified as shares listed on the stock exchange after the conclusion of the Supreme Ulema Council, investment certificates with member banks and cash investments with these banks. As for the technical reserves of companies, they are diverse. These are primarily sovereign sukuk, advances on life insurance policies and other contributions to the Insurance Solidarity Fund. These assets enable companies to meet their financial obligations.