Enhancing Efficiency and Resilience in Takaful Operations
Delve into the world of Takaful operations and discover strategies to maximize efficiency and resilience, comparing them to conventional insurance methods. Learn how proper valuations, innovative investments, and firm size optimization can boost efficiency in this sector, ultimately leading to financial resilience.
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Presentation Transcript
Resilience of Takaful DR HUDA AHMED YUSSUF 7th African Islamic Finance Summit : 8th July 2021 Hyatt Regency, Dar-es-salaam, Tanzania. (PhD in Comparative Finance)
TABARRU Contract of conventional insurance Vs of Takaful Purify our Intentions Get rid of the selfish/ Utilitarian approach
EFFICIENCY Capital markets (1) Risk Pooling & Risk Bearing (3) Financial intermediation (2) Financial services Solvency regulations Takaful Operator Policy holders Contribution Compensation Loading value Demand for Takaful Market Structure Profitability of Takaful operators Efficiency of takaful operator in all 3 functions operator s Financial Resilience
MEASUREMENTS OF EFFICIENCY Value Added (production) Approach DATA ENVELOPMENT ANALYSIS Managerial Efficiency Outputs 1. Claims paid and additions to reserve 2. Real invested assets Technical Efficiency Scale Efficiency Revenue Efficiency Inputs 1. Labour 2. Capital 3. Business services Cost Efficiency Profit Efficiency
TAKAFUL OPERATORS CAN BE MORE EFFICIENT THAN CONVENTIONAL INSURERS TECHNICAL EFFICIENCY COST EFFICIENCY REVENUE EFFICIENCY ??? > ??? = ??? ??? ??? > ??? > ??? ??? ???? 2009 - 17% 32% ??? 2009 - 36.2%??? 2012 - 12.7%???? 2010 - 23.1%??? 2013 - 23% ??? 2010 - 2.7% ??? 2007 - 18.9%??? 2014 - Financial Resilience Size Efficiency +ve
How efficiency can be maximized Proper actuarial valuations Innovative investments Input minimization Optimum size of the Takaful firm
