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An Exclusive Interview with Shoaib Soofi - Director Insurance SECP

Shoaib Soofi
Fellow of Society of Actuaries USA
Fellow of Pakistan Society of Actuaries

Working as Director (Insurance) in Securities and Exchange Commission of Pakistan since August 2005, involved in supervision, regulation and development of insurance sector in Pakistan with focus on Life Insurance and Takaful.

Before joining SECP, worked in State Life Insurance Corporation of Pakistan from 1992 to 2005 at various positions starting from an Actuarial Trainee and reaching to Assistant General Manager Level, involved in number of assignments including pricing, scheme-designing, special studies, marketing, training and operations.

Q&A

There are more than 85 Takaful Companies are working around the globe, How much potent ional you see in Pakistani market ?

In Pakistan, total working population is around 40 million of which less than 10 million are insured so over 30 million are uninsured. Total premium is less than 1% of GDP. So huge potential for all players including takaful operators. A segment of population does not buy insurance due to religious reasons and this is where takaful operators would have an edge on conventional insures. The response to takaful framework is highly encouraging as within two years, 2 takaful companies have started their operations and another 5 applications are in process. So I am quite confident on bright future of takaful in Pakistan and that it would see a double-digit growth rate

Mr. ShoaibSoofi

How to tackle the issue of Re-takaful for Pakistani Takaful Market?

Presently there are only 4-6 fully dedicated re-takaful companies but now some conventional reinsurers like Swiss Re and Munich Re are also starting re-takaful operations. Further, takaful operators can also do co-takaful with each other. So I think this would not be an issue. However, it is important to note that we do not have any retakaful company in Pakistan and therefore have to place retakaful outside Pakistan. Therefore there is a need for the market and opportunity for investors to set up a family or general re-takaful company in Pakistan. With the expectation of 5-7 takaful companies in the country by the end of 2007, there is a great opportunity for any retakaful company in Pakistan.

Either SECP Allow Window Operations to conventional Insurance Companies?

The present Takaful Rules do not allow window operations and SECP would have power in September 2010 to allow window operations in consultation with the government. If window is to be allowed before that, Takaful Rules need to be amended by the government.

Mr. Shoaib Soofi-Director SECP

HR is the main issue in the Islamic Finance Industry in
Pakistan? How does SECP tackle this issue ?

There are various ways of tackling HR issue but they are supposed to be handled at takaful company level. SECP is always available as a facilitator for that. Companies can outsource their functions, can have some common directors, can attract overseas Pakistani Insurance Professional and can also attract the middle and upper-middle management people and groom them to higher management level. There is also a need of encouraging insurance education. Karachi and Punjab Universities have started some programs in insurance but lot more has to be done.

There are Different Models of Takaful practicing in the world. Pakistan is using a hybrid model Wakalah with Waqf. Please eloborate this Model ?

We are basically using Wakala Model for risk part and Modarba for investment part. As you may know, that Wakala model is based on fee, under which takaful company acts as Wakeel of the customer and charges a fee for that. Modarba model is based on profit sharing, takaful company acts as Modarib of customer and shares in profit.

Do you see any Shariah Issues?

Certainly Shariah Issues are of prime importance since this is what makes Takaful different from conventional insurance. We would like to see maximum uniformity in application of Shariah Principles by all the takaful companies. There is a provision of Central Shariah Board at SECP level and we are working on constituting such Board so that the Board can issue guidelines for Shariah Advisors of takaful companies.

Mr. Shoaib Soofi During the Interview

Limited Investment Avenues for Takaful Companies

Takaful companies can invest only in Shariah compliant securities plus for some areas there is a requirement in the Insurance Ordinance to invest in government securities which means not only shariah compliant but also a government security, which to the best of my knowledge is only WAPDA Sukok Bond presently. So I fully agree that there is a need of introducing more and more Sukok Bond but this does not fall under the ambit of Insurance Regulation to introduce Sukok Bonds.

Any Message to the readers of Islamic Banking and Finance Magazine ?

Pakistan is a big country where majority are Muslims so I am quite confident on development of takaful in Pakistan. The industry needs dedicated people for its growth and anyone who is interested to join the takaful market either as a career or as a sponsor should first study the basics of Takaful and ideally should enter only if he is convinced with the Takaful concept.

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