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However, with 133 takaful insurers already operating around the world, Teo notes the industry is set to experience rapid growth concurrent to ongoing development in global Islamic capital markets and banking services. Citing estimates produced by accountancy firm Ernst & Young earlier this year, she notes the global takaful industry will likely double in size by 2010. In two years time, she says premium income will likely double to $4 billion a year and potentially accelerate over the coming decade.
Speaking at a seminar on takaful regulations in Singapore last week, Teo says the MAS is working to put in place a suitable cross-regional framework that will facilitate the industryÆs growth, and is also developing solutions that will help the industry to tackle certain challenges.
Unlike conventional insurers, takaful operators are forbidden from profiting from riba (interest), gharar (uncertainty) and maysir (speculations) û three fundamental qualities that make up conventional insurance. Where conventional insurers can quite simply allocate investments between bond and cash assets, takaful insurers are in the difficult position where not enough sharia-compliant assets exist to invest in, Teo says.
In 2008, Singapore saw the launch of Daiwa FT Shariah Japan ETF, the conversion of a Reit by Cambridge Industrial Trust and a maiden MTN issue by City Development.
Teo says the MAS is looking for ways to help deepen and widen the availability of such assets that will fit takaful insurersÆ needs.
In particular, the MAS is working on a sukuk structure that is based on the Al-Ijarah structure, or the sale-and-leaseback of an underlying property, says Teo.
ôSukuks issued by the facility will be given equal regulatory treatment as Singapore Government Securities (SGS) and returns will be tied to the risk-free yield of SGS of equivalent tenor,ö she says, adding that a number of Islamic institutional investors have already expressed interest. A potential launch of these instruments could arrive in the market by 2009.
Furthermore, she says the MAS has exempted murabaha investments which involve banks undertaking the sale and purchase of commodities from the previous restriction against non-financial activities for banks. This is on a condition that such activities should have the same economic substance and risks as conventional equivalents.
Teo adds the MAS is ready to level the playing field for takaful operators to compete side-by-side with conventional insurers. One way of doing so is through looking at tax issues. Islamic financial products tend to attract more taxes because of their unique structures. Teo says the MAS is waiving the double stamp duties investors often incur under Islamic real estate transactions.
The regulator is also giving the same concessionary tax treatment on sukuk payouts as interest coming from conventional bonds. These measures are carried out so sharia-compliant products will not be disadvantaged in their regulatory and tax treatment, Teo adds.
The Singaporean regulator may be going out of its way to make Islamic insurers feel welcome this week. TeoÆs speech also details plans to develop cross-regional governance and solvency frameworks for takaful operators, along with plans to train suitable manpower for Islamic insurance through tie-ups with the local Securities & Investment Institute and Chartered Institute of Management Accountant last week.
At the seminar last week, it out-gunned promises delivered by other Islamic hub state regulators who are also vying for the number one spot in Islamic insurance.
New European Union regulations being introduced in March will raise the bar for ESG reporting and could well hurt the appeal of energy- and carbon-intensive stocks.
Hurdles such as foreign exchange limitations still exist, but the new rules could help private equity fund managers and investors with ESG integration.
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By applying the ‘Investment Clock’ framework, investors can link factor behaviour across economic cycles in the US.