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Salama Insurance - Literature review Example

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This paper highlights the Salama Insurance. It is an Islamic Arab Insurance Company that leads in the provision of Shari’ah compliant Takaful solutions. The company is incorporated in Dubai in 1979. Today the insurance company remains the world’s largest provider of Takaful and Re-Takaful Company…
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Salama Insurance
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& SALAMA Insurance Introduction SALAMA is an Islamic Arab Insurance Company that leads in the provision of Shari’ah compliant Takaful solutions all over the world. The company is incorporated in Dubai in the year 1979. It was the pioneer in Takaful industry, and even today the insurance company remains the world’s largest provider of Takaful and Re-Takaful Company. SALAMA (2012) describes that the aim of the company is a true operating to the principles and values provided. The company’s vision is the provision of highest standards Shari’ah-compliant Takaful solutions to customers all around the world. Over the past 33 years, the company’s efforts have enabled it in building a solid reputation for the provision of competitive Takaful solutions of various ranges. The strength and accomplishments of the company are achieved by the competitive strategy of putting more focus on major business areas. According to SALAMA (2012), the insurance paid-up capital is about 330 million USD equivalents to AED1.2 billion. The company is listed in Dubai Financial Market which is abbreviated as IAIC. It is also assigned an excellent performance in its financial strength and issuer credit rating. The Tunis-based operation of the company is the largest in the world, and it operates in about 60 countries. The company deals with issues of individual clients and institutional customers through the global network. Currently, there are about six major Takaful companies providing their solutions to customers. The six direct Takaful companies are located in Saudi Arabia, UAE, Egypt, Algeria, Jordan, and Senegal. The company aims at expanding its product portfolio through the size of offers and geographical coverage. This will help to increase the company’s footprint around the region and promote catering for the increased technologies, customers’ needs and legal environment change. Securing the future. UAE is currently at the point of delivering the best of West and East; over the years it has been the hub which was allowing Salama insurance to nurture giving it the ability to access global workforce that is able to operate under international standards. Takaful is dealing with the shift in Muslim attitudes on religious grounds. UAE, therefore, acts as a Shari’ah-compliant platform in offering Takaful solutions. While the country develops both economically and socially, it is essential to keep track of the changes occurring since the Muslims in UAE are stressing on getting Shari’ah-compliant goods and services. These need to enable the company in delivering the best of their best to the Muslims. As UAE’s specialized Takaful company, Salama also deals with offering comprehensive policies in insurance ranging from general, health and family solutions to individuals, companies and families. The company has got its unique position thanks to its credibility, good reputation for quality products, operating under high standards of service provision, and having access to Takaful’s best insurance practices. It is also the best in the provision of both qualitative and affordable solutions. As the company expands its customer base, its aim is to be the number one for Takaful solutions and its customers. The company has also made various promises to its customers, for example, in the provision of personalized services, improved customer commitment, and improvement in Shari’ah-compliant products. Current financial conditions in the insurance industry that affect the availability and affordability of insurance products. According to Raja (2009), the UAE economic development has given many developing countries an excellent choice for overseas expansion, globalization, and foreign direct investment. This region is one of the wealthiest and fastest in development in the world. China, for example, is becoming an economic leader and manufacturer on the world perspective since it is famous for its cheap labor workers. The UAE has also increased wealth from the real estate sector that has attracted a large number of FDI. It has also eliminated most of its trade barriers supporting free trade economy; therefore, it is open for any nation that seeks new target market and consumers. Politically, the UAE government comprises of Federation of seven Emirates ruled by a president. Dubai is an investment emirate that deals with management and supervision of business portfolio. Thus, it promotes the country as a hub for commerce and trade. Among the other emirates, it bears the flag of global investments that are included in its major functions. Some of the assets owed by Dubai include DP world and Nakheel. Raja (2009) states that the 2007-2010 financial crisis was the most severe one since the Great depression of 1930s. The causes of the global financial crisis are still being debated though many factors are now clear, such as failure of major corporations and decline of assets values. Effort has been made to combat the effects of the crisis, and they include taking up both regulatory and market based measures. According to Raja (2009), Dubai is a holding company launched in 2006 when it employed about 50,000 employees located in more than 100 cities. She scrutinizes that Dubai has invested in extensive real estate in various places. In 2009, Dubai World decided to delay the payment of its debt, and this resulted in the increased risk of government default. Watts (2011) describes that the delay kept for about six months, and the debt amounted to 26 billion dollars. This debt affected many markets causing a drop in indices, including those of oil prices. The US traded stocks also fell through, but later they were rebounded as Oil prices rose by about 7% as well as other stock averages. With the effect of the 2007-2010 financial crisis Dubai market of real estate has declined after being in a boom business for six years (Watts, 2011). In 2009 the Dubai government announced its intention of asking financial institutions not to lend any money to the public and extended this strategy up to May 2010. Watts (2011) describes that they lay off about 10,000 employees worldwide due to the standing debt of about 59 billion dollars. Raja (2012) describes that the financial crisis experienced in Dubai resulted in more than half of the construction put on hold, and the amount totaled to about 582 billion dollars. These projects have include the Nakheel Harbour & Tower of 38 billion dollars; the other projects put on hold include Al Salam City, Asia Hotel, Dolphin City, Falcon City of Wonders, and Plaza Major among others. The major cause of Dubai’s trouble is rooting in its overambitious development plan which included world famous infrastructures and the construction of tallest buildings on earth (Watts 2009). International aspects of insurance issues According to Meade (2010), the International Association of Insurance Supervisors (IAIS) assists in the formation of goals directed on improving supervision for insurance, as well as promoting progress to regulated insurance markets. It also helps in contributing to the global financial stability. Moreover, IAIS helps to gain traction to the work of G-20 and the Financial stability Board (FSB). This relies on international standards in the formulation of the framework for reforms in the industry. According to IAIS, the insurance industry had no systemic risk, and it regulated those ones that had already occurred. To reduce the risk, there is a need for supervision and cross-sector monitoring. The European Union (EU) assists in the regulation of insurance within borders. By replacing the CEIOPS with EIOPA, it stepped on a broad way of refurbishing of the financial services regulation. The insurance authority in UAE has issued various regulations for the provision of degrees of details needed for providers, such as insurers, agents, brokers, and re-insurers. The provision for this is to structure and manage providers through compliance with the legal needs for insurance. UAE University (2009) describes that the insurance law in UAE guarantees that the properties in existence, in the State or liabilities, are insured with companies around UAE. The law also says that it does not apply in free zones except the cases when it is provided since the insurer should be licensed to operate. For the efficient work of Authority, they issued more regulations which are providing details required for providers. The regulations are in the Executive Regulations and the Rules of Professional Practice and Code of ethics of 2009 and 2010 respectively. The regulations include meeting capital and guarantee requirements that help in protecting of the financial integrity of the industry (Meade 2010). According to Jolowicz (2011), the major features in the regulations for UAE insurance industry include showing the kind of business regulated. These include life, property, and liability broken down into categories. Jolowicz informs that to set up an insurance entity in UAE, the law requires that the vehicle should be in a UAE public Joint Stock Company (PJSC) and represent itself as a branch from another foreign insurance country or an insurance agent. For the PJSC and the agent, there should be a local owner and more involvement of Emiratis in the sector. There are also several requirements for establishments of the offices though the scope is limited. For the branches of the foreign countries, there are additional requirements, such as new insuring products which are not on offer in UAE; in addition to other basic needs, the requirements hinder new entrants into the industry though their application is through the position of Authority. According to Jolowicz (2011), there are restrictions for insuring UAE risk. As the insurance law states the possessions existing in the State should insure directly in case they need protection of the companies in that UAE branch from a foreign company. A local participant in the industry should write the direct insurance coverage. Insurance law does not use free zones unless provided specifically. The specific provision is one that restricts mediation of local risk to UAE branches. A foreign person has relative freedom in UAE in terms of re-insurance. Those who are involved in business should license their businesses, and their existence should not trigger that of an Emirati. Major insurance events and claims in Salama Insurance The company has motor insurance policy and indemnifies the insured in either loss or damage to the vehicle, spare parts or accessories caused by accidents, theft, fire or transit. The other sector is insurance against third party where insurance compensates the insured subject to the policy specified. Family Takaful policy is necessary to offer protection for the various needs of clients. They include a selection of protection plans or investment savings. It also offers health, travel and general insurance. Conclusion In conclusion, the regulatory initiatives show that the insurance industry is effective in its regulations and does not lead to financial crisis, but acts as a source of stability though holding long term assets against long term liabilities. Enhanced supervision and strict requirements for the insurance industry remains a new norm. The major players in UAE insurance industry include codes of ethics, executive regulations, and the Insurance Law. These represent a wide base for insurance regulations. They enable the customer or client to feel reassured that the insurers are adequately capitalised and that in case of a crime a regulator exists. There is also an emerging framework for market participants where they operate with an improved determinant of regulatory confidence. Works cited Cochrane, Laura & Harif, Tal Barak. “Dubai Debt Delay Rattles Confidence in Gulf Borrowers.” Bloomerg News. Bloomberg, 26 Nov. 2009. Web. 7 Oct. 2012. Jolowicz, Philip. “Regulation of the UAE Insurance Sector - an Environment of Expanding and Deepening Oversight.” Hadef & Partners. Hadef & Partners, 18 Jan. 2011. Web. 7 Oct. 2012. Meade, Richard. “Insurance Issues and the Global Response to the Financial Crisis.” The Prudential Insurance Company of America (USA). 3 Nov. 2010. Presentation. N.p. SALAMA. Services provided by Islamic Arab Insurance Company, 2012. Web. 7 Oct. 2012. N.p. UAE University. A strategy for Emiratisation, 2009. Web. 7 Oct. 2012. Raja, Shani. “Asia Stocks Drop for Second Week on Dubai, Share Sale Concerns.” Bloomberg News. Bloomberg, 27 Nov. 2009. Web. 7 Oct. 2012. Watts, William. “Dubai Woes Roil Financial Markets: Stocks Fall and Government Bonds Rise on Flight to Quality.” MarketWatch. MarketWatch, 26 Nov. 2009. Web. 7 Oct. 2012. Read More
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