The private equity firm PineBridge Investments Middle East plans to launch a new US$500 million retakaful company based in Dubai, sources close to the company said.
PineBridge is in discussions with regulators including the Dubai International Financial Centre over licensing, and has retained Milliman, a US actuarial and advisory, as a consultant.
Retakaful is the Islamic alternative to the reinsurance industry.
Lakhdar Moussi, who was previously the chief financial officer of the Arab Insurance Group, is in line to become the chief executive of the new entity, sources said.
Mr Moussi is an independent consultant to PineBridge Investments Middle East and became a non-executive member of the board of Oman Investment Corporation Holding in 2013.
Mr Moussi declined to comment for this article.
In January, PineBridge appointed Stephan van Vliet, formerly the head of investments at ING Insurance Asia-Pacific, as its head of insurance asset management.
PineBridge Investments Middle East is a division of PineBridge Investments, a US private equity company. The company had $7.1 billion in assets under management in the Middle East as of December 31, 2014.
PineBridge declined to comment.
“It is important that increased retakaful capacity is made available to service the industry as a whole, and to support the takaful players,” said Abdullah Mohammed Al Awar, the chief executive of the Dubai Islamic Economy Development Authority.
“I believe that Dubai, the DIFC and the UAE provide an ideal infrastructure for retakaful companies, and that this would reinforce Dubai’s position as a capital of the Islamic Economy.”
While the UAE has about 50 different takaful companies, only a small handful of retakaful firms operate in the country. Many of the UAE’s Islamic insurers obtain dispensation from Islamic scholars to buy reinsurance services from conventional reinsurers, citing the difficulty of finding retakaful companies large enough to provide reinsurance.
This has held back the growth of retakaful companies in the UAE, said Chirag Shah, the chief strategy officer at the DIFC.
“It’s a chicken-and-egg problem,” Mr Shah said. Takaful companies say that retakaful companies are not big enough to provide reinsurance services, so they buy reinsurance from conventional insurers, but this prevents the retakaful companies from growing, he said.
The takaful market grew by 14 per cent last year, according to the professional services firm EY, which predicts the Islamic insurance market will be worth $20bn by the end of 2017. Last year, 29.2 per cent of takaful policies were reinsured.
“Those growth rates will catch the eye of any chief executive who wants to be a part of the Islamic insurance market,” said Raymond Hurley, a director at PwC Middle East who advises on mergers and acquisitions.
“Size matters for the takaful industry, but in the retakaful industry it is exponentially more important,” Mr Hurley said.
Crossing borders may pose a problem for a new Middle East retakaful firm. “In the retakaful space, to achieve financial viability that makes most sense, a firm will need to be a cross-border play,” Mr Hurley said.
“This is more challenging to achieve given ownership restrictions.”
“But it can be done if the will is there.” Mr Hurley said.
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