Building a Takaful from Ground Zero - Part I

As there are many investors today eyeing for a share in takaful business globally, I wish to share my actual experience in setting up a new takaful starting from year 2002 in Malaysia. Moreover, the company had survived its infancy stage successfully and now become one of the prominent takaful players in Malaysia.

I remember the early days of the company where we can see the number of staff keep increasing from less than 10 to reach about 50 people. We always ask ourselves whether this new company will be able to compete with the existing players in the market. Whatever it is, we always comfort ourselves that our intention is good and for the sake of Allah thus we are confident that the help will come should we face with any hurdles.

We brainstormed almost everyday on the vision and mission of the company as we strongly believe that the vision/mission of a company should be the driving force to achieve greater success. An independent consultant was hired to assist and guide us to determine what is the right vision/mission. As most people will usually do, we had compiled as many samples as possible from several multinational companies which are champions in their respective industries. It was a very hectic exercise as there was no specific rules to guide us and confirmed by those vision/mission of those samples. Nevertheless, I can conclude the key components of the vision/mission as follows:
1. What do we want to achieve in medium and long term?
2. What are the tangible and non-tangible benefits we would like to deliver?
3. How to achieve our aspiration?
4. When do we desire to accomplish?
5. Who are our target markets?

Once the vision/mission had been agreed upon, it should be the management's responsibilities to ensure that all staff within the organisation understand and start to align their activities towards achieving the common vision/mission of the company.

After vision/mission, we should establish the core values to be adopted within the organisation. This core values is the binding principles for all strategic objectives and initiatives within the organisation. Examples of core values:
1. Islamic values
2. Quality cultures
3. Customer centric
4. Financial strength

Foreign Holding in Takaful

For foreign investors interested to invest in Indonesia for takaful business shall observe certain strict regulations. Foreign shareholding is limited to only 80% at inception however there is an opportunity to increase above the limit should the situation warrant it. For instance, if the company is facing solvency issue under Risk Based Capital (RBC), the foreign shareholders may increase their stake higher than 80% if local shareholders fail to inject additional capital. Nevertheless, the number of shares of local should remain status quo.

Ensure that all article of associations (known as Anggaran Dasar) are properly lodge to Ministry of Law (Hukum dan HAM) and Ministry of Finance for approvals. The process is undertaken by a Notaris and should be guided by a legal advisor. MOL will issue an approval letter known as SK whilst MOF will issue a business license to reflect the latest situation of the company's capital structures.

Unlike Malaysia, there is no Takaful Act adopted in Indonesia. Thus all regulations and laws for takaful operators are prescribed under conventional insurance law. Nevertheless, MOF had initiated some efforts to incorporate few new articles in the law to address the gap in syariah insurance requirements. New accounting guidelines had also been introduced by regulator to tackle the syariah accounting principles in takaful.