HSBC's insurance breakthrough

By Jane Croft in Dubai
October 13 2003

HSBC plans to become the first international bank to offer insurance products compliant with Islamic law as early as the end of this year.

Traditional insurance products are banned under Islamic law because of the elements of gambling and uncertainty which exist over premium and payment levels, as well as the interest from investments used to maintain life funds.

There is a low penetration of insurance products in the Muslim world, but a number of mutuals have developed Takaful products, based on a system of joint guarantees in which losses are divided and liabilities spread among the pool of clients.

Keppel Insurance of Singapore already offers Takaful products, and HSBC believes these could be rolled out to Islamic clients, both in Middle East states, such as Saudi Arabia, and in countries with large Muslim populations, such as the UK.

Iqbal Khan, chief executive of HSBC's Amanah Finance unit, said the bank had recruited Kamsani Tati from General Electric's Frankona reinsurance business to develop its Takaful product base.

Mr Kahn said: "We have had existing customers asking us for this type of insurance products. It's important for us to offer the service, and we would look at reinsurance as well as insurance."

Amanah Finance products differ from conventional insurance products because the premiums are invested in a Sharia-compliant way, with a distinct separation between policyholder's funds and shareholder's funds.

HSBC has already rolled out Islamic mortgage products in Malaysia and the UK and on Monday became the first international bank to launch Sharia-compliant current account and personal finance products for retail customers in the United Arab Emirates.

The bank already offers Islamic current account services in Saudi Arabia, and said demand for Sharia-compliant products is growing in the financial services industry. The current account launched on Monday has no overdraft, debit or credit interest.

Abdul Jalil Yousuf Darwish, vice-chairman and executive director of HSBC Bank Middle East, said: "We are able to use our global expertise together with our local experience to introduce such services We plan to offer a number of other Sharia compliant personal financial services through our branch network in the near future."
The Financial Times