Sept 15, 2010 (LBO) - Amana Takaful, an Islamic insurer in Sri Lanka says the market does not have enough investment vehicles that are compliant with Shariah laws and also local regulations, where it can invest funds.
"With our foundations constructed on Shari’ah principles, sourcing investment tools that conform to the diktats of being Islamic and Shari’ah compliant is challenging," the company told shareholders in its annual report.
"We did venture towards penetrating conventional banks for Shari’ah compliant investment opportunities which unfortunately did not materialise in 2009 due to the prevailing economic and financial market conditions.
"However, our treasury team in conjunction with a top investment specialist is working to develop a portfolio of Shari’ah compliant products aligned to IBSL (Insurance Board of Sri Lanka) regulations."
A large portion of profits on an insurance company comes from investing accumulated funds. For live insurance policies in particular, investment income is the key source of revenue.
But charging interest is against Islamic Shariah principles and investment products that conform to Sharia'h rules are needed.
In 2009, Amana Takaful had withdrawn 180 million rupees placed with Deutsche Bank as the bank had moved out of Islamic investment products due to a group decision.
Investment income from bank had fallen to 18.7 million rupees in 2009 from 36.2 million rupees a year earlier.
Sri Lanka's general rates of interest on government Treasury bills were also falling steeply amid lower inflation and rate cuts the firm said.
In Sri Lanka the stock market had moved up steeply.
"Amana Takaful being a Sharia’h compliant company, however, has its restrictions and therefore could invest only in few companies," chairman Tyeab Akbarally said.
"The development of non interest based investment vehicles is a continuing battle for Amana Takaful.
"We have had several rounds of discussions with banks and financial institutions with a view to developing non interest based investment vehicles."
Akbarally said new insurance regulation may allow additional opportunities for investment including in gold and finance companies that offer compliant products.
"This would facilitate Amana Takaful to invest in these vehicles and increase the investment income," he said.
Amana Takaful said its revenues had grown 13.4 percent in 2009 to 1.02 billion rupees, with general insurance growing 14.2 percent and the smaller life business growing 9.8 percent.
The group's business in the Maldives islands had grown 55 percent. It had also cut operational costs.
But the group had lost 51.9 million rupees after charging an additional 46.8 million reserve for possible unreported claims.
The group had net assets of 188 million rupees at end December 2009 from 218 million a year earlier and gross assets of 1.22 billion rupees.
source - www.lbo.lk
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