Willis Group Holdings will start offering the first Shariah compliant commercial real state insurance in the U.K., with security provided by QBE Insurance (Europe) Ltd. and XL Group.
Coverage is available to real estate investors and companies, and Cobalt Underwriting will underwrite the policies. The U.K. outfit is a division of Cobalt Insurance Holdings Ltd. and specializes in writing Sharia compliant insurance capacity, according to Cobalt’s web site.
A Willis spokesperson explained via email that the policy wording is Sharia compliant because it “contains a certificate of compliance with Shariah principles and is based on a fatwa issued by Sheikh Nizam Yaquby—a widely respected Islamic scholar, who also Chairman of the Supervisory board of the underwriter behind the product, Cobalt Underwriting.”
The spokesperson said that terms for the policy were set in May 2014 and that Willis placed the first risk with Cobalt Underwriting soon after. Other Shariah-compliant policies are planned, including a Shariah compliant construction policy
Willis said its policies in this area will still keep price neutrality, which means the premiums would be similar to non-Sharia coverage.
Why launch a Sharia compliant real estate insurance policy?
Willis sees such an initiative as a smart move considering that the Islamic finance sector continues its strong growth, said John Dilley, managing director of Willis’ real estate practice.
“While the global economic crisis has impacted many areas of the world’s financial system, Islamic finance has continued to deliver a rapid rate of growth,” Dilley said in a statement. “Hand in hand with the growth in Islamic finance is the demand for Shariah compliant insurance cover, in particular for real estate investors.”
By the end of 2013, Islamic finance assets hit the $1.7 trillion mark, Dilley noted, having grown annually by about 17.6 percent in the previous four years.
Shariah complaint coverage is generating more attention overall in the property casualty industry. In 2013, XL Group announced it would offer Shariah compliant insurance cover for large corporate and middle market clients outside of the U.S. and Canada, initially focused on property cover with a $300 million maximum capacity. XL’s coverage also has a binder relationship with Cobalt, taking advantage of its substantial Shariah advisory board.
Earlier in 2014, AIG announced it would begin a Shariah-compliant reinsurance (retakaful) business by June in Malaysia, with the idea of offering a broader range of services down the line. AIG’s move followed similar action in the country already taken by Munich Re and Swiss Re AG.