KARACHI, Aug 25: The private general insurance companies are showing their reluctance in introducing Islamic shariah compliance insurance products called "Takaful" for want of support from an Islamic reinsurer.

"As a general insurer, we shall not be willing to offer Takaful products," an executive of a general insurance company confided to Dawn the response of his company to a questionnaire issued by the four-member committee set up by the Securities and Exchange Commission of Pakistan (SECP) to frame rules of business for the Islamic insurance business.

The committee is headed by retired Chief Justice of Federal Shariat Court Mahboob Ahmad. The members are Saifuddin Zoomkawala, Abdul Rahim and Shafaat Ahmad of SECP is the secretary of the committee. The committee has circulated a questionnaire among the few selected insurance companies to seek their views on the operation of Islamic insurance business.

The insurance companies are reluctant to invest in an Islamic insurance company business for paucity of funds and lack of reinsurance support. "We would prefer to open a counter for Takaful products in our existing business provided the government set up an Islamic re-insurance support", a senior executive of a leading insurance company said.

According to a proposal given by these few general insurance companies, the Pakistan Insurance Corporation Limited which functions as a re-insurer should also take up the functions of an Islamic reinsurer or Takaful Reinsurer.

Another proposal is to entrust the public sector insurance companies National Insurance Corporation, Pakistan Reinsurance Company Limited and State Life Insurance Corporation be asked to set up a Retakaful Insurance Pool.

"The Pakistan Retakaful company should provide 100 per cent support to the Takaful insurance business, the insurance executive demanded. For international re-insurance coverage the suggestion is to involve Organization of Islamic Countries (OIC) in setting up an international Takaful reinsurance company for covering risks of all Takaful operators.

With Rs12 billion annual business premium, the general insurance in Pakistan remains one of the least governed business but is under the tight control of powerful administrators of the SECP who exercise discretionary powers. Private insurance comes under the control of SECP but government owned insurance business is governed by the Commerce Ministry.

The dichotomy in insurance business has created many problems in the insurance business which remain unresolved. Insurance business sources say that government's insistence on introducing Islamic shariah compliance insurance products will make the business cumbersome for the policyholders.

Takaful, they said is being practised only in Malaysia and the actuaries and insurance professionals from Pakistan should be sent to comprehend the grammar of Islamic insurance business before asking the companies to take initiative.

"We understand Takaful is almost a substitute for the conventional insurance business in which "Riba" or interest has no place," argued a senior insurance professional. It means that the Takaful or Retakaful operators should invest their insurance premium funds only in those business which runs of interest-free principle.

"Bulk of over Rs100 billion life fund of the State Life Insurance Corporation (SLIC) is invested in long-term government securities with a fixed rate of return," he argued.

Therefore, what is needed is a diversified but prudent investment plan for investing Takaful fund which should ensure security and protection of policyholders fund and also an adequate rate of return.

The four-member SECP committee set up early this year to frame rules for Takaful insurance business has asked nine questions from the insurance business professionals. These seek answers from the insurance operators what limitations they see in introduction of Takaful insurance business, a framework for operation of a Takaful window in the general insurance company, setting of ratios for investment of Takaful funds.