HARGEISA – Yussur Abrar, Somalia’s former central bank governor that served under President Hassan Sheikh Mohamud, launched a new insurance company in Somaliland on Saturday (Oct 20).
Abrar, was appointed as Somalia’s central bank governor in September 2013 and resigned two months later, after she refused to sign a corrupt deal, and was later threatened by the President’s Chief of Staff.
Abrar, an American-Somalilander, originally from Awdal region, returned to Somaliland in mid-2017 after she was granted a pardon by former Somaliland President, Ahmed Mohamed Silanyo.
The official launching ceremony of her new company, Horn of Africa Insurance, was attended by government ministers, Somaliland’s central bank governor, parliamentarians, opposition figures and members of Somaliland’s civil society.
“After deciding to invest in our country, we seen that there was a great need for insurance services. Our company provides auto insurance, marine cargo insurance, property insurance and health insurance,” Abrar told attendees at the event.
Abrar asserted that Horn of Africa Insurance is an Islamic Insurance Company, based on Islamic religious law.
Ali Ibrahim Jama, Somaliland’s central bank governor, also spoke at the event, announcing that the central bank aims to unveil an ‘Insurance Act’ in 2019.
Ahmed Yasin Sh. Ali Ayanle, Somaliland’s Deputy House Speaker, also discussed how Somaliland’s parliament plans to introduce an ‘Insurance Act’ in 2019.
“Before implementing this new law, we will be looking at other Insurance laws in the USA, Djibouti and Nigeria, compare them to our own economy and assess how it will affect our citizens,” Ayanle said.
It is not known whether Ayanle plans to table an Insurance Bill before Somaliland’s parliamentary elections in March 2019.
More on Yussur Abrar’s background
Abrar has over three decades of experience in banking, risk management and insurance.
Abrar previously also acted as the Vice-President at Citigroup. Additionally, she was Vice President of Credit Risk Management at the American International Group (AIG) in New York City, one of the world’s largest insurance companies.
Abrar has likewise served as a financial consultant.
What is Islamic Insurance?
Takaful is a type of Islamic insurance, where members contribute money into a pool system in order to guarantee each other against loss or damage. Takaful-branded insurance is based on sharia, Islamic religious law, and explains how it is the responsibility of individuals to cooperate and protect each other.
Takaful insurance companies were introduced as an alternative to commercial insurance companies, which are seen as violating Islamic restrictions on riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles, and outlawed in sharia.
How Takaful Works
All parties (policyholders) in a takaful arrangement agree to guarantee each other and make contributions to a mutual fund, or pool, instead of paying premiums. The pool of collected contributions creates the takaful fund. The amount of contribution that each participant makes is based on the type of coverage they require and their personal circumstances. As in conventional insurance, a takaful contract specifies the nature of the risk and time period of coverage.
The takaful fund is managed and administered on behalf of the participants by a takaful operator, who charges an agreed-upon fee to cover costs. Much like a conventional insurance company, costs include sales and marketing, underwriting, and claims management.
Any claims made by participants are paid out of the takaful fund and any remaining surpluses, after making provisions for the likely cost of future claims and other reserves, belong to the participants in the fund, not the takaful operator. Those funds may be distributed to the participants in the form of cash dividends or distributions or via a reduction in future contributions.
Takaful Operating Principles
An Islamic insurance company operating a takaful fund must operate under the following principles:
It must operate according to Islamic co-operative principles.
A reinsurance commission may be paid out to, or received from, only Islamic insurance and reinsurance companies.
The insurance company must maintain two separate funds: a participants/policyholders’ fund and a shareholders’ fund.
Differences Between Takaful and Conventional Insurance
Most Islamic jurists have concluded that conventional insurance is unacceptable in Islam because it does not conform with sharia for the following reasons:
Conventional insurance includes an element of al-gharar (uncertainty)
Conventional insurance is based on the concept and practice of charging interest. Islamic insurance, on the other hand, is based on tabarru, where a portion of the contributions made by participants is treated as a donation. For this reason, policyholders in takaful are usually referred to as participants.
Conventional insurance is considered a form of gambling.