Systematic review on takaful and retakaful windows: a regulatory development perspective

This paper reviews the regulatory developments of takaful and retakaful windows in the international regulatory bodies and selected jurisdictions. The takaful and retakaful window operations as a business model has been adopted in some countries such as Indonesia, Nigeria, Pakistan and Turkey to achieve certain objectives, including encouraging financial inclusion, tapping a new market segment, and boosting competitiveness. On the flip side, takaful and retakaful window operations are banned by the regulators in other countries such as Brunei, Qatar and Saudi Arabia due to concerns on adherence to Shariah governance, and the performance of standalone full-fledged takaful operators, which have the capability of handling the demands of their respective markets. The paper investigates the takaful and retakaful window operations in the six jurisdictions i.e. Indonesia, Pakistan, Turkey, Nigeria, Kenya and Bangladesh. It also discusses the current regulatory development of transferring the takaful and retakaful windows business into full-fledged takaful players in Indonesia and Turkey, and the decision to maintain the windows model as the ideal model in Pakistan

Herding behaviour in the Islamic bank market: evidence from the Gulf region

Purpose This study examines herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events such as Organization of the Petroleum Exporting Countries (OPEC) meeting days, Ramadan, the Gulf Cooperation Council (GCC) crisis of 2017 and the COVID-19 pandemic. The authors also look at the impact of rising and falling oil prices on herding behaviour. Design/methodology/approach This study uses the model of Chang et al. (2000) to estimate herding behaviour in the Islamic bank markets. Findings First, the authors estimate herding at the GCC region level, and the results reveal an absence of herding under all market conditions and during all the events considered, except for the GCC crisis of 2017. Second, the authors investigate herding in four Gulf countries (Saudi Arabia, United Arab Emirates [UAE], Qatar and Kuwait) separately and find that herding is evident in all these countries during various market conditions. During Ramadan, herding appears in the Saudi Arabia and Kuwait Islamic bank equity markets. Herding is not prevalent during OPEC meeting days in any of the markets, whereas herding is evident in Saudi Arabia, UAE and Kuwait Islamic bank equity markets during the GCC crisis of 2017 and the COVID-19 pandemic. Lastly, the rising and falling oil prices do not influence herding at either GCC region or country level. Practical implications From the practitioner's perspective, this study provides useful insights for investors in Islamic banks and policymakers, in terms of asset pricing, portfolio diversification, trading strategies and market stability. Originality/value Many studies explore herding in the equity markets of Muslim majority countries, but not specifically in the Islamic bank market. This study fills this literature gap by comprehensively examining herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events, such as OPEC meeting days, Ramadan, the GCC crisis of 2017 and the COVID-19 pandemic

Do Publicly Listed Insurance Firms in Saudi Arabia Have Strong Corporate Governance?

Saudi Arabia has now opened its markets to foreign investors in line with its strategy to diversify its economy. However, investors need to feel confident that Saudi enterprises are being monitored and regulated appropriately. This study identifies the impact of improvements in Saudi corporate governance practices among insurance firms. The effects of corporate governance on the financial performance of 35 insurance firms listed on the Saudi stock market are examined from 2008 to 2014, including Shariah-compliant and life insurance firms. Four different methodologies are used: the generalised least squares random effect, fixed effect models, a difference-in-differences (DID) measurement for comparisons, and the probit model with average marginal effect to address endogeneity. The results indicate that firm performance is affected by information asymmetry. The 2009 exogenous shock from the Saudi regulatory change to board composition and audit committee size shows a positive effect on performance in the DID comparison. However, an increase in independent board and audit committee members has a significant negative effect. Other findings indicate that an increase in CEO (Chief Executive Officer) age has a positive effect on performance, as do three pay variables (director incentives, CEO and top executive pay, and above-the-mean director incentives). However, when CEO and top executive pay increases above the mean, the effect turns negative; this also happens with a change in CEO from poor performance. The results support the importance of Saudi insurance industry corporate governance regulation and reflect the improved governance perspectives of the Saudi Capital Market Authority and Saudi Arabian Monetary Agency

Solvency determinants: evidence from the Takaful insurance industry

This paper contributes to the nascent literature on Takaful by investigating the solvency determinants for Takaful firms in both the Gulf Cooperation Council (GCC) and Malaysian economies. Our main objective is to develop a deeper understanding of the solvency determinants of these firms. Using hand- collected microdata for the period 2011 to 2016 for 52 Takaful firms, we document that firm size and wakalah fees significantly decrease solvency. From a regulatory point of view, this finding underscores that the percentage of wakalah fees should be closely monitored. Moreover, we find that other explanatory variables, including return on assets and the risk retention and investment income ratios, are not significantly associated with solvency. Overall, our results remain robust to many different model specifications. Further analysis indicates significant differences between the GCC and Malaysian Takaful firms. This may be explained by the different stages of financial development in the two markets