risk participation risk management · that may occur. if at the conclusion of the underwriting year...

Risk Participation • Risk Management

Islamic Insurance

3,000 years ago, Phoenician sea merchants formed trade communities. Each community member

agreed to contribute a portion of his profit to compensate a member who had lost cargo at sea.

This was the oldest known origin of the principles of insurance

Islamic or Shariah-compliant insurance is commonly known as Takaful and is also rooted in the principle of charitable support and literally means Mutual Assistance, Cooperation or Joint Guarantee

In essence, Takaful is a community arrangement, supported through donations to provide mutual assistance to those few who suffer misfortune.

In Takaful insurance, the concepts of community and charity are paramount. Each community member “donates” money to a Shariah-compliant insurance fund, with no expectation of repayment. If a member of the fund suffers a loss, those donations are used to restore him fully to his original

English Law contracts of insurance are by and large fully Shariah-compliant.

It is the structure of the insurer itself that is important and an insurer must:

ensure all products, services and contracts have to be based upon the foundation of the ethics and principles of Shariah. These principles are founded on a need for transparency, certainty and fairness in any transaction or business dealing.

avoid usury (for example, investment returns must not be from interest earned on insurance funds)

involve the policyholder in the outcome of the underwriting process i.e there must be some participation

ensure segregation of funds so that all monies are protected from contamination by non-Shariah funds

invest the funds exclusively in Shariah-compliant investment products

have a Shariah Supervisory Board to provide credibility and integrity

Cobalt Underwriting

London’s first Shariah-compliant underwriting

agency and Lloyd’s Coverholder providing

insurance and reinsurance for commercial risk

Cobalt Group

The Group was started in 2012 and is formed of two operations:

Cobalt Underwriting - a specialist commercial underwriting agency based in the London Market

Cobalt Advisory - providing Shariah audit, training and certification

Our capacity is provided by a number of established carriers, all with an S&P rating of at least A or above.

Cobalt’s Mission

Our mission is to establish London as a global centre for the provision of insurance and reinsurance capacity that satisfies the principles of Shariah.

Compliance is in our DNA

Our products and services are based upon the foundation of the ethics and principles of Shariah. These principles are founded on the need for transparency, certainty and fairness in any transaction or business dealing.

The essence of Shariah-compliant Insurance (SCI) is that it should

avoid usury (for example, investment returns must not be from interest earned on insurance funds)

involve the policyholder in the outcome of the underwriting process. This is achieved by sharing the underwriting profits with policyholders.

ensure that all monies are protected from contamination by non-Shariah funds

place investments exclusively in Shariah-compliant instruments.

Setting a New Standard

We have applied the standards of London to this

exciting new part of the global insurance industry

London has traditionally played the role of developing and creating innovative insurance solutions to meet the challenges of an ever changing world.

Cobalt is continuing this fine tradition by working closely with leading Islamic Scholars and representatives of some of insurance industry’s leading carriers to develop common standards for the development of new products and capacity.

A unique proposition

Cobalt utilises the strengths of the London Subscription Market model to provide broad capacity for complex risk and a depth of knowledge and expertise that only a unique market such as London has to offer.

We are working closely with both global insurance carriers and Lloyd’s of London to develop solutions to some of the globe’s most challenging risks and work closely with the international broking community, to market and promote our underwriting capability, and build business relationships with companies throughout the Muslim world.

Direct access to Shariah expertise

We have a full-time in-house Shariah scholar, Sheikh Zubair Miah, and a Shariah Board chaired by Sheikh Nizam Yaquby.

By building Shariah expertise in London, Cobalt is providing common standards, consistency of Shariah interpretation and a robust platform for collecting premiums and paying claims.

Broker Only

We will only work with professional broking houses that have representation here in London. We believe firmly in the added benefits that a broker brings to the placement process and their skills and expertise in ensuring the highest standards of risk presentation and control.

Risk

For Cobalt to provide cover, it is the risk exposure

itself that must be Shariah-compliant, not the

entity requesting cover.

From oil rigs to shipping, from aircraft to real estate, there are wide and varied assets owned or invested in by those who would like to protect their interests utilising the ethical alternative to conventional insurance that SCI provides.

Cobalt will consider risks from many sources so long as the exposure itself is not forbidden.

Those risks for which we cannot consider providing cover are:

conventional financial services featuring interest, speculation and gambling

certain food and beverage industries

tobacco industry and illegal drugs

gambling

production of armaments

sectors within entertainment industry

certain aspects of Life Sciences

However, not all risk exposures can be ruled totally forbidden. Where a risk exposure includes some aspect of non-Shariah activity, so long as this can be measured and deemed in minority, then it is possible for Cobalt to provide a SCI contract.

Examples of this are multi-tenure buildings, buildings such as hotels that have some sales of alcohol or manufacturing processes where a forbidden product is created as a by-product.

Having our in-house Scholar allows us to identify and rule on these exposures as part of our underwriting processes.

Risk Participation : Risk Management

The model used to provide Shariah-compliant

cover offers some significant advantages

In order to provide a SCI or SCRI product, we have to ensure that the policyholder has a clear understanding of what each party to the contract does for them.

We disclose what the carrier will do with the premiums received, how much they will take to cover their own expenses and the expenses of others i.e. brokers commissions etc.

This is called the Insurer Protocol.

Once deductions are made the remaining premium is put into a fund or risk pool where it is held in order to meet any claims that may occur.

If at the conclusion of the underwriting year of account as surplus exists, this is then shared with policyholders.

Cobalt believes in encouraging good risk management.

As such we will ensure that any surplus generated will be used to reward those policyholders that take proactive steps to control their risks through good risk management practice.

This approach, which is closely aligned to the mutual insurance movement prevalent in many developed countries, has proven value in helping emerging and developing

Principal Geographic Risk Focus

Inclusive and Broad

Our capacity is available across a wide range of

risk exposures

Risk classes supported include

Commercial Real Estate

Commercial Property

Construction and Property Developments

Political Violence, Sabotage and Terrorism

Casualty

Financial & Professional Risks including Financial Institutions

Energy & Power

Marine Cargo

Fine Art & Specie

Aviation

Equine

We can offer solutions across a wide range of risk classes and can look to offer cover either for all or part of the placement and will consider quota share or excess of loss.

If you have business in these areas, we would be pleased to discuss further.

We are also keen to develop bespoke and specialty facilities for both brokers and insurers alike.

Real Estate & Development

Underwriting Guidelines

Coverage

Property Damage

Loss of Rent & Service Charge

Associated Machinery Breakdown

Terrorism All Risks or named Perils basis

Includes wind, flood and earthquake exposure

Capacity

PAR/LOR/MB up to GBP 250 million at top location

100% or Quota Share market placement capability

First Loss and Excess placements

Client Profile

Institutional Investors

Sovereign Wealth Funds

Family Office Trusts

SPV’s Exposures in excess of GBP 25 million

Specialities

Industrial

Office

Residential

Retail

Development Sites

International Property


Coverage

Property Damage

Business Interruption

Associated Machinery Breakdown

All Risks or named Perils basis

Includes wind, flood and earthquake exposure

Capacity

PAR/LOR/MB up to GBP 425 million at top location



Exclusions

High hazard manufacturing

Stand-alone warehousing

Client Profile

Engineering Risk Management led programmes

Exposures in excess of USD 100 million

Specialities

Residential and office blocks

Education

Leisure

Ports, airports and social infrastructure

Sports Stadia

Construction & Engineering


Coverage

Construction All Risks / Erection All Risks

Advanced Loss of Profits

Delayed Start Up

Associated Third Party Liability

Package covers for project cargo through to construction/erection phase

Maximum 60 months coverage plus 24 months maintenance

Capacity

CAR/EAR up to USD 160 million on a maximum foreseeable loss basis

Associated TPL USD 7.5 million

Additional capacity may be available 100% or Quota Share market placement capability

Decennial Mining

Client Profile

Engineering Risk Management led programmes Exposures in excess of USD 100 million

Single Project Construction and Erection All Risks

Annual contractors cover for Contract Works and associated equipment on a Losses Occurring basis

Specialities

Oil and gas projects

Inherent and Latent Defect

Exclusions

Completed Engineering

Civil Risks Offshore

Employer’s Liability/Workmen's Compensation

Decennial Mining

General Liability


Coverage

General Third Party Liability

Products Liability

Pollution Liability

Employer’s Liability

Capacity

TPL/Prods USD 50 million any one occurrence

Products USD 50 million any one occurrence/aggregate

Pollution USD 50 million any one occurrence

Employers Liability USD 20 million any one occurrence

100% or Quota Share market placement

Client Profile

Enterprise Risk Management led programmes

Turnover of circa USD 50m to 500m Specialities

Specialities

Automotive

Chemicals

Construction

Engineering

Public Bodies & Utilities

Transportation

Wholesale & Retail

Exclusions

Stand-alone Workers’ Compensation

Management Liability


Coverage

Director’s and Officer’s Liability

Management Liability/Side A

Employment Practices Liability

Capacity

D&O USD 25 million each and every loss

Primary D&O offered on Side A or Management Liability forms

Excess D&O follows terms and conditions of primary policy and underlying insurance


Client Profile

Public and private companies

Trusts and SPV’s

Specialities

Broad Appetites

Civil Liability


Coverage

Professional Indemnity

Errors & Omissions

Civil Liability

Includes personal injury from professional services

Capacity

USD 25 million in the aggregate (per occurrence limits on request)


First Loss and Excess Placements

Client Profile

Annual Contracts

Specialities

Construction

Lawyers

Miscellaneous

Surveyors

Technology

Media

Financial Institutions


Coverage

Comprehensive Crime incl Fraud

Bankers Blanket Bond

Electronic Computer Crime

Civil Liability

Director’s and Officer’s Liability

Capacity

Crime/BBB/ECC/CL/D&O

USD 25 million each and every loss


Will participate on multiple layers

Client Profile

Strictly Islamic Financial Institutions

Specialities

Commercial and retail banks

Asset management companies

Exclusions

Small start-up organisations

Attrition led programmes

Marine Cargo


Coverage

Marine Cargo

Project Cargo including DSU

Stock Throughput

Fine art and specie

Capacity

Cargo Limits to GBP 20 million

Project Cargo Limits to GBP 100 million

Fine Art & Specie USD 25 million

Annual and single transit covers

Global to global


Client Profile

General cargo programmes

High volume programmes via certificate issuance

Bullion Storage

Specialities

Heavy machinery

Oil and Liquid Natural Gas

Freight forwarders

Armoured Car Transits

Exclusions

Static vehicles

High risk warehousing

Frequently Asked Questions

Where are you located?

In the City of London.

Are you regulated?

Yes, by the Financial Conduct Authority.

Are you yourselves Shariah-compliant?

Yes, we have a Shariah Supervisory Board, chaired by Sheikh Nizam Yaquby and employ our own in-house Scholar Sheikh Zubair Miah.

Why have you got Scholars in-house?

The respected Scholars are few in number and are constantly moving around the globe. This makes getting opinions a slow process. By having an in-house Scholar we can provide this advice swiftly and, more importantly, in a consistent way on behalf of all supporting markets.

Do you carry risk?

No, we are an underwriting agency providing SCI & SCRI based on the London Market Subscription model via London based carriers operating Islamic “windows”.

What is your security then?

Capacity is provided by established global insurers and Lloyd’s syndicates, with a minimum S&P rating of A.

Is your model that of a Takaful?

Our capacity is constructed using the syndicated placement model that is unique to the London Market and uses all the underlying principles of Takaful, but structured to comply with the requirements of the UK regulatory and fiscal environment. This model enables us to provide

scalable capacity by class of business, whilst maintaining Shariah integrity.

Is this model approved by the Scholars?

Yes, we have a ruling (fatwa) provided by our Shariah Supervisory Board to prove it is.

I’ve heard that SCI involves mutuality. Does this mean that there might be a call if funds are not sufficient?

This is a popular misconception. Whilst there is a concept of mutuality under the principles of Shariah risk carrying, this differs from the principle of mutual funding developed in the conventional insurance market, as uncertainty is not allowed. Therefore, any shortfall in funds is covered by the carrier’s own capital until such time that it is reimbursed out of future surpluses thus ensuring that the contribution is limited to the amount paid at the time the risk is bound.

How does your cover differ from normal conventional cover?

There are subtle differences, but coverage is broadly identical.

How do we know what is being provided is Shariah-compliant?

All our policy documentation will contain a fatwa from our Shariah Supervisory Board to confirm that the cover is Shariah-compliant.

Can a risk be insured on a partly Shariah-compliant basis?

Yes. We can provide cover either as a quota-share or as an excess layer.

What are the differences in the placement of cover?

Risk is placed in exactly the same way as any conventional cover placed in the London Market. The only difference arises when it comes to the payment of premium contribution.

In order to keep the transaction Shariah-compliant, all premium contributions must be paid directly to Cobalt from either the client or cedant unless the broker concerned has a Shariah-compliant bank account of their own.

What about Claims? Will they be handled differently?

Claims will be handled in exactly the same way as that of the conventional market. Claims will be submitted to Cobalt, who will establish liability in conjunction with capacity providers and then make settlement in accordance with policy conditions.

However, before payments are made, the claim will be reviewed by the Scholars to ensure that the client is made aware of any aspect of the claim that might itself be deemed non-Shariah, and to give them the opportunity to decide whether to accept any non-Shariah settlement.

Will claims be settled via the Broker?

No, like the payment of premium contributions, all claim settlements will be paid directly to the client or cedant.

What about Broker’s remuneration?

A broker may work for either a fee or commission. However, if paid a commission, this will appear on the policy schedule.

Premiums

Claims

Policyholder

or

Cedant

Broker

Advice

Placement

For more information

Phone: 020 3642 0200

Email: [email protected]

Address: Gallery 4,

The Lloyd’s Building,

12 Leadenhall Street,

London, EC3V 1LP

Website: www.cobaltuw.com

You can also follow us on LinkedIn

Cobalt Underwriting Services Limited, trading as Cobalt Underwriting, is authorised and regulated by the Financial Conduct Authority.

risk participation risk management · that may occur. if at the conclusion of the underwriting year...

Documents