Diversification of Islamic Financial Instruments
48
According to the 2016 financial statements 31 of Cornerstone Insurance Plc., the performance of
the Takaful products vis-à-vis the conventional insurance products is shown in the table
(Takaful Products Performance) below. It should be noted that the other two conventional
insurance companies did not report the performance of their Takaful products perhaps due to
its insignificant.
Table 20: Takaful Products Performance as at end December 2016
Takaful
Insurance
Products
Conventional
Insurance
Products
%
Takaful /Conventional
Gross Premium ($' 000 )
672.73 18,242.83
3.69
Gross Claim ($' 000 )
247.58 8,025.20
3.09
Underwriting Expenses ($'
000) 139.32 3,634.15
3.83
Underwriting Results ($' 000)
298.30 2,081.03
14.33
Sources: Computed from Cornerstone Insurance Financial Statements for 2016
From the table above, the gross premium, gross claims and underwriting expenses generated
by the Takaful products is less than 4% of those generated by the conventional insurance
products. Compared to the entire insurance industry, the performance of the Takaful in terms
of premium, claims and underwriting expenses will be much more less than 4% signifying
insignificance of the Takaful business in Nigeria.
Challenges Facing the Islamic Financial Sector
There are a number of issues that are militating against the development and growth of Islamic
finance sector Nigeria. These include:
 Lack of separate legal framework: The operations of Islamic financial institutions
are subjected to the interpretation of the laws guiding the operations of the
conventional financial institutions. There are no explicit statements of laws for the
Islamic financial institutions; they depend on the interpretation of some provisions of
the laws for conventional financial institutions.
 Lack of viable liquidity management instruments for Islamic financial
institutions: To date the Central of Bank of Nigeria has been able to come up with
only three (3) liquidity management instruments and only one of the three
instruments is viable as it enables an Islamic bank to manage it liquidity and obtain
some return. This instrument involves securitization of the Central Bank’s holding of
multilateral financial institutions’ Sukuk for the Islamic banks to invest. Unfortunately,
this instrument is still not available as the Central Bank is still having some challenges
31 Cornerstone Insurance Annual Report and Financial Statements 2016 available at:
.