“Challenges” anticipated as Maldives adopts mandatory motor cover

Vehicle owners in the Maldives are be required to have third party motor insurance under new regulations coming into force today or otherwise face paying a potentially indefinite number of fines from police, transport authorities have warned.

Assessing the new law, which will have direct impacts on police and insurance providers in the country, the head of the Transport Authority of Maldives said that a “wait and see” approach would be taken before judging the efficiency of the new regulations and how they are being undertaken.  The authority said it nonetheless held reservations about the actual insurance regulation as well as the capacity of private and state institutions to ensure motorists were correctly registered.

However, the Maldives Police Service has said it does not expect the motor insurance regulations to severely impact officers in carrying out their duties due to an potential increase in workload.

Several key insurers in the country have meanwhile announced measures to try and keep up with demand.  These measures have included extending office hours across the last week and launching an online purchasing of insurance coverage.

The introduction of the new law requiring all owners of two and four wheel motor vehicles on the country’s inhabited islands to have third-party insurance was ratified under the previous government in the form of an amendment to the Land Transport Act.

The insurance bill was required to be brought into force three years from the start of the Act, together with regulations stating that the mechanisms for investigation of accidents, identifying the cost of damage and claim for damage should be made public.

Speaking to Minivan News, Transport Authority Chair Abdul Rasheed Nafiz said that concerns remained over the original legislation amendments, as well as the capacity of private companies to ensure members of the public would be correctly registered in time.

“My question is whether [insurance companies] can finish registering people on time,” he said. “There was a little concern about this, but I have spoken with the companies [this week] and they have said that staff had been sent out to islands to assist with registering. Insurance groups have been extending their office hours to meet demand.”

Nafiz said that in order to speed up the registration process for the country’s motorists, customers would be initially able to obtain coverage for a vehicle providing they present valid documentation proving their ownership. He added that customers would then be able to finalise registration at a later date with insurers as the law comes into place today.

Nafiz also pointed to what he believed were “problems” within the regulation calling for mandatory insurance that needed to be addressed as a result of the law coming into effect without further study.

“The law itself has some problems; any driver found by police not to be insured will have to pay a MVR750 fine. However, there is no limit on the number of times police can charge a person without insurance,” he said.  “In one hour even there can be several violations against the same vehicle. This puts drivers at the mercy of police.”

Nafiz added that insured motorists should nonetheless carry official proof of their insurance policy.

Transport authorities claimed that the new regulations also created challenges for police themselves, with any accidents having to be reported to officers within seven days of occurring.

“Traffic police will then be required to investigate the case and produce an accident report,” he said, adding that a copy of the report would then be sent to the insurer. “We will wait and see how efficient this will be. Police have agreed they will go to accidents to investigate.”

Nafiz also criticised the previous administration for some of the challenges presently being experienced over implementing the mandatory insurance, claiming the former government has undertaken “no work” on the matter after amending the Land Transport Act.

With the regulations coming into place today, Police Spokesperson Hassa Haneef said that officers were already performing random checks on vehicles across the country to check drivers had the correct registration and documents.

“We will be performing checks on a daily basis to ensure vehicle are registered according to the proper rules and regulations,” he said. “This won’t be much different to an officer’s existing work.”

Nafiz said that transport authorities had met with three to four insurers n the country in order to outline a standardised annual cost for vehicle coverage order with the implementation of a mandatory motor insurance policy.

“We managed to get agreement with every company to charge the same amounts in terms of maximum costs. They can charge lower if they like, but the companies have agreed to a maximum amount,” he said. “We have been using TV and radio to try and notify the public about this change.”

Nafiz claimed that under the new insurance scheme, the most that can be claimed was a total of MVR 100,00(US$6500)  an amount designed to cover charges related to injury or vehicular damage. Under this programme, up to 60 per cent of this total amount could be used to cover expenses linked to injuries sustained during an accident.

According to Nafiz, another challenge had been faced in terms of agreeing the basic levels of coverage afforded by the standard vehicle insurance policy – discussions that he claimed had become “heated” at times.

It was proposed that the insurance would cover damages of over MVR 2,500 (US$160). However, from research we conducted, most of the damage caused in vehicle accidents would be to plastic covers on a bike or a bulb on a headlight. These were the type of things we found garages were dealing with,” he said. “So if owners are having to pay MVR 500 (US$32) in costs to repair damage, what is the benefit they are getting from insurance?”

Nafiz contended that such a system would serve only to encourage garages inflating charges to MVR2,500 per bill. In response, he claimed insurers agreed on offering a second option, where a package would be offered that covered damages to vehicles under MVR 2,500. However, such a package would require a customer to pay higher premiums on their policy in return.

Last minute demand

Whilst the new regulations may have led to an influx of custom for some companies, several insurers speaking to Minivan News have said that they face challenges themselves after being increasingly inundated with “last-minute” demand from motorists.

Allied Insurance Company of the Maldives, one of a number of groups providing the third-party vehicle coverage in the country, said that it had seen a large number of customers continuing to request coverage today even after the regulations came into force.

Ahmed Riyazi, Information Systems Manager for the company said that over the course of the last week, demand for vehicle insurance rose from 150 customers a day to 1,000 clients a day.

As well as a surge in custom, the company claimed that it faced other challenges in providing services to customers on the country’s outer atolls.

“Geography has certainly been challenge we have faced [with providing motor insurance], but we are also seeing a lot of late demand from customers,” he said.

In an attempt to overcome the problem, Allied today announced the launch of an online payment service from its website that allows customers to purchase both motor and travel insurance coverage instantly.

Amidst strong demand for vehicle insurance, insurer Amana Takaful has said it has also experienced people “rushing to get a policy at the last minute” as the new regulations were launched.

Imran Ramzan, Assistant Manager of Marketing for Amana Takaful, said the company had as of Sunday (October 7) prolonged its open hours till 10:00pm to try and meet customer demand.

“Even now, demand remains very high as it seems most people have waited until the last minute to arrange insurance for their vehicles,” he said. “This strong amount of last minute demand has created a bottleneck, but we are working with our customers to ensure they are all registered correctly and on time,” he said.

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Amana Takaful opens shares for trading Feb 8

Amana Takaful has announced that its initial public offering (IPO) of 800,000 shares will open for trading on the February, along with a further 11,441,187 bonus shares.

The Sri Lanka-based sharia-compliant insurance company had previously announced an IPO of 800,000 shares in September last year.

General Manager of Amana Takaful, Hareez Sulaiman, said in a statement that the total number of shares issued were 20,241,987.

“The Maldives economy, no doubt, has huge potential for growth, but needs foreign and local investments,” Sulaiman said.

“An active stock market is what will attract this investment. Therefore, we expect not only our valued shareholders but also other individuals and corporates to actively take part in the stock market.”

The company had previously shared its hopes of generating Rf16 million (US$1.4 million) in proceeds through the IPO, by selling shares at a low issue price of Rf20 (bundled in packages of 25).

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CMDA to license companies for Sharia-compliant securities

Capital Market Development Authority (CMDA) has opened applications to companies wishing to provide Sharia-compliant securities.

According to local media, CMDA will screen companies to ensure that their operations and transactions are made in alignment with Islamic Shariah.

Licenses will be awarded following consultation with the Capital Market Sharia Advisory Committee.

Sharia-compliant security services are most notable for their exclusion of interest. Currently, Amana Takaful is the only insurance company licensed to provide Shariah-compliant services to the Maldivian public.

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Amana Takaful IPO fully subscribed

Amana Takaful ended its Initial Public Offering (IPO) with a full subscription and 800,000 shares floated to the public in parcels of 25 shares each, at Rf20 (US$1.3) per share.

The issued shares have been alloted and a list has been sent to the Maldives Securities Depository (MSD) to be deposited in the respective MSD accounts.

“Our intention was to help change the way the Maldivian stock market operates as this was the first time that Maldivians, expatriates and foreigners were able to purchase securities in a Maldivian listed company,” said Hareez Sulaiman, the General Manager of Amana Takaful Maldives PLC, in a press statement.

Amana Takaful is the first Shari’ah compliant insurance company listed in the Maldives. It first came to the Maldives from Sri Lanka in 2003 in concept-form, and was licensed to provide insurance in 2010.

The IPO launch received support from Capital Marketing Development Authority (CMDA), Maldives Stock Exchange and the Maldives Monetary Authority (MMA).

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Three companies to compete for health insurance scheme

Allied Insurance, Sri Lanka Insurance and Amana Takaful are contending to provide universal health insurance for all Maldivians under Public Private Partnership.

The three companies submitted applications after the Finance Ministry tendered the plan to insure all Maldivians by January 2012 on October 20 this year.

The Finance Ministry’s October 20 announcement stated that the chosen company would have a 40 percent government share and a 60 percent private share. Service providers will fund customer claims and billings, while the government will cover insurance premiums.

The chosen service provider will be expected to set up an information center on each inhabited island across the Maldives.

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Maldives director of Amana Takaful resigns weeks before IPO

Director of the Maldives branch of Amana Takaful, Hassan Ali Manik, has resigned his post scarely a week after the company announced the launch of a landmark IPO on the local stock exchange.

Manik’s resignation will take effect from the 21st of September. In a statement, Amana Takaful said Manik was tendered his resignation “citing business and personal commitments”.

The company did not announce a replacement.

Sharia-compliant insurance company Amana Takaful will issue 800,000 shares in an initial public offering (IPO) on the Maldives Stock Exchange (MSE).

In a first for the country, 20 percent of the shares will be made available to expatriates and 15 percent to overseas applicants. The remaining 65 percent will be offered to Maldivians.

The Sri Lanka-based company hopes to generate Rf16 million (US$1.4 million) in proceeds through the IPO, by selling shares at a low issue price of Rf20 (bundled in packages of 25).

CEO of Amana Takaful Maldives, Hareez Sulaiman, said the IPO would “change the way the Maldivian Stock Exchange operates as this will be the first time that Maldivians, expatriates and foreigners will be able to purchase securities in a Maldivian listed company.”

The decision to price the shares low “at a price affordable to any average Maldivian” also promised to “be a kick starter for an active stock market which may benefit the entire economy at large,” the company said in an accompanying statement.

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Amana Takaful seeking to “kick start” Maldives stock market with landmark IPO

Sharia-compliant insurance company Amana Takaful will issue 800,000 shares in an initial public offering (IPO) on the Maldives Stock Exchange (MSE).

In a first for the country, 20 percent of the shares will be made available to expatriates and 15 percent to overseas applicants. The remaining 65 percent will be offered to Maldivians.

The Sri Lanka-based company hopes to generate Rf16 million (US$1.4 million) in proceeds through the IPO, by selling shares at a low issue price of Rf20 (bundled in packages of 25).

Amana Takaful’s board of directors announced the IPO on Monday afternoon at the Nasandhura Palace Hotel.

CEO of Amana Takaful Maldives, Hareez Sulaiman, said the IPO would “change the way the Maldivian Stock Exchange operates as this will be the first time that Maldivians, expatriates and foreigners will be able to purchase securities in a Maldivian listed company.”

The decision to price the shares low “at a price affordable to any average Maldivian” also promised to “be a kick starter for an active stock market which may benefit the entire economy at large,” the company said in an accompanying statement.

The company expects the Sharia-compliant nature of its business to be a key attraction in the market, it noted in its prospectus, with the “growing religious awareness within the domestic market further reinforcing [Amana Takaful Maldives’] decision to embark on expanding its shareholder base in the Maldives.”

Globally, Director of Amana Takaful Osman Kassim, also chairman of the first licensed Islamic bank in Sri Lanka, Amana Bank, explained that Islamic finance was “a phenomenon worth 1.4 trillion and growing at a rate of 20 percent annually.”

It functioned, he explained, through the prohibition of riba, or interest.

“Taking a return without participating in the risk of the return is not allowed, be it 1 percent or 99 percent. Any additional revenue is riba,” he said. “Even if you give a loan and he gives a gift, and is not in the habit of giving a gift, that is also riba.”

Islamic finance in its current form emerged 40 years ago, Kassim explained, first in Egypt and the Arab Emirates.

“It promises to be a just system. Interest is oppression – the charging of something where nothing is due,” he said, noting that in the wake of the global financial crisis, “All major banks now have Islamic financing products, and the more adventurous have their own Sharia Councils.”

Certain terminology used in Islamic finance was now routinely used in normal banking, he said, also observing a rise in financial offerings that were all but labelled Sharia-compliant.

In its IPO prospectus, the company predicted strong potential growth on the back of a higher disposable income as the rufiya eased against the dollar, brought on by a “significant” decrease in the cost of imports.

The key areas of the Maldivian economy – fishing and tourism – had shown strong growth, the company noted. Tourist arrivals grew 18 percent in 2010, while bed nights grew 13 percent even as capacity grew by almost 3000 beds to roughly 24,000.

Fishing was a key area of interest to the company given the high number of insurables. The industry had registered a slight decline in productivity in recent months, the prospectus noted, but nonetheless annual fish purchases had increased 29 percent and fish exports by volume had risen fourfold. Higher prices had led to 77 percent increase in monthly earnings.

The company has set a target of 30-40 percent growth in the Maldives, identifying a key market as the local, atoll and city councils following the government’s policy of decentralistion.

“Considering the current trends in religious conciousness, it is generally believed that the level of awareness and preference for investing in Sharia- compliant investments would be greater at the grassroots level,” the company noted.

It also indicated its intention to offer a micro-insurance product in the Maldives targeting the expatriate market.

The IPO will open on September 20 and close on October 19. The company has pegged a minimum subscription of Rf 2.4 million (US$156,000) or 15 percent to proceed with the IPO.

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