Prophets and loss

"And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the moneychangers ... And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.”

Christianity and finance got off to a bad start – and their relationship has never got much better. But it took another dip last month, when the two most senior figures in the Church of England, the archbishops of Canterbury and of York, used similar “den of thieves” rhetoric to describe the financial traders they blame for the unfolding economic crisis.

Traders were “bank robbers and asset strippers”, according to John Sentamu, Archbishop of York. And Rowan Williams, the Archbishop of Canterbury, quoted an unlikely “prophet” for a churchman – Karl Marx – claiming Marx was right to critique “unbridled capitalism”.

As some of the “robbers” were quick to point out, however, the Church of England does have ties to the City of London. A day after Sentamu issued his condemnation, the church was accused of profiting from the controversial (and currently banned) practice of short selling on the stock market, by lending stock from its £5.5bn of funds. It was also reported that the Church Commissioners, who manage the church’s considerable assets, have invested in Man Group, a hedge fund manager.

The Archbishops’ Council told Insurance Times, however, that its links to the financial services sector had been misrepresented. “The commissioners do not short equities, nor have they delegated any shorting powers to their external equities fund managers. They do not have any exposure to hedge funds that short stocks, either,” said a spokesman.

He confirmed that the commissioners had a £7m stake in Man Group, but added that this was through an index tracking fund not a hedge fund. The commissioners do have a currency hedging programme, put in place last year to protect the sterling value of the commissioners’ foreign currency-dominated assets. It uses “protective not speculative” strategies, so there is no betting.

Although the commissioners, through JP Morgan, have a small stock lending programme, the spokesman said it had not and would not lend to enable shorting of financially vulnerable institutions in the US and UK, including HBOS.

So the church has dealings with the Square Mile, just like many of its adherents – as clients and as service providers. Does that mean the archbishops were in no position to comment?

Simon Hickman, a Christian who runs Christian Insurance, a trading style of Access Underwriting in Croydon, believes not. “They’re right to be involved,” he says.

“Ethics plays a big part in the way a business operates, and [religion] is where ethics came from in the first place. You can see what greed has done to the economy.”

As Hickman suggests, religious groups have long been involved in what we now call ethical business. Church insurers and church-backed charity provident funds – the forerunners of the NHS – go back well over a century. Modern-day innovations, such as the launch this year of the first Muslim insurance company in the UK – complying with Sharia, or Islamic law – are building on a rich heritage in the UK.

More than three-quarters of Britons claim to be religious. In the last census, 76.8% of people in England, Scotland and Wales said they were religious.

Few think there are so many actual believers. A 2007 survey by Tearfund, a Christian charity, found that just over half the population said they were Christian but only 15% actually went to church. That still puts the church-going population at close to 8 million people, though.

According to Tearfund, attendance more than once a month is concentrated among black and minority ethnic communities (48%), Londoners (22%), the over 55s (22%), the upper classes (21% in social groups AB) and women (19%).

Then there is Britain’s growing Muslim population – the second largest religious group. The Foreign Office says there were 2.2 million Muslims in the UK in 2005. This is up from 1.6 million in 2001.

All those groups are potential targets for the industry, but how do their beliefs affect their insurance needs?

A Mori poll conducted in August 2007 found that 95% of Muslims said their religion was “relevant to their life”. That includes financial services. Sharia sets criteria for acceptable insurance products, called takaful (which means guaranteeing each other) – a sort of mutual.

Sharia prohibits interest or usury, gambling or speculation, uncertainty and exploitation and unfairness.

In takaful insurance, policyholders pay into a mutual pool and share the risks between them. The pool is invested in financial products that do not pay interest. The pool pays out in the event of a claim and, if there is any surplus left, that is shared between the policyholders. A panel of Islamic scholars oversee the pool to ensure compliance with Sharia.

The first trading takaful insurance offering in the UK is Salaam Halal, from Principle, a newly FSA-registered insurer. The company brings together Saudi, Bahraini and Malaysian Muslim financial backers with the likes of Dennis Holt, former boss of AXA UK, and Mike Ross, former chief executive of Scottish Widows and one-time ABI chair. The chief executive is Bradley Brandon-Cross, founder of insurance consultancy Rubicon.

Progress has been swift, says Brandon-Cross: “The idea came from three guys in the Gulf in summer 2005. The company was incorporated in 2006 and I joined in May 2007. We submitted a licence application to the FSA, which was granted in April this year, and started trading in July.

“We’re happy with the level of inquiries, have given lots of quotes and our sales conversions are improving. Our conversion rates are close to those most internet insurers achieve.”

Salaam Halal offers a takaful motor policy and will soon launch household insurance, followed by a small business commercial combined policy.

Brandon-Cross points out that his potential customers – perhaps 600,000 Muslim drivers – are not currently uninsured. “It’s not against their religion to have insurance. If there is no Sharia policy available, Muslims are expected to abide by the laws of the land but we would hope they would prefer to have a policy that complied with Sharia too,” he says.

A complex financial and contractual regime is in place to ensure compliance. In addition to Principle there is Principle Marketing Services, which is appointed by the takaful pool to manage the insurance business. It is paid a fee for its services. Principle Marketing Services then distributes its profit to its shareholders and investors.

Because Principle Marketing Services is not part of the takaful pool but contracted to it, Sharia rules prohibiting speculators and investors profiteering are not, technically, broken. If, after paying the fee to Principle Marketing Services, there is any surplus left in the pool, each policyholder will get their share back as a notified premium cut – in addition to any no-claims discount. All drivers, whether they have made a claim or not, get their takaful contribution back as a discount.

Anila Preston, chief executive of law firm Reorient Legal, specialises in takaful. She set up the first UK takaful insurance outfit – Lloyd’s Syndicate 3786 for the Creechurch managing agency. It never traded as a takaful syndicate and was closed after Canopius acquired Creechurch. She is currently working on another takaful offering in the UK, which would include re-takaful (Sharia-compliant reinsurance).

But Preston says takaful policies should not be marketed solely at Muslims. “Rather than label it a Muslim product we will look at it as an ethical product,” she says. “I am more interested in integration than in segregation. A lot of Muslims in the UK don’t even know what takaful is and, by labelling it a Muslim product, you alienate Jews, Sikhs and Hindus.

“There are 4.5 million Asians in the UK. It can have all the features of a takaful product but does not have to be called that. It can comply with Sharia yet be under English law and it should not be available to only one section of the community.”

Principle agrees and will be offering its takaful insurance to non-Muslims as an ethical product.

Preston is also concerned at the small number of Sharia scholars in the UK – and their lack of financial nous. “Until we have scholars who have law degrees and accounting degrees and who have been actuaries, we are going to have problems. There are some very interesting men but I was talking to one about premium and he thought I meant profit margin,” she says.

As the Archbishops’ Council indicates, the Church of England has complex procedures to protect its own investments from accusations of unethical practices. But, according to Hickman, Christianity does not place demands on its adherents beyond using FSA-approved insurers with a strong credit rating.

His own Christian Insurance offers the usual cover, but also insures charities and places of worship. “We insure churches. We don’t discriminate. We do mosques too.”

Ecclesiastical Insurance was founded to protect churches from fire, but believes its religious history and ethical outlook now have the biggest impact in personal lines.

“Customers are more concerned nowadays about the kind of company they are buying from, who runs the company, where the funds come from and how the company controls itself,” says an Ecclesiastical spokesman.

“We have adopted certain values that we take into all the work we do. When we had a rebranding two years ago, we asked our customers what they liked and they liked our heritage and what it had come to mean.

“Our customer base is more heavily weighted to those of a Christian faith than other insurers, but it is less about religious conviction than about their approach to life and their personal values.

“We need to get our brand values across to the customers who appreciate it. That is not just Christians, but people with an ethical approach to life.”

The insurer aims to work with brokers soon to emphasise those values.

The Board of Deputies of British Jews said there were no specific policies on finance for Jews or products that Jews were forbidden to take out.

A minority of Jews were concerned that life assurance might make someone more valuable to their family dead than alive, which would be immoral, but most Jews were happy to both be insured and work in the insurance industry, a spokesman said.

Organisations representing Sikhs and Hindus declined to comment on financial services. But these and other faiths provide an ethical code for believers – and the industry ignores that at its peril.