KUWAIT CITY, March 8: KIPCO - the Kuwait Projects Company - has signed a Memorandum of Understanding with Munich Re, one of the world’s leading reinsurers as part of its plans to launch the MENA region’s first range of long-term savings and pension products.
The agreement between the two companies means that Munich Re will provide a full range of technical, actuarial, training and other specialized services to Taka’Ud Savings & Pensions — KIPCO’s new savings and pensions company. Taka’Ud Savings & Pensions will be incorporated in Bahrain and aims to launch its initial product range in selected MENA countries by the middle of 2010.
KIPCO believes there is a large and unmet demand throughout the MENA region for low-risk, long-term pension products with secure and reasonable returns. Statistics from the United Nations’ Economic & Social Affairs Department forecasts that the number of people aged over 65 in the region, estimated at 10.6 million in 2000, will increase to 32 million, or 6.8 per cent of the total population, by 2030.
This number is expected to grow to 70 million, or 12.3 per cent of the total population, by 2050. This means that while the region’s total population will double during the first half of the century, the population of over 65s will multiply by more than six times in the same period.
KIPCO’s Vice-Chairman, Mr Faisal Al Ayyar, said these demographic trends were both a challenge and an opportunity for regional governments in the way they finance state retirement pensions:
“Funding retirement is a staggering challenge for regional governments because of the sheer number of people who will reach retirement age during the next 40 years. The challenge is so enormous that even the richest countries in the region will find the cost of funding this demographic growth extremely difficult.
The development of a regional private pension industry is therefore essential in order to achieve two objectives: first, to fill an existing gap in the financial industry by offering customers suitable products to manage their savings and fund their retirement needs.
Second, a private pension industry will support the efforts of regional governments as they encourage working people to take more personal responsibility for their retirement funding. This will also allow government pension schemes to focus on the needs of less affluent segments of their societies.”
Stimulating
“As in other parts of the world, private pension funds in this region will play a key development role by stimulating inward investment through the creation of new financial instruments suitable for the recycling of personal savings into national economies. Our new pension products will be among the most transparent and reliable financial products on offer and will give customers an opportunity to preserve the purchasing power of their lifetime savings.
We will distribute these products through our network of commercial banks, insurance companies and asset management firms operating in the MENA region. This distribution network will be supported by a dedicated and highly-trained team of financial advisors who will establish an on-going relationship with their customers and provide professional guidance on the products best suited to their needs.
We aim to create a product brand that is anchored in the regional economies and is clearly identifiable with the needs, particularities and aspirations of each nation. Our products will answer the needs of all the people that want to take personal control of their long-term finances,” he said.
During a recent visit to Kuwait to meet KIPCO’s top management, Munich Re’s Chairman, Dr Nikolaus von Bomhard, said:
“Due to the demographic development, the MENA countries offer a market with high potential for profitable growth for long-term savings and pensions products. For the new planned venture with KIPCO, we will provide our services. Together with our outstanding financial stability, we will ensure that it will be a sustainable success for the business partners and the company’s clients.”