AIG offers Sharia-compliant M&A policy for Middle East and North Africa

American International Group Inc. on Wednesday said it is offering Shariah-compliant insurance for merger and acquisitions activity in the Middle East and North Africa region.

AIG said in a statement that it is offering the policy through its partnership with Shariah-compliant managing general agent Cobalt Underwriting, based in London.

The new warranty and indemnity insurance product helps protect MENA buyers and sellers from financial losses if misrepresentations or inaccuracies in representations or warranties occur, the insurer said in the statement.

Islamic insurance is an alternative to conventional insurance that has been designed to comply with Shariah principles, AIG said in the statement.  Traditional insurance is processed in a way that goes against the fundamental rules of Islamic finance, such as the presence of gross uncertainty in a financial transaction, speculation and full risk transfer. Islamic insurance essentially is based on mutual cooperation and assistance. 

Participants make a contribution into a pool with the intention of indemnifying any of its members should they suffer loss.

“Our M&A policies adhere to key principles of Islamic insurance, including risk-sharing by pooling of risk and not insuring assets or businesses that are involved in prohibited activities, such as gambling or selling arms,” AIG said in a statement.  “Islamic insurance requires oversight by a Shariah supervisory board to ensure credibility and integrity.” 

“Sharia-compliant W&I insurance provides a unique and exclusive solution for MENA clients investing both in the region and globally,” Mark Storrie, emerging markets M&A manager at AIG, said in the statement.