A new agreement between the UAE’s export credit agency Etihad Credit Insurance (ECI) and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) will seek to promote non-oil UAE trade through Islamic risk mitigation tools.

The two institutions have signed a memorandum of understanding to co-operate on trade credit and political risk insurance, as well as exchange information and knowledge.

The aim is to “further strengthen the facilitation of trade and investment between member countries and the world, through sharia-compliant risk mitigation tools”, says Oussama Abdel Rahman Kaissi, CEO of ICIEC.

It will enable ICIEC to offer reinsurance capacity and sharia-compliant export credit insurance solutions through ECI to UAE-based SMEs, specifically focusing on the country’s non-oil exports, trade and strategic sectors development. The deal also has a larger aim of promoting the halal industry worldwide.

According to Massimo Falcioni, CEO of ECI, the agreement will be “instrumental to advance and sustain UAE’s national economic non-oil diversification programmes, as well as support the export and re-export of UAE goods, services, and the foreign investments of the UAE businesses, by providing a range of export credit, financing and investment insurance products”.

The ICIEC, the insurance arm of the Islamic Development Bank Group, was established in 1994 with a mandate to promote exports from its Islamic member countries by encouraging the use of sharia-compatible instruments. ECI was established in 2015 by the UAE governments to support the export and re-export of UAE goods and services.

Put simply, Islamic financial products comply with sharia law and are based on the principles of risk and profit sharing. Sharia law prohibits earning interest on loans and bars funding activities involving alcohol, pork or gambling.

A booming demand for such products is also being followed closely by private insurance firms and brokers, including outside of the Muslim-majority countries, such as London. Speaking at an industry event last year, Vincent Vandendael, Lloyd’s of London’s chief commercial officer, said he is seeing a “surging demand” for specialist insurance in the Middle East, including sharia-compliant insurance, an area where Lloyd’s is looking closely at how it can “support the growth of this segment”.

Rapidly expanding economies, a complex regional geopolitical landscape, huge infrastructure investments and increasingly structured public-private initiatives are all driving this demand, he said.

“As the Middle East develops, there is a significant requirement for innovative insurance solutions to support economic growth. We see lines such as trade credit, political risk, public-private finance initiatives, warranties and indemnities and mining as a growth opportunity as the regional economies diversify and require increasingly sophisticated risk transfer mechanisms,” he noted.