Dubai Holding, a conglomerate owned by the emirate's ruler, and Kuwait's Al Fajer Re plan to launch a firm with $500 million of authorised capital in January to tap unserved demand in retakaful, or Islamic reinsurance.

There are only 19 retakaful firms globally, so Islamic insurers are often forced to transfer some of their risk to conventional re-insurers, according to a Dubai government study.

The new firm, Emirates Retakaful, will be set up in the Dubai International Financial Centre, said Fareed Lutfi, director of insurance services at Dubai Holding. There will be scope to add more investors to the firm, he added.

Dubai announced this year that it planned to develop as a centre for Islamic business in a range of areas, and identified retakaful as one opportunity.

"We do require more retakaful capital to come to the market - there is scope for more," Lutfi told Reuters on Monday on the sidelines of the Global Islamic Economy Summmit in Dubai.

Emirates Retakaful will focus on covering general takaful business, such as oil- and aviation-related risks, and later explore family takaful risk, Lutfi added. "We are basically on the general side, but we are hopefully going to mix it with family takaful."

In conventional insurance, risk is transferred from one party to another; under Islamic rules, risk is shared among members of an insurance fund. -Reuters