FWU Group, a Munich-based financial services company, has issued a US$20 million five-year Islamic bond backed by insurance policies, according to a report published by Reuters.

The sukuk is the first tranche of a US$100 million programme, and is arranged by EIIB-Rasmala, a venture between London-based European Islamic Investment Bank and Dubai’s Rasmala Group.

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FWU, which offers takaful (Islamic insurance) solutions, has used a structure known as wakala.

In a wakala sukuk, certificates are issued by an originator to buy assets which are given to an agent for management, who charges a fee for his services and the originator undertakes to buy the assets on maturity at an agreed price.

Harris Irfan, managing director at EIIB, said:"Sukuk will benefit from moving to asset-backed structures, so ring-fencing and recourse to the underlying assets is important.

"It is fair to say the spirit of sharia-compliant financing is not merely about replicating conventional financing, rather it is about forging a new path – making a connection with the real economy. Anything with a regular income stream – it could be a utility or a toll-road – any asset which you can ring-fence," Irfan added.

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Irfan also added that the wakala format used by FWU is flexible enough for other Western issuers to consider tapping the sukuk market, as long as they can identify a set of assets.

Proceeds of FWU’s sukuk, which carries a profit rate of 7%, will be used to fund a set of re-takaful transactions for its Luxembourg-based unit Atlanticlux, which is the ultimate obligor under the programme.

In December 2012, FWU has issued a US$55 million seven-year sukuk through a private placement that was backed by intellectual property rights.