Ernst & Young said at the Annual World Takaful Conference 2008 yesterday that GCC’s accepted contributions reached in excess of $ 1 billion as compared to total global contributions of $ 2 billion in 2006. Of the world total of 133 Takaful operators, 59 are within the GCC.
Standard and Poor’s, in a report, has said the GCC Takaful market, which is growing at 40 per cent annually, has the potential to become a $ 4 billion market. Industry experts said Takaful in the GCC represents only a tenth of one per cent of conventional insurance, whereas in Malaysia, which established its Takaful industry 15 years ahead of the GCC, it had grown to seven per cent.
According to American International Group, the world’s biggest insurer, global takaful premiums will rise more than fivefold to $ 11 billion by 2015 as Muslims become richer and awareness of products grows,
The world’s leading Islamic insurance operator, Salama, has said that it expects the sector to be worth $ 10 billion in five years’ time.
In its inaugural World Takaful Report 2008, Ernst & Young said its findings indicate that growth in the Takaful sector has outpaced that in conventional insurance sectors in most countries of the Middle East. General Takaful, which includes Property & Miscellaneous Accident Takaful, currently accounts for approximately 50 per cent of written business globally and in the region.
The drivers of Takaful demand include high economic growth and increase in per capita GDP, a youthful demography, increasing awareness, a greater desire for Shariah compliant offerings and increasing asset based, Shariah compliant financing.
While current growth rates indicate a future Takaful industry of $ 10-15 billion within the next ten years, there are critical factors that must be addressed. Key challenges facing Takaful, as outlined by the report, include a fragmented and undercapitalised landscape, limited reTakaful capacity, problematic asset management and lack of local solution offerings and local distribution channels, it said.
Noor Ur Rahman Abid, Managing Partner, Audit and Assurance Business Services at Ernst & Young Middle East, said it is clear that there are significant growth opportunities for the Takaful industry, especially when the estimated global insurance premiums are as high as $ 3.7 trillion.
Most Organisation of Islamic Conference (OIC) countries have underdeveloped insurance sectors. Premiums in the Middle East are at 1 per cent of nominal GDP compared to 8 per cent in North America. In addition, high levels of market liquidity and with income levels rising in the region, should contribute to a future rise in the global Takaful industry.
Despite significant challenges, the outlook for the Takaful industry has enthused the Islamic finance world, according to Sameer Abdi, Head of Ernst & Young’s Islamic Finance Services Group.
