Takaful overtaking conventional insurance

Middle East

The Islamic insurance or Takaful sector is in the process of replacing conventional insurance sectors in most countries of the Middle East, according to a report on the sector by professional services firm, Ernst & Young. The firm’s inaugural World Takaful Report suggests that general Takaful, which includes property and miscellaneous accident insurance, currently accounts for approximately half of insurance business written globally and in the region. The report also identified the Gulf Cooperative Countries (GCC) which consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates as the heart of the global Takaful market, with over 50% of the value of global Takaful contributions of $2.0bn in 2006. The analysis of current growth rates suggests that the Takaful industry could produce a premium income of $10.0bn to $5.0bn within the next 10 years. However, the report points to a number of critical factors that must be addressed to maintain this expansion. Key challenges facing Takaful include a fragmented and undercapitalised landscape, limited reTakaful capacity, problematic asset management and lack of local solution offerings and local distribution channels.