DOHA: GCC gross takaful contribution is estimated to reach around $8.9bn in 2014 from an estimated $7.9b in 2013, according to Ernst & Young’s latest report, Global Takaful Insights 2014.
The report forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 percent from 2013 to 2016 and expects the industry to reach $20bn by 2017. This is against a backdrop of continued buoyancy in the estimated $2 trillion global Islamic finance markets. The Gulf Co-operation Council (GCC) countries and Association of Southeast Asian Nations (Asean) markets are likely to maintain their current growth path in the next five years, subject to their economic growth.
“The continued strong growth of the much larger Islamic banking sector will help sustain the progress of the takaful industry. The rapid-growth markets, particularly UAE, Malaysia and Indonesia, are key markets to watch as they improve on market practices, widen distribution channels and strengthen the regulatory front. The low insurance penetration rates, on average just two percent, across key Muslim rapid-growth markets signify a huge opportunity and growth potential for takaful products, particularly in the areas of family takaful and medical insurance,” said Abid Shakeel, Senior Director of EY’s Global Islamic Banking Centre.
The global takaful industry continues to gain market share across several high value rapid-growth markets, which still show significant untapped potential. Within the Gulf region, Saudi Arabia accounts for the majority of the total gross takaful contribution at 77 percent, followed by UAE, which accounts for 15 percent. The rest of the Gulf countries account for just 8 percent of gross takaful contributions.
Saudi Arabia will likely remain the core market of Islamic insurance business, commanding approximately half (48 percent) of the global contributions while UAE, Qatar and more recently, Oman, continue to set the pace for the development of takaful products in the Middle East and West Asian markets. Turkey and Oman are new entrants to the takaful industry, offering strong first mover advantage to takaful operators, whereas established takaful markets in Africa like Sudan, offer great prospects for efficient replication across new African markets endorsing Islamic finance.
Profitability of takaful companies has been threatened not just by undifferentiated strategies but also by the lack of uniform regulations that will allow them to operate across different models. Undifferentiated business strategies mean most takaful operators are competing intensely and this is likely to squeeze out the under-performers.
The Peninsula
