According to a report by Dubai Center for Islamic Banking and Finance (DCIBF), the global takaful insurance market would reach US$52.5 billion by 2020. In 2015, it was estimated at $23.2 billion.
After the spectacular growth asset growth of Islamic banking and finance in the past years, the Islamic insurance, or Takaful, industry, is expected to go into full swing due to the regulatory improvement in some countries and the higher readiness in Muslim nations for risk coverage.
In 2017 acquisition of Al Hilal Takaful by Takaful Emarat in the UAE, a deal created the largest Takaful group in the country for life, health and general Takaful for individual and corporate customers.
Around $245 million has also attracted international attention for the market potential of Islamic insurance. Currently, there are no less than 34 domestic and 27 foreign conventional and Islamic insurance companies publicizing for a customer pool of just 10.5 million people in the country.
According to secretary general of the Emirates Insurance Association and the Gulf Insurance Federation, most of the Islamic insurers face difficulties to keep pace with the speed of digital transformation in the finance and insurance industry and need to adapt, ideally by pooling their strengths.
One of the priorities after the merger will be to come up with a combined digital platform to provide more efficient and cost-effective services for insurance clients.
One of the world’s largest insurance companies, Allianz Group, in October last year increased its stake in its Saudi Arabian Takaful joint-venture with Banque Saudi Fransi, Allianz Saudi Fransi Cooperative Insurance Company, by 18.5 percent to a majority of 51 percent.
This was mainly to ‘underline its commitment’ to the Saudi Takaful market, the world’s largest by gross written contributions, and develop a number of new products for private and corporate customers.
In the UAE, Saudi Arabia’s insurance market remains largely fragmented, with 33 listed Takaful operators competing against each other. In this context more consolidation and foreign input needed to help create solid companies.
A recent report by the Deloitte Middle East Islamic Finance Knowledge Center outlined the key challenges for Takaful operators to break into the mainstream and build mass coverage globally. Among those are the need for improved governance, capital adequacy, training and leadership, new business models and product innovation, strategic planning abilities.
The Takaful market in Saudi Arabia and the UAE already saw regulatory changes such as the introduction of actuarial reserving which led to an increase in premiums and provided some financial respite for operators. Bahrain, Oman and Qatar also introduced new regulations specific to the Takaful industry, while Kuwait’s new insurance law draft also provides for specific regulations for the sector.
Overall, the global Takaful market had a volume of $14.9 billion in gross written contributions as per latest available figures of 2015, according to the Global Takaful Report 2017 by US-based actuarial and consulting firm Milliman issued in July last year.
The Gulf Cooperation Council (GCC) was the largest market for the global Takaful industry, representing around 77 percent or $11.5 billion of the world’s takaful gross written contributions. Saudi Arabia held by far the largest share of $9.7 billion.
The markets in the other countries in the GCC were still relatively small with Takaful premium volume of less than $1 billion each, whereby the UAE was the second largest with around $700 million in gross written contributions.
The second-largest chunk of the global Takaful market is mainly spread over Malaysia, Indonesia and Brunei with a combined global market share of 15 percent in premiums.
The small rest were Bangladesh, Pakistan, Turkey, Sri Lanka, Syria, Yemen, Jordan, Lebanon, Iran, Sudan, Egypt, Algeria and Tunisia.
Specific Takaful regulations have also been introduced in several African countries such as Kenya and Gambia, with Tanzania expecting to issue detailed Takaful regulations in the near future, indicating the commitment to grow the industry by these African governments.
Apart from that, there are a few Takaful operators scattered over Europe, for example Noorassur in France, KT Bank in Germany, NDI Takaful & Retakaful in the UK and Solidarity Takafol in Luxembourg.
Anticipating an average annual growth rate for the global Takaful market of an estimated 13 percent The future potential of Takaful in the GCC is certainly driven by the reduction of state benefits which increases demand for products such as life and health insurance.
As family Takaful is largely non-existent in the GCC, there are growth opportunities for this segment in the region, particularly given the lack of retirement-related Islamic insurance products.
Most experts see Africa both North and Sub-Saharan as the regions with the currently greatest growth potential for Takaful, while there are many other new jurisdictions which have also introduced Takaful specific guidelines in recent years, such as Indonesia and Turkey, to spur industry growth.