The growth of Bahrain's takaful (Islamic insurance) sector dipped to single digits in 2011 for the first time in a decade, while still outpacing growth in conventional insurance, according to data released on Sunday by the country's central bank.
Takaful gross contributions grew by 4.25 percent to 40.2 million dinars ($107 million) in 2011, the central bank said in a statement. This compares to 18 percent growth in 2010, with double-digit growth registered in all of the previous 10 years, central bank data shows.
Growth still outpaced that observed in the overall insurance market, with gross premiums for both Islamic and conventional insurance combined increasing by 2.12 percent to 214.9 million dinars in 2011, down from 4.95 percent a year earlier.
Combined assets for the insurance sector grew by 7.65 percent to 1.46 billion dinars during 2011. No breakdown was available for the growth of takaful assets alone.
The takaful sector, which has its core markets in the Gulf and southeast Asia, is a bellwether of consumer appetite for Islamic finance products. But slower growth in core takaful markets is raising pressure on the sector to boost efficiency, roll out new products and explore new markets.
Bahrain has been a major hub for Islamic finance in the Gulf region, but in recent years that role has been challenged by other financial centres such as Dubai and Doha.
The country's takaful sector was hit hard by the 2008 global financial crisis, with assets decreasing 35 percent that year, prompting the reorganisation of one of its flagship operators, Solidarity Group.
An alternative to conventional insurance, takaful is based on the concept of mutuality; the takaful company oversees a pool of funds contributed by all policy holders, but does not necessarily bear risk itself.
In their investments, takaful firms must follow religious guidelines, including bans on interest and pure monetary speculation, and a prohibition on investing in industries such as alcohol and gambling.