There are over 60 companies offering Takaful insurance services in 23 countries around the world. These countries include Malaysia, Singapore, Indonesia, Sri Lanka, Bangladesh, Turkey, Luxembourg; Senegal; Tunisia; Bahrain; Brunei; Kuwait; Jordan; Qatar; UAE; Egypt; Saudi Arabia; Sudan; Nigeria; Iran and Pakistan hence the demand for takaful insurance has grown significantly in recent times in those countries except for Nigeria which is yet to level up in the Islamic insurance business.
Ernst and Young forecasted that the general insurance class of Takaful products would grow at a compound annual growth rate (CAGR) of more than 24 per cent from 2010 to 2012, due to increasing demand for motor and energy insurance. Property and aviation insurance policies are also expected to emerge as fast growing segments of the general insurance sector.
Takaful is an Islamic-compliant insurance concept that is a rapidly growing. For instance, Saudi Arabia generated $3.86 billion USD 2009; Malaysia ($1.15 billion USD), UAE ($640 million USD) and Sudan, $340 million USD.
Indian subcontinent’s Takaful contributions have increased by 85 percent, making it the fastest growing Takaful market in the world. The next fastest growing market is the Middle-East, which has grown by 40 per cent, followed by the GCC (31 per cent), South-East Asia (29 per cent), and Africa (26 per cent).
It was for the growing pace of takaful that the UAE recently enacted a law on Takaful in order to boost transparency in the sector.
Sultan Bin Saeed Al Mansouri, minister of economy and chairman of the UAE Insurance Authority who announced the law pronounced that Takaful insurers and reinsures must henceforth have a sharia board consisting of three qualified scholars with experience in Islamic finance.
The law also emphasises companies need to comply by sharia principles, and set standards for financial and accounting issues.
Each insurance company should set up a zakat fund in which zakat money would be deposited.
Islamic insurance and reinsurance companies have one year to make the necessary changes to comply with the new law.
Though key takaful markets, according Ernst and Young are characterized by low insurance penetration rates and comparatively high rates of economic growth.”
In Malaysia, the disparity is even greater with an average RoE of 16 per cent for conventional insurers and 6 percent for Takaful companies. This difference, however, may arise from a significantly lower claim ratio than the GCC, mostly because of differences in business lines.
Bank Negara of Malaysia revealed that total income from family takaful policies increased to 4,030.2 million ringgit (US $1.35 billion) in 2010 from 3,381.6 million ringgit (US $1.13 billion) recorded in 2009, representing 20 per cent.
This data includes the increase in net contributions for family Takaful, which rose to 3,326.9 million ringgit (US $1.1 billion), and net investment income which similarly grew to 451.6 million ringgit ($150 million) in 2010 from 354.8 million ringgit ($118 million) in 2009.
For general takaful, the underwriting profit in 2010 experienced a slight decline from 170.1 million ringgit (US $ 57 million) to 145.8 million ringgit (US $48.6 million), although the overall operating profit for takaful providers in Malaysia improved from 247.5 million ringgit ($82.6 million) to 272.4 million ringgit ($90.92 million) over the same period. Additionally, investment income for general takaful enjoyed an increase from 57.7 million ringgit ($19.3 million) to 67.9 million ringgit ($22.66 million).
Bank Negara Deputy Governor Mohd Razif bin Abd Kadir remarked that this new international joint venture marked an important milestone in Malaysia’s economic evolution. “With this strategic alliance between two financial groups of such caliber, Bank Negara Malaysia looks forward to strong management stewardship, innovative product offerings, wide distribution channels, operational and service excellence as well as breakthrough business strategies that are well-matched by robust risk management capabilities,” the deputy governor said.
Malaysia remains determined to put forth a great effort in providing a sufficient financial safety net and proactive investment opportunities for its growing Muslim population
He said: “This presents a huge window of opportunity for our Takaful operators to accelerate their regional and global orientation and move up the global value chains. It is therefore important for strategic international partners such as ING to explore all possible avenues to elevate the business potential of Takaful internationally.
Regionally,“We have found that Saudi Arabia has emerged as the largest market for Takaful insurance, followed by Malaysia. Takaful insurance is growing at an annual growth rate of 15_20 percent globally, but it will grow at faster rate in Saudi Arabia because premium paid by the insured people is considered as donation and not premium”