Takaful plays vital global role in sector
Dubai, September 26, 2012
The growing need for Sharia-compliant insurance means that the global takaful sector is becoming an increasingly significant niche within the wider insurance industry, according to a report by Standard & Poors Rating Services.
"We expect to see generally strong growth in contributions, which act as premium income, and greater use of insurance in Islamic states," the rating agency report said.
"Takaful has developed most in the GCC region and southeast Asia, but individual countries in each region have taken different routes to develop the sector.
"Thus, the business lines that predominate in these two regions are distinctly different, as are the sources of growth and the investment models.
"We remain concerned by widespread use of high-risk investment strategies by takaful providers, and by the sector's lack of global standards in areas such as accounting standards and Sharia compliance," S&P said.
"In our view, it is unclear how many of the companies involved will sustain their profitability over the longer term, particularly in the GCC region.
"However, developments in Malaysia, the largest takaful market in southeast Asia, appear much more healthy and sustainable," it said.
"They are supported by more-sophisticated regulatory oversight and the stronger investment profile of the industry," it added.-TradeArabia News Service