Takaful industry 'will face big challenges'
Manama, June 13, 2013
The takaful insurance industry faces a number of major challenges as it grows both in the region and across the Islamic world and further afield, said a top official of the Central Bank of Bahrain (CBB).
"Corporate governance within the industry is a major challenge," CBB executive director of financial institutions' supervision Abdul Rahman Al Baker was quoted as saying by the Gulf Daily News, our sister publication.
He was speaking at the opening session of the Deloitte executive roundtable on the global takaful insurance market, at the Ritz-Carlton Bahrain, Hotel and Spa yesterday.
"In contrast to policy-holders in a conventional mutual insurance company who are owners of the company, participants in general meetings and have the right to remove the management, takaful policy-holders have no such governance structures or rights although they are exposed to similar risks.
"They must rely on market competition to get a fair deal and good value for money in their dealings with the takaful operator," he added.
He said that standardisation of takaful accounting standards and disclosure, especially those related to capital adequacy and solvency disclosures, was a challenge as was the lack of human talents that have the necessary exposure and experience in the takaful business.
"One of the most critical challenges facing the takaful industry is the issue related to limited availability of Islamic instruments like sukuk, which are the most suitable type of investment for takaful companies," he said.
"Another challenge is with respect to offering micro-takaful to address the needs of lower income individuals in society as well as finding the appropriate distribution channels to offer takaful assurance services through banks," he added.
"The future prospects of the takaful industry will hugely depend on the combined efforts of all the relevant parties including regulators, market players and the community at large to chart the strategic direction for the industry. Collective effort is critical in order to maximise the potential for the takaful industry," he said.
"The global takaful industry has continued to demonstrate a strong growth momentum and is increasingly being recognised as one of the major components of the Islamic financial system," he added.
"As with other forms of Islamic finance, the industry has gained significant interest as a viable and efficient alternative model of insurance. Global takaful contributions amounted to around $13.7 billion in 2010, a significant growth of 23 per cent compared with 2009," he said.
"Overall, the GCC market contributed $5.7 billion which is more than 41 per cent of global takaful contributions," he added. – TradeArabia News Service