Global Islamic insurance contributions surged 19 percent in 2010 to $8.3 billion helped by Saudi Arabia, the world’s biggest oil exporter, which made up more than half the industry, an Ernst & Young report said.
The six-nation Gulf Cooperation Council, which also includes the United Arab Emirates, Qatar, Bahrain, Oman and Kuwait, made $5.68 billion of Islamic insurance or takaful contributions in 2010, and South East Asia $2 billion, according to the World Takaful Report 2012 e-mailed today.
Growth in the GCC slowed to 16 percent in 2010 from an annual average of 41 percent between 2005 and 2009 as the implementation of compulsory medical insurance in Saudi Arabia and Abu Dhabi was completed earlier, it said.
The growth amid a “global economic meltdown is definitely commendable,” Ashar Nazim, the head of Islamic financial services for the Middle East and North Africa, at Ernst & Young, said in a telephone interview from Bahrain yesterday. “With the current growth trends, and the addition of new fringe markets such as Indonesia and Bangladesh, we expect gross contributions of $12.4 billion by 2012.”
The Kuala Lumpur-based Islamic Financial Services Board estimates assets of the Islamic finance industry will grow to $2.8 trillion by 2015 from $1 trillion now. Islamic finance has a 25 percent share in the GCC and 22 percent in Malaysia, while takaful’s share is 15 percent in the GCC and 10 percent in Malaysia, leaving room for growth, Ernst & Young said.
Strong competition, evolving regulations and shortage of takaful expertise are key risks in both the GCC and South East Asia, according to the report. Young Islamic insurance companies are relying on aggressive pricing to compete against established companies amid increasingly stringent regulations on capital and solvency, which is hurting profitability, it said.
“Industry consolidation would allow takaful operators to compete effectively with larger more established conventional insurers and also reduce unhealthy price wars,” Nazim said. “The growth trajectory will change once there is regulatory clarity, and once you have a champion for the industry, a mega-takaful company that can lead growth.”