GIFF 2012 report about Global Takaful Industry

Amongst the key markets, Malaysia, Indonesia and UAE achieved growth rates of over 24.0%, whilst Saudi Arabia saw its gross contributions increase by 9.7%.

In 2010, growth in the GCC slowed to 16.3%, from a CAGR of 44.7% in 2004-2009, as the implementation of compulsory medical Takaful in Abu Dhabi and Saudi Arabia was completed earlier.

Saudi Arabia remains by far the largest takaful market after Iran, contributing $4.4bn or 32.0% of the industry at an average contribution per operator of $141.0 million.

Malaysia grew 24.0% to reach contributions of $1.4bn at an average contribution per operator of $141.0 million. UAE ranked third with contributions of $818.0 million, growing at 28.0%. Outside of GCC, Middle East 'Non- Arab' and SEA, Sudan is the most significant market, with contributions totalling $363.4 million, growing by 7.0% in 2010.

In terms of takaful models applied, Wakalah-Mudharabah 'hybrid model' remains one of the most widely applied models with at least 9 countries adopting it. This is followed by 'Wakalah with and without fee' and Mudharabah.

The past few years has seen certain countries moving away from the latter model to the hybrid model which provide certain advantages over the other such as the upfront Wakalah fee which helps to incentivise takaful agents to recruit more participants.

Standardisation of takaful models applied is highly welcomed as it will facilitate cross border selling and making it easier for the customers to understand the product. Nevertheless, the emergence of different takaful models across jurisdictions presents opportunities for greater understanding and acceptance as different jurisdiction may experience different impediments to implement certain practices.

The takaful industry is facing strategic challenges as the market establishes itself. Significant investments are required to establish the Shariah board, develop technical expertise on Shariah compliance, train staff, create brand awareness among customers, as well as implementing the appropriate technology.

To ensure the success and sustainability of the takaful and retakaful industry, the companies will need to work with their respective national regulator to address impediments facing the industry. Despite all the challenges, takaful is a viable alternative to conventional insurance and is expected record gross takaful contribution of $17.2bn by end of 2012.

Factors Supporting Takaful Growth
•Growing demand for Shariah-compliant products.
•Abundant liquidity.
•Increasing levels of foreign direct investment.
•Growth of retakaful capacity.
•Growth of high quality sukuk papers for takaful companies to invest in.
•Increased awareness amongst consumers.
•A more efficient distribution channel of takaful products.
•Growth in other financing products such as housing financing which leads to increase in housing takaful.