Islamic insurance products take off
11 April 2007
Prospects for the growth of takaful insurance products in the Middle East look bright, according to Standard & Poor’s.The rating agency has sketched out a potential $20 billion marketplace for the shariah-compliant insurance instruments in the Gulf region.
At current growth rates, Standard & Poor’s predicts the market could easily expand to $4 billion in the near future.
Takaful products are essentially a form of cooperative insurance: policyholders invest on the basis of shared risk and mutual gain. Islamic law forbids commercial insurance due to bans on interest and gambling.
The takaful market currently enjoys growth rates of 40% year-on-year; borne on the back of rising investor confidence in the virgin shariah insurance market and rapid economic growth in the Gulf.
“The opportunities for increased uptake of takaful in the GCC [Gulf Cooperation Council] are positive because the considerable economic growth in the region, coupled with a sizable, underinsured population, means that there are substantial prospects for further development of personal lines cover,” said Jelena Bjelanovic at Standard & Poor’s.
In a notoriously fickle market, however, experts are also preaching caution.
Standard & Poor’s says the success of takaful will hinge on their ability to deliver on policyholder expectations.