The Islamic insurance industry could be worth up to $15 billion globally within the next 10 years, driven by growth in the GCC, Ernst & Young said on Tuesday.
The professional services firm said in its World Takaful Report 2008 that the Islamic insurance, or takaful, market was growing at an annual rate of 20% and would hit $4.3 billion by 2010.
Ernst & Young said the GCC accounted for more than a third of the takaful market globally, contributing in excess of $1 billion in 2006 compared to global contributions of $2 billion.
Of the 133 takaful operators worldwide, 59 are within the GCC, it said.
The report found that growth in the takaful sector has outpaced that in conventional insurance sectors in most countries of the Middle East.
Ernst & Young said the industry was being driven by factors such as high economic growth and increase in per capita GDP, increasing awareness, a greater desire for Sharia compliant offerings and increasing asset-based Sharia compliant financing.
“Assets held and financed by the Islamic financial services industry are increasingly motivated to use takaful to underwrite risk," Sameer Abdi, head of Ernst & Young’s Islamic Finance Services Group, said in a statement. "Existing takaful capacity is slowly replacing conventional insurance in the industry."
Ernst & Young said key challenges facing takaful include a fragmented and undercapitalised landscape, limited re-takaful capacity, problematic asset management and lack of local solution offerings and local distribution channels.
"The challenge for takaful operators lies not only in tapping extrinsic demand but also in developing their capacity and expertise to provide a competitive alternative to conventional insurance,” Abdi said.
The report found that growth in the takaful sector has outpaced that in conventional insurance sectors in most countries of the Middle East.
Ernst & Young said the industry was being driven by factors such as high economic growth and increase in per capita GDP, increasing awareness, a greater desire for Sharia compliant offerings and increasing asset-based Sharia compliant financing.
“Assets held and financed by the Islamic financial services industry are increasingly motivated to use takaful to underwrite risk," Sameer Abdi, head of Ernst & Young’s Islamic Finance Services Group, said in a statement. "Existing takaful capacity is slowly replacing conventional insurance in the industry."
Ernst & Young said key challenges facing takaful include a fragmented and undercapitalised landscape, limited re-takaful capacity, problematic asset management and lack of local solution offerings and local distribution channels.
"The challenge for takaful operators lies not only in tapping extrinsic demand but also in developing their capacity and expertise to provide a competitive alternative to conventional insurance,” Abdi said.
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