GCC: Retail focus, size & track record, hold back earnings of takaful operators
Source: Middle East Insurance Review | Oct 2016
Earnings in the GCC Islamic insurance industry remain relatively weak and are unevenly distributed, said S&P Global Ratings in a new report. The Islamic insurers’ retail focus, size, and limited track records are counting against them.
“For a number of companies operating in these overcrowded markets, we find that precipitous growth, combined with net losses, is eroding their capital strength and damaging their credit profiles. Most takaful players are still relatively small compared with their conventional peers. Their shorter track records and less-diverse books of business put them at a disadvantage now that the falling oil price and stricter regulation are hitting GCC insurance markets,” said the report.
This is despite the fact that Islamic insurers in the GCC saw gross contributions increase by an impressive 20% or so year-on-year in 2014 and 2015. In 2015, the combined gross premium income of Islamic insurers in the region exceeded US$10 billion (based on available data from listed companies), which compares to roughly $9 billion of premium income generated by conventional insurers for the year in the GCC.
More than 85% of the region’s Islamic insurance premiums were written in Saudi Arabia, which has the largest Shariah-compliant market in the region.