Indonesia: Structural demand to boost takaful's market share
Source: Middle East Insurance Review | Mar 2017
Favourable structural demand factors should help the takaful sector in Indonesia enlarge its market share within the country’s insurance industry, even though the growth of Islamic insurance in the country has now eased to be more in line with that of the overall industry, said Fitch Ratings.
Family takaful remains the largest contributor to the takaful sector, accounting for 78% of the total, the rating agency noted in its “Indonesia Takaful Dashboard 2017” report.
The five-year CAGR for general takaful contributions stood at 24% in 2015, while that of family takaful contributions was 31%, outpacing conventional counterparts.
For the 10 months to October 2016, general and family Shariah insurance amounted to IDR2.2 trillion (US$165.2 million) and IDR7.7 trillion, respectively, compared with the IDR50.4 trillion and IDR109.1 trillion for conventional counterparts.
Demand for takaful products remains low despite Indonesia having the world’s largest Muslim population. A lack of awareness, which the government aims to address through educational programmes, and the absence of a robust Islamic finance system to support long-term growth restrain the sector’s expansion.
Fitch expects guidelines coming from Indonesia’s Financial Services Master Plan to be positive for the industry from a supervision perspective, aligning it more closely with the policies of conventional peers.
Any consolidation among takaful insurers is likely to be long-tailed, as the “window” operations of existing insurers remain relatively small, the rating agency added.
IDR1,000 = US$0.08