Indonesia: Shariah ecosystem to give impetus to takaful
Source: Middle East Insurance Review | Feb 2019
Indonesia’s takaful industry is expected to benefit from developments in the broader shariah ecosystem over the long term, according to Fitch Ratings.
In its report ‘Indonesia Takaful Dashboard 2019’, the rating agency said total takaful contributions increased by a modest 1% to IDR9.7tn ($688.5m) in the first nine months of 2018.
“But we expect takaful growth to regain traction as new operators and investment capital enter the market and travel insurance is made mandatory by the government for umrah and hajj trips,” the report said.
The family takaful sector continued to expand faster than non-life shariah on rising incomes, helped by low insurance penetration, high saving rates and a flourishing middle-income population. Family takaful contributions increased by 2% to IDR7.7tn in the first nine months of 2018, mirroring growth trends of conventional insurance business in the country.
Currently, takaful windows of conventional insurers outnumber full-fledged shariah operators, although a handful of companies have spun off their takaful windows ahead of the financial services regulator’s requirements for all conventional insurers to do so by late 2024.
Takaful operators, and the insurance industry in general, are also preparing for the imminent introduction of IFRS 17, with government support remaining important for a smooth transition. M
IDR1,000 = $0.07