Takaful has gained little traction in Qatar (less than 1% penetration), indicating substantial growth opportunities if the government makes it more of a priority and there is greater public awareness, according to an annual Islamic finance report issued by the Qatar Financial Centre (QFC) in association with Refinitiv, a global provider of financial markets data and infrastructure.
The takaful sector is yet to benefit from a more robust regulatory framework, particularly for family takaful given its low penetration, said the report, which makes several recommendations aimed at helping the sector to grow.
Family takaful
Takaful contributions in Qatar are currently mainly sourced from property and liability coverage for corporates. Substantial opportunities are available in personal lines (family takaful), particularly medical takaful.
The report suggests that like Malaysia and the UAE, Qatar could enforce the legal separation of general and family takaful businesses, allowing an appropriate grace period. Such a move would encourage local takaful firms to focus greater attention on family takaful lines, which would boost the segment’s long-term growth.
Retakaful
Retakaful business in Qatar is mainly carried out through foreign providers, which can potentially use QFC as a base for their Qatari business. Permissible by some shariah scholars, takaful operators may resort to conventional reinsurance if a shariah-compliant option is not available, resulting in some leakage of takaful contributions to the conventional sector. Introducing stricter retakaful rules, such as those enforced in Malaysia and the UAE, would ensure the full shariah compliance of takaful operators in Qatar as well as spur the establishment of domestic retakaful providers to accommodate their requirements. These regulations could either restrict ceding takaful contributions to shariah-compliant firms, or provide strict conditions for permitting conventional reinsurers to accept takaful business.
The report also suggests that Qatar has the necessary foundation to take its Islamic finance industry to the next level, while benefiting from the experience of other Islamic finance markets. For instance, Qatar could play a major role in the takaful industry by establishing a retakaful operator that caters to the reinsurance requirements of takaful providers, both domestically and regionally.
Performance
Qatari takaful assets were estimated at $1.09bn, or 7% of the overall insurance sector’s total assets as at 30 June 2019. Takaful assets saw a compounded annual growth rate of 5% since 2015 against total insurance asset CAGR of 11%.
Takaful has fared better in the Qatari market and outperformed conventional insurance asset growth over the past two years, growing 6% during 1H2019 compared to the conventional insurance sector’s 3%.
The largest drivers of takaful growth are the conventional insurance operators’ Islamic subsidiaries, which have a collective market share of 45%.
There were five takaful operators in the domestic market at the end of June 2019, compared to eight conventional insurers. Separately at the QFC, there were three takaful operators and 11 conventional insurers at end-June. M