A slowdown in growth is expected in the global takaful industry in the short term due to the tightening of regulations across all jurisdictions, particularly in the GCC, as regulators increase their focus on consumer protection and the implementation of risk-based capital (RBC), according to the Global Takaful Report 2017 released by actuarial and consulting firm Milliman at the 12th World Takaful Conference.
Releasing the report entitled “Market Trends in Family and General Takaful”, Mr Safder Jaffer, Managing Director & Consulting Actuary - Middle East & Africa, Milliman, said the report will serve as a barometer to gauge and shape the performance of the global takaful industry.
In the GCC, despite impressive topline growth for general takaful operators, there is significant pressure on the overall profitability of the companies.
A number of the takaful operators are facing the issue of perpetual qard (interest-free loan), given the poor quality of business written, with the key driver being the intense competition witnessed in the market where takaful operators compete against established conventional players, particularly on compulsory lines such as motor and medical. As a consequence, many takaful operators are burning up capital and the worsening results provide little hope for imminent recovery, the report said.
The total takaful industry in the GCC grew by a CAGR of 18% in the 2012-2015 period, while that of Southeast Asia decreased by 4% in the same period due to the depreciation of local currencies relative to the US dollar, the report said.
Nevertheless, there continues to be a positive growth in Southeast Asia in local currencies terms.
The largest market is Saudi Arabia as the entire market is defined as Shariah-compliant, with GWP of US$9.7 billion in 2015. The market is predominantly general insurance, with limited life insurance business.
The GCC continues to dominate the general takaful industry, whereas Southeast Asia continues to dominate the family takaful industry, the report said.
The GCC has an 88% overall market share of global general takaful market in 2015 in terms of total contributions. General takaful in the GCC exhibited the highest growth globally with a CAGR of 19%.
In the GCC, family takaful contributions achieved a record growth of 34% in 2015, driven mainly by the introduction of compulsory health insurance in Dubai.
Malaysia continues to lead the takaful industry in terms of takaful regulations, with the country being the first market in the world to implement a RBC framework for takaful.
There are significant growth opportunities for family takaful in the GCC region given the current low penetration rates, particularly those witnessed for family takaful.
Given the lack of market penetration in most countries for family takaful, the need for retirement planning – combined with an ageing society – would create an opportunity to grow the family takaful market in most jurisdictions, the report said. M