Growth prospects for takaful remain healthy in the GCC, Africa and Southeast Asia, helped by large Muslim populations, relatively low insurance penetration and rising demand for medical cover, according to a report by Moody’s Investors Service.
“We expect takaful premiums to keep growing moderately over the next two to three years, helped by rising demand for medical insurance as more GCC, African and Southeast Asian countries introduce compulsory health cover,” said Moody’s vice president-senior analyst Mohammed Ali Londe.
He added, “The recent adoption of risk-based capital regulation in key takaful markets, and takaful insurers’ continued embrace of digitalisation, are further positive factors.”
Takaful premiums/contributions grew at a compound annual rate of 6.8% between 2017 and 2020. Insurance penetration in the takaful markets remains low, indicating good growth potential. The introduction of compulsory medical insurance over the past four years in Oman, Qatar, Saudi Arabia and Kuwait and the implementation of mandatory motor insurance in Saudi Arabia, will help sustain takaful premium growth.
Takaful operators are well positioned to benefit from compulsory medical and motor cover, as they focus mainly on retail lines. Mandatory medical cover along with increased demand for healthcare induced by the COVID-19 pandemic is also driving growth in Southeast Asia and in Africa. In Malaysia, health premiums already grew 25% in 2019 thanks to the country’s National Health Protection Scheme, while Egypt is phasing in compulsory health cover.
Moody’s expects takaful industry’s capitalisation to strengthen as more governments introduce risk-based capital regulation. In the short term though, there are implementation and operational hurdles, including added costs, which may need takaful operators to achieve the scale required to absorb these costs or grow through mergers and acquisitions. M