Net contributions in the family takaful market in Pakistan increased by 8.09% to PKR28bn ($174m) in 2020 on the back of significant increases in the renewal contributions by window takaful operators (WTOs). This signifies the growing importance of the WTOs, says the central bank, the State Bank of Pakistan, in its 2020 financial stability review.
Family takaful business accounted for 13.31% of the total net premiums of the insurance market in the country last year.
Net claims in the family takaful segment increased by PKR2bn to PKR10bn in 2020 due to an increase in net claims for WTOs. The claims ratio for the takaful segment rose to 35.02% in 2020 from 29.98% in 2019.
For policyholders’ funds, the surplus reserve increased by 4.82% to PKR0.3bn in 2020 on the back of a significant increase in net realised gains on investments, which covered the increases in net takaful benefits and other expenses.
Profit before tax for shareholders’ funds increased by PKR0.2bn to PKR0.3bn in 2020, mainly due to increases of PKR0.1bn each in weakly fees and takaful operator fees.
Net contributions in the general takaful market decreased from PKR7.5bn in 2019 to PKR6.6bn in 2020.
Meanwhile, general takaful net claims increased from PKR4.8bn in 2019 to PKR5.2bn in 2020 on the back of increased health claims. As a result, the claims ratio for the general takaful segment has increased from 63.66% in 2019 to 78.65% in 2020, which is a significant increase.
The segment, which saw underwriting losses in 2019, posted an underwriting profit of PKR26m in 2020 in their participants’ takaful fund on the back of substantial gains in net contribution revenue. However, due to increases in management expenses and commissions, the shareholders’ fund registered lower profits of PKR35m in 2020 (2019: PKR44m).
The Pakistani takaful sector comprises two family takaful operators, two general takaful operators and over 20 takaful windows.