Islamic insurance remained broadly stable in 2025, with solvency ratios generally within regulatory requirements across jurisdictions, according to the "Islamic Financial Stability Report 2026" released by the Islamic Financial Services Board (IFSB).
However, pressures are emerging in some Islamic insurance markets. Rising claims, particularly in motor and medical lines, have weakened underwriting performance in several jurisdictions, increasing reliance on investment income. In a number of cases, persistent policyholder fund deficits continue to require qar? support, which may weigh on capital over time. These pressures are further compounded, in some markets, by challenges in wakalah fee calibration and limited availability of Islamic reinsurance, keeping risk retention elevated.
Strengthening the resilience of the Islamic insurance sector will require improvements in business models, pricing discipline, and capital frameworks, alongside enhanced risk-based supervision. This includes incorporating fund-level indicators and continued efforts to develop Islamic reinsurance capacity.
Overall, the Islamic financial services industry (IFSI) continued to expand in 2025, reaching approximately $4.4tn in total assets, supported by favourable financing conditions and ongoing market development across all three sectors, which are the banking, insurance and capital markets.
The non-bank segments included the Islamic insurance, sukuk and Islamic funds. Islamic banking remains the dominant sector, accounting for nearly 70% of total IFSI assets.