Profitability in the Islamic general insurance branch varied across regions, with some markets facing rising claims pressures in 2024, the Islamic Financial Services Board (IFSB) said.
In its report, titled “Islamic Financial Services Industry Stability Report 2025”, the IFSB stated that in the GCC, underwriting results weakened due to rising motor and liability claims. These pressures were further compounded by intense market competition that limited the ability of operators to adjust pricing adequately as many prioritised retaining or expanding market share. Regulatory requirements for enhanced service quality further increased operational costs, placing additional strain on profitability.
In the MENA region (excluding the GCC), technical performance deteriorated due to rising claims and regulatory limits on pricing adjustments, which restricted operators’ ability to increase contributions in line with inflation; efforts to improve expense ratios were insufficient to restore underwriting profitability.
In the East Asia and Pacific (EAP) region, underwriting performance improved markedly, supported by increased vehicle sales, growing demand for natural catastrophe coverage, and prudent pricing strategies. Europe and Central Asia (ECA) markets similarly preserved profitability despite pressures from declining vehicle financing and rising credit costs, reflecting effective underwriting discipline and claims management.
Family branch
Family business lines experienced declining underwriting performance across regions with some exceptions, as increasing policy surrenders and medical claims pressured margins. Benefit payout ratios increased across several markets in 2024, reflecting escalating health-related claims and elevated policy lapses amid inflationary pressures.
In the GCC, profitability remained relatively stable through effective risk selection strategies. In MENA (excluding GCC) payout ratios rose, with higher claims and policy surrenders outweighing operational efficiency improvements.
South Asia (SA) markets recorded an overall decline in payout ratios; however, performance varied across jurisdictions, with some facing strain from higher risk retention due to limited access to Islamic reinsurance.
ECA experienced a notable increase in payout ratios, driven by rising claims costs and market expansion.
Sub-Saharan Africa (SSA) markets recorded the sharpest deterioration, with a substantial increase in payout ratios reflecting structural weaknesses and higher claims.
In contrast, EAP markets improved performance, supported by contribution rate adjustments and effective claims management.
Investment returns
Investment returns played a key role in supporting profitability, partially offsetting underwriting losses in several regions, although performance varied. ECA recorded strong investment returns, supported by market expansion and portfolio diversification.
GCC operators reported improved returns, underpinned by diversified fixed-income portfolios, particularly sukuk investments. EAP and SSA markets posted moderate gains. In MENA (excluding GCC), operators engaged in portfolio restructuring strategies to partially offset declining RoA. SA presented mixed outcomes: jurisdictions with developed Islamic financial sectors maintained moderate yields, while others remained constrained by limited investment avenues due to shallow Islamic capital markets and heavy reliance on cash holdings.
While investment dynamics mirrored broader insurance industry trends, the extent to which Islamic insurers benefited from rising yields remained uneven across markets. This reflected deeper structural limitations—such as shallow Islamic capital markets and a narrow range of Islamic financial instruments—that continued to constrain operators’ ability to enhance returns and diversify investment risk.