The global Islamic insurance sector generally maintained solvency positions above regulatory thresholds in 2024, although resilience varied across regions, says the Islamic Financial Services Board (IFSB).
In its report, titled “Islamic Financial Services Industry Stability Report 2025”, the IFSB says that the trend was broadly aligned with the conventional insurance sector, with most Islamic insurers remaining adequately capitalised. However, capital positions differed considerably across jurisdictions, shaped by differences in regulatory frameworks and market development stages.
Some markets, such as East Asia and Pacific (EAP), recorded robust solvency levels, while others—particularly in parts of South Asia (SA) and Sub-Saharan Africa (SSA)—remained near minimum compliance thresholds.
Capital quality and operator size influenced solvency outcomes in key markets. In the MENA region (excluding GCC), capital strength was supported by an increasing proportion of shareholders’ equity and improved governance frameworks. In the GCC, market segmentation based on operator size became more pronounced. Larger insurers maintained strong capital buffers through prudent reserve management and underwriting discipline, while smaller entities struggled with compliance due to weaker technical performance. This performance gap has accelerated market consolidation, expected to result in stronger, better-capitalised entities.
Several regions recorded notable improvements in solvency positions. Europe and Central Asia (ECA) demonstrated substantial improvement evidenced by rating upgrades, while MENA (excluding GCC) maintained strength aided by conservative regulatory requirements despite emerging pressures on technical provisions. East Asia and Pacific’s (EAP) resilience stemmed from effective adaptation strategies and claims control measures that preserve public trust despite weakened consumer purchasing power. Conversely, in markets with delayed regulatory reforms (parts of SA and SSA) asset quality weaknesses contributed to downward pressure on solvency ratios.
Differences in business line composition further influenced capital adequacy patterns. The general business line maintained relative capital stability, due to short-tail insurance products that allow for quicker claims settlement and lower long-term risk exposure. However, increased weather-related claims during the year highlighted the need for stronger capital buffers. The family business line exhibited higher but more volatile ratios, particularly in growth markets where business expansion often outpaced internal capital generation, underscoring the need for more sophisticated capital planning and allocation frameworks.
Structural vulnerabilities continued to affect capital resilience in certain markets. Rising technical provisions and weakening underwriting results placed additional strain on internal capital generation, particularly in jurisdictions facing higher claims volatility or inflation-related cost pressures. The effectiveness of capital frameworks varied significantly, with heightened vulnerability in regions where regulatory and supervisory frameworks for Islamic insurance had not evolved in tandem with market developments.