Takaful Worldwide
There has been an explosion in the growth of Takaful operators worldwide, with a number of the major insurers entering the market, including Hannover Re, AIG, Munich Re and Allianz. Premium growth has been staggering, with some players reporting growth of fifty percent or more over the last few years.
There is no doubt of the potential for growth of the Takaful industry with roughly 1.5 billion Muslims around the world being underserved by the insurance sector coupled by the fact that many markets in which Takaful would be attractive to consumers in the Muslim world have traditionally low penetration rates for insurance, Takaful is rightly seen as an Islamic financial product with a bright future.
At the recent World Takafol Conference held in Dubai in April, Ernst & Young presented their report focused on the future of Takaful. It was reported that by 2012, total Takaful contributions could reach US $7.7 billion per year. Even higher projected growth had previously been reported. HSBC, for example, estimated that the global Takaful market to be worth US$14.4 billion by 2010. The growth is spectacular when one considers that Takaful contributions (premiums) were reported as being US $1.4 million per year in 2004 rising to an estimated US $ 3.4 billion in 2007, the majority of those contributions coming from within the Gulf with South East Asia following behind.
In a sea of statistics, many of which are often contradictory, it is helpful to remember simply that global Takaful contributions are less than 1% of the total insurance premium spend annually, despite the fact that Muslims are 24.79% of the total global population.
Takaful is still a “young” product
The world’s first Takaful company, the Sudanese Islamic Insurance Company was established in 1979. Since then, to date it is reported that there are around 124 Takaful companies as of January 2009 and 38 Takaful windows (i.e conventional insurers undertaking Takaful business through a “window” which allows for safeguards and separation of contributions and assets).
Takaful has broad appeal beyond the Muslim communities who are seeking a Shari’ah compliant alternative to conventional insurance and may help to unlock markets that have not historically been accessible to conventional insurers. It can be also attractive to those who are concerned with all forms of ethical finance and finding alternatives which suit this type of ethically conscious consumer. In addition, some non-Muslim customers may be attracted to Takaful by the possibility of a return of surplus generated on the contribution they provide in order to receive insurance protection.
Conclusion
Given that Takaful is, compared to other financial products, in its early stages of development, this means that there inevitably remain uncertainties and divergence of opinion regarding aspects of the Takaful models and the way in which business should be conducted.
Despite these uncertainties, there is certainly great cause to be optimistic regarding the future of Takaful and its huge potential for growth. There is no reason why it should not succeed to be the future means by which many more Muslims and non-Muslims around the world seek to protect their lives, health, possessions and businesses