Takaful Worldwide

The Takaful industry has experienced remarkable global growth, with numerous traditional insurers, including Hannover Re, AIG, Munich Re, and Allianz, entering the market. Premium growth has been extraordinary, with some operators reporting increases of 50% or more in recent years.

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The Takaful industry holds significant growth potential, given the approximately 1.5 billion Muslims worldwide who remain un insured by the sector. Furthermore, many markets where Takaful would appeal to Muslim consumers traditionally exhibit low insurance penetration rates. As a result, Takaful is widely regarded as an Islamic financial product with a promising 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 a wide-ranging appeal that extends beyond Muslim communities seeking a Shari’ah-compliant alternative to conventional insurance. It has the potential to open markets that have historically been out of reach for traditional insurers. Additionally, Takaful can attract ethically conscious consumers who prioritize ethical finance and are in search of alternatives aligned with their values. Furthermore, some non-Muslim customers may find Takaful appealing due to the prospect of receiving a surplus return on their contributions while benefiting from insurance protection

Conclusion

Takaful, being relatively early in its development compared to other financial products, naturally faces uncertainties and varying opinions regarding its models and operational practices.

Nevertheless, the future of Takaful holds immense promise, with significant potential for growth. There is every reason to believe that it can become the preferred method for a growing number of Muslims and non-Muslims worldwide to safeguard their lives, health, assets, and businesses.