Takaful growth diverging

Islamic insurance option takaful, having developed predominantly in the Gulf Co-Operation Council (GCC) region and Southeast Asia, has begun to diverge significantly, as individual countries have taken different routes to develop it, according to ratings agency Standard & Poor’s (S&P). This has resulted in a number of distinct business lines operating within the two regions, along with varying sources of growth and investment models. Takaful is also becoming increasingly important as a globally recognised sector, as the need for Sharia-compatible insurance law increases, and S&P expects to see strong growth in contributions – which act as premium income – and a high take-upof insurance in Islamic states. “We remain concerned by widespread use of high-risk investment strategies by takaful providers,” said the ratings agency in a statement, “and by the sector’s lack of global standards in areas such as accounting standards and Sharia compliance.” It went on to say that it is not optimistic about the sustainability of relevant companies’ profits, particularly in the GCC region, although Malaysia – Southeast Asia’s largest market for takaful products – appears to be persistently healthy, with ‘more sophisticated regulatory oversight and the stronger investment profile of the industry’.