Dubai: The Takaful industry, which is also known as Islamic insurance, is poised to increase to $20 billion (Dh73.4 billion) by 2017 and $25.5 billion by 2020 from the current $12 billion, even though there are critical gaps that needs to be addressed, a study has revealed.
The report reveals that the GCC region currently dominates the Takaful business, with Southeast Asia and Africa as the next biggest markets.
There were a total of 224 global Takaful operators as of 2012, with 101 new companies formed between 2006 and 2012 alone. The total manpower supporting the Primary Takaful sector stood at 70,010 as of 2013.
“The Takaful sector is an important component of global Islamic finance that requires more attention and research in order to address major issues and achieve long-term growth,” said Eisa Kazim, Governor of the Dubai International Financial Centre (DIFC) and Secretary General of the Dubai Islamic Economy Development Centre .
Growth in Takaful, which is a mutual risk sharing under the principle of indemnification, has been eclipsed by the capitalist system drive for profit maximisation from the business, said Omar Fisher, managing director of Khidr Solutions Consultancy.
Over the last 10 years the number of Takaful companies has climbed nearly four-fold, reflecting the growing global popularity of the sector and its increasing importance to the development of Islamic finance, industry participants said.
Takaful has been witnessing a rapid growth in Africa. Between 2006-2012, 101 new Takaful companies were formed in that part of the world.
The global insurance premiums are more than $4 trillion and most of them is done by mutual companies, who dominate in the European and the US markets. In olden days, Takaful was the second important social institution after Zakat (charity) for the poor.
“We believe the potential of the Takfaful sector to drive growth is not limited to Islamic finance alone, but impacts the wider Islamic ecosystem as well,” said Abdulla Mohammad Al Awar, CEO of Dubai Islamic Economy Development Centre (DIEDC).
Less than 239 active Takaful companies are less than 15 years old, and 47 per cent are less than 5 years old, so it’s an emerging segment, triggering a need to experiment with conventional insurance.
There is also a scarcity of pool of talent in this emerging industry, Fisher said.
“Despite its gains, though, the industry is still undermanned and faces several issues in vital areas such as innovation, distribution, and legal structures, among others,” said Mansoor Al Awar, Chancellor, Hamdan Bin Mohammed Smart University.
Meanwhile, the Dubai Centre for Islamic Banking and Finance (DCIBF), a joint initiative of Hamdan Bin Mohammad Smart University (HBMSU) and ‘Dubai the Capital of Islamic Economy’, and Aafaq Centre for Research in Islamic Economy (ACRIE), a subsidiary company of Aafaq Islamic Finance, released their extensive report entitled ‘Takaful: Global Challenges to Growth Performance and Governance’ during the 2015 Global Islamic Economic Summit in Dubai.