Islamic insurance sector urged to pursue innovation

Dubai: The worst for the global Islamic insurance sector appears to be over, a top official said, emphasising that the industry needs to seek innovation to grow further.

"We need to improve products and become more innovative to serve the needs of the industry by providing the right products at the right time," Shaikh Khalid Bin Zayed Al Nahyan, chairman of Salama, told Gulf News in an interview.

Salama, the world's largest Islamic insurer, celebrated 30 years on Friday.

With equity and asset prices down, options are limited for investment income. However, Shaikh Khalid says opportunities are there even in the downturn.

"There are opportunities even in an economic downturn — even in real estate and equities. It's just the options are limited," he said.

Salama, which has seven subsidiaries in the Middle East and Africa, earned Dh68.05 million net profit in the first nine months of the year — the toughest period in its history, down from Dh87.82 million in the corresponding period last year.

The company offers a bouquet of takaful services for the growing needs of Islamic insurance.

"The year 2009 has been an extremely challenging year for all of us as the insurance industry was hit along with other sectors. However, we see growth coming back and 2010 will be a year of growth," he said.

‘Focus on real estate'

"The industry as a whole was hit due to the global economic crisis. Most insurers have been focusing on real estate and equities — which are the worst hit."

Although investment income has nosedived due to market conditions, technical or fee-based income from underwriting has remained strong — despite the market situation.

"However, next year will be a year of recovery and growth. The government's initiatives will help the economies to grow," he said. Salama does not have much exposure to Dubai World, he added.

Gross premium from Islamic insurance (takaful) is expected to be somewhere between $6 billion (Dh22 billion) and $7 billion this year, which is about 5 per cent of the global insurance premium. More than 28 takaful operators are increasing the share of the Islamic insurance premium in the global insurance industry.

The industry, that has a market potential of nearly 1.5 billion — or nearly a fourth of mankind — is growing at an annual rate of about 25 per cent. Premium from Islamic insurance is expected to reach $8 billion in 2012 and $11 billion by 2015, despite the economic slump, according to a report by Ernst and Young.

During the downturn, the global insurance industry's losses reached $342.6 billion. However, Islamic insurance has remained on the growth path.

"Although I will be bias-ed to takaful, it is a better model than other conventional models of insurance and it has proven to be so," he said.

Subsidiaries of Salama