Changes ahead: It is expected that new regulations will push the takaful sector’s GDP contributions to 3 per cent by 2020 Image Credit: Gulf News Archives

Dubai: GCC’s gross takaful contribution is estimated to reach around $8.9 billion (Dh32.6 billion) in 2014 from an estimated $7.9 billion in 2013, according to EY’s [Ernst &Young] report, Global Takaful Insights 2014.

The report forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 per cent from 2013 to 2016 and expects the industry to reach $20 billion by 2017. This is against a backdrop of continued buoyancy in the estimated $2 trillion global Islamic finance markets.

The Gulf Co-operation Council (GCC) countries and Association of Southeast Asian Nations (Asean) markets are likely to maintain their current growth path in the next five years, subject to their economic growth.

Within the Gulf region, Saudi Arabia accounts for the majority of the total gross takaful contribution at 77 per cent, followed by UAE, which accounts for 15 per cent. The rest of the Gulf countries account for just 8 per cent of gross takaful contributions.

Strong growth

Saudi Arabia will likely remain the core market of Islamic insurance business, commanding approximately half (48 per cent) of the global contributions while UAE, Qatar and more recently, Oman, continue to set the pace for the development of takaful products in the Middle East and West Asian markets.

“The continued strong growth of the much larger Islamic banking sector will help sustain the progress of the takaful industry. The low insurance penetration rates, on average just 2 per cent , across key Muslim rapid-growth markets signify a huge opportunity and growth potential for takaful products, particularly in the areas of family takaful and medical insurance,” said Abid Shakeel, Senior Director of EY’s Global Islamic Banking Centre.

According to EY, among the GCC countries, competition, operational issues and the lack of qualified talent continue to be impediments. The industry needs to re-examine its strategies, operations and regulations in order to gear itself up for further growth and a sustainable ecosystem.