Takaful insurance, a favorable dynamic

The rise of takaful insurance

The development of takaful insurance depends on the strategies of those countries that have passed legislation in this area and created favorable environments for Islamic finance. Technological advances and economic recovery should also stimulate growth in sales.

The development of takaful relies on:

• rising oil prices and the diversification of public investment in the GCC countries, particularly Saudi Arabia, a 100% takaful market,
• the rise in demand for coverage, particularly in the health sector, following the introduction of new compulsory health plans, particularly in the Gulf countries,
• rising motor insurance rates. In some markets, this class of business accounts for almost 50% of takaful premium income,
• the appeal of takaful family (life) products, a line of business being supported by demographic growth and awareness of death and disability risks,
• the introduction of innovative products and digital technologies into the value chain, a strategy aimed at reaching a wider audience and meeting the emerging needs of young consumers,
• Saudi Arabia, which plays the role of global takaful insurance locomotive. This country alone will generate nearly 52% of premiums in this segment by 2023,
• the sector's strong long-term growth potential in all countries, thanks to the support of regulatory authorities,
• the improved penetration rate of Islamic insurance products. For the Gulf countries as a whole, the low ratio of the Takaful family line (1.5%) suggests significant room for improvement.
  In Asia, the penetration rate of takaful insurance, across all classes of business, is steadily improving. In Indonesia, this ratio reached around 9% in 2022, compared with 5% in 2020.

Takaful insurance: region-based development outlook

In Asia: takaful insurance is expanding rapidly, driven by growing demand fueled by several key factors including:

• growing Muslim population in the region,
• growing awareness of the benefits of Takaful products,
• the expansion of Islamic banks and financial institutions,
• the introduction of regulations favorable to the sector,
• the multiplication of companies offering Takaful products.

To stimulate growth and facilitate accessibility to Islamic insurance products, initiatives have recently been undertaken, including:

• In Malaysia, introduction in 2023 of a takaful insurance best practice guide (Value-Based Intermediation for Takaful) by the Malaysian takaful insurance association.
• In Indonesia, introduction in early 2023 of a Sharia life insurance plan, set up by the local Sharia insurance association.
• In the Philippines, publication in 2024 of a regulatory framework for Islamic insurance.

In the Middle East : The Takaful market is growing rapidly, underpinned by:

• strong religious and cultural values favoring mutual aid,
• the presence of a significant number of takaful companies,
• the presence of Muslim expatriates requiring adapted coverage,
• dynamic economic growth stimulating demand for coverage,
• a robust regulatory environment ensuring market security,
• growing adoption of new technologies,
• continued consolidation operations,
• the adoption of IFRS 17, which should make it easier to assess and compare results.

In Africa : The African Takaful insurance market is lagging behind. With the exception of Sudan, where takaful has been operational for over four decades, the other predominantly Islamic countries are developing a niche business, complementary to conventional insurance.

In recent years, however, there has been renewed interest, particularly in North African countries, Kenya, Nigeria, Senegal, South Africa, Gambia, Mauritania, Ethiopia and Zambia.

In short, takaful insurance is up against a number of obstacles in all regions:

• legal: lack of specific regulations in some countries, inadequate framework in others,
• economic: market uncertainty, slowing global growth, fluctuating economic indicators,
• commercial: lack of consumer awareness and delays in upgrading of distribution channels,
• geopolitical: conflicts, wars and political instability in predominantly takaful countries,
• financial: difficulty of integration into global finance and investment restrictions.

Innovations of Takaful insurers

The modernization of takaful insurers' operating methods is another major undertaking, prompting them to bring to market products and services that are not only new, but above all innovative.

• July 2020: Qatar Islamic Insurance Company (QIIC) implements a new digital platform for its Takaful products.
• August 2020: Salama Islamic Arab Insurance Company (SALAMA) introduces a mobile app for its products.
• September 2020: Abu Dhabi National Takaful Company (ADNTC) sets up an online portal for its products.
• December 2023, Tunisia: Assurances Zitouna Takaful develops a new online personal space called "TAAMINET".
• May 2024, Pakistan Salaam Takaful Limited creates the first exclusively digital Islamic life insurance company, Salaam Family Takaful Limited.