Growth prospects for Islamic insurance, or takaful, remain healthy in the GCC countries helped by their large Muslim populations, relatively low insurance penetration and rising demand for medical cover, Moody’s Investors Service said in a report on Wednesday.
“We expect takaful premiums to keep growing moderately in the next two to three years, helped by rising demand for medical insurance as more GCC, African and southeast Asian countries introduce compulsory health cover,” said Mohammed Ali Londe, senior analyst at Moody’s.
“The recent adoption of risk-based capital regulation in key takaful markets, and takaful insurers’ continued embrace of digitalization, are further positive factors,” he said.
According to Moody’s, takaful premiums/contributions grew at a compound annual rate of 6.8 per cent between 2017 and 2020. Insurance penetration in the takaful markets remains low, indicating good growth potential.
The introduction of compulsory medical insurance within the past four years in Oman, Qatar, Saudi Arabia and Kuwait, and the implementation of mandatory motor insurance in Saudi Arabia, will help sustain takaful premium growth at or close to current levels, the ratings agency said.
Moody’s said takaful operators are well positioned to benefit from compulsory medical and motor cover, as they focus mainly on retail lines. ‘Mandatory medical cover along with increased demand for healthcare induced by the coronavirus pandemic is also driving the growth.’
Moody’s expects takaful industry’ capitalisation to strengthen as more governments introduce risk-based capital regulation. Albeit in the short term this poses some implementation and operational hurdles, including added costs, which will drive the need for takaful operators to achieve the scale required to absorb these costs or grow through mergers and acquisitions.
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