According to recent estimates the global Takaful business will reach USD 20 billion by 2017.
The GCC market contributes more than 62 percent of the world’s gross Takaful premiums.
Saudi Arabia maintained the largest share of contributions, growing 17 percent to USD 5.7 billion during 2010.
A recent Deloitte report aims to address Takaful industry trends.
The recently released report by Deloitte aims to address these very predicted trends in the Takaful industry. The report titled, ‘The global Takaful insurance market: charting the road to mass markets’ seeks to identify the vital challenges prevalent in the widespread knowledge and implementation of Takaful on a global scale while at the same time highlighting the scope of opportunities including market developments and growth trends.
These report identifies ten key challenges that are grouped into 5 industry disciplines:
- Governance and regulatory compliance: the report finds that more consistency of regulatory frameworks is needed, and optimizing capital adequacy through consolidation will achieve growth and sound corporate structures
- Risk management and internal controls: Making risk-based business a priority, unified with Takaful operators’ strategic planning, and improving risk and Sharia’ disclosures and governance
- Operational and Business Excellence: There is a need for new business models to accommodate wider niche markets and improved technology capabilities to achieve cost efficiency and productivity
- Product governance and strategy: Improving product governance and product development processes, and placing emphasis on target markets, sales and distribution
- Capacity building: talent and leadership development: Switching emphasis to internal development to build specialized knowledge and refocusing on competency-based training and leadership programs.
According to the report, the biggest challenge being faced by the industry in the Middle East region is the ‘Arab Spring syndrome’ which has resulted in the reluctance of corporates to invest for expansion and to hire. In addition, growth rates of Takaful penetration are slowing due to a lack of customer education and inadequate product awareness programs. This has been further hindered by a lack of clear strategies from Takaful providers, and lack of research and development (R&D) in product innovation and marketability.
In the attempts to address the aforementioned issues, the report suggests that practitioners as well as regulators need to work together to ensure that the industry specific standards ﬁnd their way in a real, practical sense. It presents a model for positioning of new Takaful solutions which is largely driven by core influences, which include governance competence, risk management function, Sharia compliance, product governance and process, strategic target market and sales and marketing capabilities. These influences can aid in the design of ‘generic’ Takaful solutions which can then be facilitated by enablers including regulators and operators.
Takaful – From Wikipedia, the free encyclopedia, for more information about Takaful insurance, click here:
Takaful (Arabic: التكافل) is a co-operative system of reimbursement in case of loss, paid to people and companies concerned about hazards, compensated out of a fund to which they agree to donate small regular contributions managed on behalf by a [Takaful Operator] It is defined as an Islamic insurance concept which is grounded in Islamic muamalat (Islamic banking), observing the rules and regulations of Islamic law. This concept has been practised in various forms since 622 CE. Muslim jurists acknowledge that the basis of shared responsibility (in the system of aquila as practised between Muslims of Mecca and Medina) laid the foundation of mutual insurance.