Takaful insurance sector to grow in 2010: Report

The takaful insurance and reinsurance sector is likely to continue to grow in 2010, according to a report by Standard & Poor’s Corp.

S&P said the market for takaful insurance and reinsurance, which complies with Islamic Sharia law, is supported by high levels of growth and an increase in profitability.

In a report, “Takaful Insurance Has Long-Term Viability and Benefits from Expected Growth, but Stiff Competition Exists,” S&P said particularly strong growth is likely in Malaysia and the Gulf Cooperation Council states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

But the takaful market is becoming highly competitive and is suffering from the impact of global investment markets on returns, factors that “place an ongoing strain on sustainable development,” Neil Gosrani, a credit analyst at S&P in London and one of the report’s authors, said in the report.

One area of concern is the lack of risk-based regulatory supervision of the takaful sector, particularly in the GCC region. This means the sector lacks “the growing sophistication of risk management and capital demand increasingly found in Europe and North America,” according to the report.

source : business insurance