Islamic insurance premiums are expected to keep rising moderately in the next two to three years.
Wednesday 03, April 2019
Moody’s said that global demand for Takaful is growing, helping premiums to rise and support profitability.
In the GCC region, Southeast Asia and Africa, demand expected to continue to be bolstered by the widening of compulsory cover in products such as motor, travel and health.
Additionally, the GCC area will also benefit from activity linked to events such as the 2020 Expo and 2022 FIFA World Cup.
Mohammed Ali Londe, AVP-Analyst at Moody’s, said, “Takaful insurers’ profitability should stabilise in 2018 and 2019 after falling in 2017 due to discounting in GCC countries and rising claims in Southeast Asia.”
The rating agency expects stronger regulations and increased compulsory cover will help drive the growth and profitability in Southeast Asia and GCC countries is likely to remain stable, helped by adequate pricing and improved operating efficiencies, with a return on capital of eight per cent to 10 per cent.
Moody’s expects that regulatory regimes to become sophisticated across all Takaful markets as demand keeps growing, which will lead to improvements in Takaful operators' risk management, underwriting and reserving. In Malaysia and Indonesia, more rigorous regulation is anticipated to support Takaful operators’ capitalisation.
Similarly, a widening of compulsory insurance such as Umrah and Hajj (pilgrimage) travel insurance is also a factor which is expected to spur profitability in Southeast Asia, complemented by the rise of digital distribution.
In Saudi Arabia, Moody’s expects proposed increased capital requirements to drive consolidation in the Takaful sector, while in Africa profitability is likely to be volatile as regulations evolve, creating short-term compliance and operational hurdles.