Global takaful contributions to reach US$8.8b

www.theedgemalaysia.com    Written by Loong Tse Min Tuesday, 13 April 2010 22:45

KUALA LUMPUR: The global takaful industry is on track to surpass US$8.8 billion (RM28.42 billion) in contributions this year, said Ernst & Young (EY).

Saudi Arabia and Malaysia were the world's biggest takaful markets, it said in its World Takaful Report 2010 released at Fifth Annual World Takaful Conference in Dubai on Monday, April 12.

In a statement on Monday, EY said Saudi Arabia had contributions totalling US$2.9 billion in 2008 and Malaysia had US$900 million. Outside the Gulf Cooperation Council (GCC) and Southeast Asia, Sudan had the most significant market with contributions totalling US$280 million in 2008.

The fastest-growing takaful markets were the United Arab Emirates with a compounded annual growth rate (CAGR) of 135% from year 2005 to 2008 and Indonesia at 35%, it said. The global CAGR from 2005 to 2008 was 39%.

However, generating profitability may remain a challenge. Sameer Abdi, EY's head of Middle East Islamic Financial Services Group, said: "Globally, performance has been mixed. Yields realised by GCC operators have been comparably high but volatile, while Malaysian operators have posted stable returns driven by better underwriting results."

In terms of operating efficiency, average combined ratios of GCC firms had continued to improve and reached 72% in 2009 (latest year for which data is available), indicating improving operational efficiency, he added.

"The figures seem to indicate that while the industry may seem to be temporarily bogged down by market troughs, the long-term outlook seems very positive," he said.

EY said family and medical takaful continued to grow, with compulsory medical insurance requirements in Saudi Arabia contributing to such growth.

Southeast Asia is the most highly penetrated family and medical takaful market, accounting for 73% of net contributions in 2008, compared with 49% of gross contributions in the Middle East and North Africa (Mena) region.

The primary challenge for the industry remained the shortage of skilled professionals across all key areas such as underwriting, risk management, claims management and TECHNOLOGY [] deployment, said EY, adding that underwriting losses remained a concern for most operators.