DUBAI (Reuters) - The emerging Islamic insurance or takaful industry could grow at 30-40 percent annually in the next three to five years as more people switch from conventional to Islamic insurance, a senior executive said.
“I think the takaful industry is in a growth mood for two reasons,” Noor Takaful’s managing director Ahmed al-Janahi told the Reuters Islamic Banking and Finance Summit in Dubai on Tuesday.
“Every day, people need to insure and there is a departure from conventional insurance. A lot of people are switching,” he said. “Growth is expected at 30-40 percent going forward as people in Muslim countries are switching from conventional to takaful.”
Janahi said more people were switching to takaful as insurance product ranges were becoming more competitive.
“Until now it was understandable, even the Muslim community, why they were dealing with conventional banks and conventional insurance,” he said. “They were saying basically we don’t get the right services that we expect and there weren’t enough product ranges. But that is quickly changing.”
Takaful firms are considered to be better placed to weather the global economic downturn than conventional counterparts because Islamic law requires conservative investments, hence avoiding riskier products.
Under takaful, the risk and reward are shared between the customer and insurer, while in conventional insurance the insurer takes on all the risk for a premium.
Noor Takaful, a unit of Dubai’s Noor Islamic Bank, launched two businesses concentrating on family and general insurance in January to help diversify its revenues. It aims to focus on its home market in the United Arab Emirates before considering possible expansion into other Arab markets, Janahi said.
Longer-term growth would be in family insurance because it is the least-serviced and covered in the Gulf region, he said.
Janahi said the current global market for takaful was estimated at around $2.5 billion (1.7 billion pounds) and would likely exceed $11 billion by 2015.
“It’s possible considering the fact that a lot of government assets (in the Middle East) are covered by conventional insurance, and if part of that goes to takaful.”
A recent report by HSBC, which set up a global Islamic financial services division in 1998, estimated the size of the global Islamic banking market at $650-$750 billion a year, and said it was rising at more than 15 percent a year.
HSBC estimated the global takaful market at $14.4 billion by 2010.
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Editing by Sam Cage and David Cowell