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Family takaful to hit $5.6b by 2016
Issac John / 16 April 2013
The global family takaful industry is on track for a sharp growth with its gross contributions set to treble by 2016 to $5.6 billion, an industry study said.
The growth of family takaful has outperformed the growth in conventional life insurance, and over the past five years it has picked up pace at a compound annual growth rate, or CAGR, of 32 per cent, according to a report released at the opening of the 8th Annual World Takaful Conference, or WTC, in Dubai on Monday.
The global takaful industry has been experiencing double-digit growth rates with the GCC and Malaysia being the major contributors, said David McLean, executive of the WTC.
“However, the latest industry data reveals a slight deceleration in the growth rates. A critical factor that will determine the success in taking the industry to the next level of development is the existence of players with the right quality and calibre, as well their readiness in terms of capacity and capability to formulate and execute successful strategies in response to new market opportunities,” he said.
“To achieve this, it is essential that key players in the industry remain profitable in the long run and the current slowdown makes it even more challenging for takaful operators to maintain momentum while boosting profitability. This calls for taking proactive steps and rethinking strategies to overcome diverse challenges to sustain the forward growth momentum,” McLean told a gathering of more than 400 senior decision makers from over 150 organisations.
Jeff Singer, chief executive officer of the Dubai International Financial Centre Authority, inaugurated the two-day event.
Safder Jaffer, managing director of Milliman Middle East and Africa, said that over the past five years, growth in family takaful has increased at a CAGR of 32 per cent. “Growth of family Takaful in Asia and Indonesia in particular is increasing at far higher rates, and Malaysia continues to provide global family takaful leadership on all fronts. In the Middle East, family takaful penetration has not been as rapid, though the region has all the necessary ingredients to make family Takaful more viable and profitable than general takaful.”
The Global Family Takaful Report, developed by Milliman and released at the WTC, provided research insights into the performance of family takaful offerings, the future direction of the market and new opportunities for the growth of family Takaful across key international markets.
By 2016, family takaful contributions are poised to grow to $5.6 billion from $2.2 billion in 2011, the report said. The global takaful industry had been projected to record gross contributions of $17 billion by the end of 2012.
The report also noted that with bottom-line profitability on the general takaful front facing stiff competition from a relatively soft market, family takaful is seen as a long-term and sustainable proposition with strong bottom-line expectations.
Though the challenges of matching the long-term liability profile of family takaful with similar duration Shariah-compliant assets remain, higher profit margins and the potential for surplus sharing make family takaful a more viable long-term proposition and ideally placed to meet the “spiritual” dimensions of takaful, the report said.
“This report addresses the increased need for a pertinent reference source to help industry leaders navigate the evolving family takaful landscape.”
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