The Bahrain takaful industry, one of the fastest growing segments of overall insurance sector showed a seven per cent growth, with total premium reaching BD 57.2 million in 2013, compared to BD 53.7 million in 2012, said Abdul Rahman Al Baker, Executive Director of Financial Institutions Supervision, Central Bank of Bahrain.
Delivering the inaugural keynote address at the 3rd Annual Middle East Takaful Forum, he said takaful premiums contribute 22 per cent of overall gross premiums of insurance industry in Bahrain and the outlook for growth is very promising. The family takaful share increased to 20 percent of gross takaful contributions in 2013 compared to 15 per cent in 2010. He added the growth in family takaful is mainly due to increased awareness on the importance of long-term products and change in appetite of clients towards life products related to investment.
The GCC market contributed to around $8.9 billion, which accounts for 63 per cent of global contributions, while Malaysia and Indonesia contributed $4.2 billion of the total gross takaful global market.
Al Baker said that the global takaful industry recorded an average growth rate of around 20 per cent, indicating a high growth potential. The present low rate of penetration worldwide will pave the way for this growth, he added. The takaful industry is expected to flourish, the growing awareness and demands for insurance in accordance with Shariah principles being the drivers, he said.
The global takaful contribution is estimated to reach $14 billion by the year end, a significant growth of 14 per cent over 2013, said Al Baker.
Takaful has made significant improvements, in line with other forms of Islamic finance, he added. It is seen as a viable and efficient alternative model of insurance, the director added.
He factored the entry of international players into the local market to the existence of enabling legislation that promotes the growth of Takaful in Bahrain.
The Central Bank of Bahrain, as a regulator, believes in continual enhancement and improvement of its regulator infrastructure for the growth and betterment of the industry,he added. The launch of new solvency requirements for Takaful is a step in affirming Bahrain as the jurisdiction of choice for all Islamic insurance and Re-insurance companies globally, he added.
The primary objective of modifying the existing takaful rules is to facilitate a faster growth of the industry, while protecting the interest of all stakeholders, vis-a-vis participants, shareholders and operators.
There are also challenges on the road, he added. These include the corporate governance in relation to policyholders rights. A second challenge is the issue related to standardisation of accounting standards and disclosure, especially those related to capital adequacy and solvency, disclosure of Qard Hassan and regulatory framework. Among the most critical is the issue related to limited availability of Islamic instruments, including sukuks. Among the final challenges is the ability to find the appropriate distribution channels to offer takaful products and services, as well as the appropriate promotion mix for such products, he added.