The ratio of insurance premiums in the Muslim world is around one per cent of the gross domestic product (GDP) compared to the international ratio of around 7.5 per cent, industry experts have revealed.
George Oommen, Executive Director of Insurance at the Dubai International Financial Centre (DIFC), said the per capita expenditure on insurance in the Muslim world is around $40 (Dh146.8) annually compared to the international rate of $550 per year.
Oommen said this low penetration of insurance in the Muslim world – particularly in the Middle East – creates big opportunities for insurance and reinsurance companies to offer new and varied products, especially takaful and Shariah-compliant products.
“Due to the ongoing economic turbulence and volatility in Western Europe and North America, the global insurance and reinsurance companies are looking beyond their traditional markets,” said Oommen, an insurance industry veteran with 28 years of experience.
Commenting on the listing of insurance firms at the bourse, he said there are currently 22 companies operating from DIFC, including five captives that get category one licence, which allows them to carry out all activities of reinsurance.
Oommen said: “We aim to increase this number to 40 companies. We are expecting 10 more companies this year and negotiations are already going on with some of them. The World Insurance Forum (WIF) at DIFC will be a great chance for insurance firms to come and see a world-class financial centre.
“We offer regulations and laws based on British Common Law, a world-recognised set of financial regulations, through the Dubai Financial Services Authority (DFSA). One of the key factors that has attracted captives is the fact that DFSA has introduced legislation relating to captives. The laws and regulations have been adopted and blended to produce a clear, flexible and practical legislative framework.
“This legislation has created a solid base for the industry and has attracted a lot of businesses to the region. We offer companies a unique gateway to regional market opportunities. We also support the development of the regional insurance market by attracting global insurance and reinsurance companies, brokers, captives and other service providers, enabling them to establish their regional operations here.”
Oommen said the takaful industry is growing by 20 per cent annually and has touched the $2.5 billion mark.
“I predict the takaful market will surge to $7.5bn by 2015. The Islamic insurance and re-insurance sector has started gathering momentum. As an alternative to conventional insurance, takaful is making progress and looks set to continue this growth with the launch of more and more Islamic finance instruments.
“It may take time to convince people about the difference between conventional insurance and takaful because takaful entails savings for the future and not hedging against death. In Malaysia, the majority of people interested in insurance products were the Chinese population but when we introduced takaful, the response was very high because takaful suits both Muslims and non-Muslims.
“It was the same case in Egypt. It was difficult to get people buy insurance policies. It takes time to create awareness among people about takaful products and there are more than one billion Muslims in the world. It is a huge market and insurance and reinsurance companies have high potential in the region. In GCC, there are around 23 takaful companies compared to 278 conventional insurance firms.”
Oommen pointed out that most of the insurance companies in the region are small and need to consolidate through mergers or acquisitions to increase their capital and introduce new products.
The insurance and reinsurance industry in the region needs foreign expertise and a strong capital base to survive as international companies with long experience flock to the region, he said.
Oommen will deliver a keynote speech at WIF in Dubai today. The forum, hosted by the DIFC, is being held outside Bermuda for the first time and brings top industry executives from around the world.
It will address key issues in regional and international insurance arenas and discuss the latest trends and developments affecting the insurance industry.
Huge opportunities for takaful products