Gulf takaful can achieve high growth rate

The Gulf takaful, or Islamic insurance, industry still holds promise and can achieve high growth rates in the long term due to strong regional catalysts, top industry executives said. This is despite the financial crisis and difficulties in the global insurance industry in general. Ahmed Al Janahi, Chief Executive of Noor Takaful, the Islamic insurance arm of Noor Islamic Bank, explained that the main catalyst in the region is the young population. "Almost 60 per cent of the GCC population is below 20 years of age. This important category will need takaful services in the long term and this creates high potential opportunities for the industry. "The industry is new in the region. In fact the insurance principles are new here and the penetration is very low. This is an advantage in light of the current crisis because there is increasing need for Islamic insurance in the GCC and the Islamic world in general," Al Janahi added. Abdulaziz bin Naif Al Orayer, Chairman of Bahrain-based T'azur Company, said penetration in the region is still below one per cent of the population. "The real issue is increasing awareness among the population about the importance of takaful services in the education, healthcare and pension segments. "The young generation should be aware of the importance of such services to improve their living through campaigns that encourage them to save for the future." Some studies have suggested that takaful services should be made obligatory in the GCC, not mandatory, to push forward the industry. Al Orayer believes that some governments have started to think about the need for strong takaful organisations and regulations. "Currently, only car insurance is obligatory in the region, mandatory in some countries. However, we expect the future will be very promising because governments are planning to hand over a lot of services to the private sector, which will be more involved in health and education services. This will support the industry in the future." Al Janahi sees the need for such regulations coming from the community. "When there is strong demand for such services, society will push regulators to set rules and regulations. As long as the community is not totally supporting such a move, governments will feel no need for such regulations." He stressed that the current woes of insurance companies around the world were due to their investment strategies, especially in derivative products. "Takaful companies are safe because Shariah principles prohibit such investments. However, takaful companies are not totally immune from some aspects of the financial crisis because they have relationships with global re-insurance companies." However, Al Orayer expects the takaful industry to grow in the long term regardless of the impact of the crisis. "Takaful is a long-term investment, not for a year or two. We cannot assess the industry according to the current situation." He also announced plans to expand T'azur's services in the UAE and other GCC countries. "Fortunately we entered the market late and our operations are still limited while we have strong capital. We are looking at expansion opportunities through establishing new subsidiaries in GCC countries or go for joint ventures with takaful companies in these countries. We also have options for acquisitions in the region. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .