The UAE takaful premiums are expected to represent at least 10 per cent of the total insurance premiums in the country within the next five years, according to estimates by Takaful Re.
The total insurance market in the UAE exceeded $3 billion (Dh11bn) in 2008 and it is expected to grow at around 10 per cent annually during the next few years, said Chakib Abouzaid, Chief Executive of Takaful Re.
"The takaful market in the UAE, and the whole GCC region, witnessed unprecedented growth rates of 20-22 per cent per annum during 2003-2008. However, this high growth rates will slowdown sharply to around 10 per cent during 2009-2010, but this rate is still far higher compared to the situation in the global insurance market."
He said that takaful contributions in the UAE would reach $300 million annually within five years. "The takaful industry in the UAE is still at its early stages as it represents around 1.3 per cent of the world takaful industry. There is still high potential growth in the local industry despite the slowdown."
He said that the takaful industry in the UAE was still new in the country as five new takaful companies started operating during the past 18 months.
"This is good for the industry as the new players will support the industry as a whole on the long term."
However, Abouzaid cited challenges facing takaful companies due to the financial crisis especially their investments and the downturn in economic activities.
"Takaful companies in the UAE have no direct losses due to the financial crisis. The major impact is the deterioration of global and local equity markets, which affected their investments in stock markets. Also, the decline in real estate markets affected their investments. However, the future challenge for takaful companies is the sharp decline in activities.
"For example, car sales in the country fell, leading to drop in their revenues from this segment. The drop in expat manpower will lead to drop in health and life insurance premiums."
He said the tightness in the market and the entry of new players would push takaful firms to be more dynamic and to introduce more aggressive strategies.
"The new players have a strong advantage as they are backed by Islamic banks and financial institutions. This will help them to navigate during the tight market conditions," he said.
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