JEDDAH — In the Gulf Corporation Council (GCC), net income of listed companies in the Islamic (takaful and Islamic cooperative tawuni) insurance sector nearly halved in 2017 to $375 million, from $674 million in 2016, S&P Global Ratings said in its report titled “Islamic Insurers' Net Income Continues To Fall But The Sector Will Stay Profitable In 2018” published on Sunday.

The decline in 2017 net income was mainly driven by weaker results in the Saudi Arabian insurance sector and follows an increase in earnings by about 151% in 2016, indicating some considerable earnings volatility in the sector.

“In our view, the Islamic insurance sector continues to face secular challenges around relatively concentrated and undifferentiated business models and high expense ratios that leave them susceptible to adverse event risk related to solvency, governance, and accountancy. That said, we believe that medium-term growth prospects in the sector remain satisfactory given relatively low penetration levels, and we expect Islamic insurance to remain profitable overall in 2018. We also observe strengthening capital levels,” S&P said.