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Moody's Investors Service expects takaful, or Islamic insurance, premiums to grow moderately in the next two to three years, as more GCC, southeast Asian and African countries introduce compulsory health cover.
In a report issued on Wednesday, the ratings agency said growth prospects for takaful remain healthy in the Gulf Cooperation Council (GCC) countries, Africa and southeast Asia, helped by their large Muslim populations, relatively low insurance penetration and rising demand for medical cover.
"We expect takaful premiums to keep growing moderately in the next two to three years, helped by rising demand for medical insurance as more GCC, African and southeast Asian countries introduce compulsory health cover," said Mohammed Ali Londe, Vice President-Senior Analyst at Moody's.
"The recent adoption of risk-based capital regulation in key takaful markets, and takaful insurers' continued embrace of digitalization, are further positive factors."
Takaful premiums/contributions grew at a compound annual rate of 6.8 percent between 2017 and 2020. Insurance penetration (gross written premiums as a percentage of GDP) in the takaful markets remains low, indicating good growth potential, the report said.
Meanwhile, the introduction of compulsory medical insurance within the past four years in Oman, Qatar, Saudi Arabia and Kuwait, and the implementation of mandatory motor insurance in Saudi Arabia, will help sustain takaful premium growth at or close to current levels, Moody’s said.
Moody's expects takaful industry' capitalisation to strengthen as more governments introduce risk-based capital regulation. Albeit in the short term this poses some implementation and operational hurdles, including added costs, which will drive the need for takaful operators to achieve the scale required to absorb these costs or grow through mergers and acquisitions.
(Writing by Brinda Darasha; editing by Seban Scaria)
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