Link to Fitch Ratings' Report: Indonesia Takaful Dashboard - Vast Potential for Takaful Products
Fitch Ratings - Dubai - Sharia insurance products have gained in prominence and are steadily securing a foothold in Indonesia, the world's largest Muslim country of more than 200 million. The large Muslim population offers vast, untapped potential for takaful products, which are based on Islamic principles. However, total takaful insurance and reinsurance gross premiums have stayed low, compared with the entire Indonesian insurance market.
Takaful has expanded to account for 6.2% of Indonesia's insurance market by gross written premiums (GWPs) as of end- 2015, from 2.6% as of end-2010. The sector's GWP expanded by around 4.1% to around IDR10.5trn in 2015, slower than the previous year amid a slowdown in the country's real GDP growth but outperforming the conventional insurance product segment that had more modest growth of 1.6%.
The insurance law introduced in 2014 stipulates that conventional insurance/reinsurance companies have to spin off their sharia divisions when the combined "tabarru" funds (the funds contributed by participants) and investment funds of the participants of the relevant sharia unit are at least equal to 50% of the total insurance or, in any event, within 10 years from the promulgation of the law.
Fitch expects the mandatory spin-off regulation to stimulate growth and competitiveness of the Indonesian sharia insurance industry in the longer term. Insurance companies are likely to focus on boosting their sharia businesses, and gradually enhancing their capacity and capitalisation to achieve the maturity needed to finally be independent of their conventional siblings. Nonetheless, Fitch believes any market consolidation is expected to happen gradually, given the conditions and ample timeframe set by the regulator for insurers to fully develop their sharia units.
The full report "Indonesia Takaful Dashboard" is available at www.fitchratings.com or by clicking the link above.
Contact:
Bashar Al Natoor
Global Head of Islamic Finance
+971 4 424 1242
Fitch Ratings Limited
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Office 1805
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Associate Director
+62 21 2988 6814
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.
Additional information is available on www.fitchratings.com
© Press Release 2016
