Islamic insurance has been gaining ground in Egypt as customers seek out sharia-compliant products.
The takaful industry in Egypt is expected to growth around 20% in 2016 as more players enter the market to meet robust demand for Islamic insurance products and services, the chairman of the country's insurance watchdog said.
Abdel-Raouf Kotb, chairman of the Insurance Federation of Egypt (IFE), said that growth has also been fueled by the introduction of new products to meet customer needs, such as insurance against risks from political violence as well as credit insurance, which had proven popular especially after local banks expanded their lending policies.
"The micro insurance instrument is expected to be issued soon to insure the production tools of lower income segments against theft and fire. It also aims to bridge the micro enterprises funding gap in Egypt," Kotb told Zawya.
Takaful insurance companies accounted for 12% of Egypt's insurance market during the period from January to August 2015, compared with a share of 8.75% for the whole of 2014, according to a report issued by the Egyptian Financial Supervisory Authority ( EFSA ) last November.
EFSA said that premiums of new and existing life takaful insurance certificates rose 38.7% to USD 1 billion at the end of October 2015, compared with USD 900 million a year earlier. New and renewed issues of property insurance witnessed slight growth of 1.1% during the period to reach USD 639 million.
Kotb said the number of takaful companies in Egypt has risen to nine with the entry of Emirate Egyptian Takaful Life Insurance Co., a subsidiary of SALAMA (Islamic Arab Insurance Company), last year.
"Growth in the takaful insurance sector is due to the acceptance it enjoys from large segments of clients looking for products that comply with the rules of Shariah, as well as from the Islamic finance sector's expansion in Egypt."
"Premiums of takaful insurance on properties amounted to USD 62 million as of the end of June 2015, which represents about 15.4% of the total insurance premiums worth around USD 385 million during the same period," said Kotb, who is also managing director of Egyptian Saudi Insurance Home (ESIH).
Kotb said the ESIH has been strengthening its financial position in anticipation of the market's expansion by raising its capital to EGP 120 million (USD 15.3 million) after a recent injection of EGP 20 million.
"The premiums of ESIH stood at EGP 190 million in 2015, registering an increase of 4% compared with the year before, which was EGP 182 million. The company is targeting a growth of 13% in its direct premiums in 2016, which amounts to EGP 215 million," he said.
ESIH's total investment portfolio grew 11.6% to EGP 432 million in 2015, up from EGP 387 million by the end of June 2014.
Established in 2003, ESIH is the first takaful insurance company in Egypt and is backed by Gulf Arab investors, with contributions from Saudi and Emirati investors in the company estimated at 86.5%.
According to the Egyptian Financial Supervisory Authority , overall investments of insurance companies and cooperative insurance societies amounted to USD 7 billion in 2015 distributed across various investment channels, namely fixed bank deposits (26.1%), treasury bonds and government securities (23.8%), securities for sale (18.2%) and loans against insurance documents (1.3%).