A concrete legal framework and global takaful reference body are needed to address some of the challenges facing the global takaful industry today, experts at the 11th annual World Takaful Conference (WTC) discussed on Monday.
Abdulla Mohammed Al Awar, chief executive officer of the Dubai Islamic Economy Development Centre (DIEDC) in his opening keynote, spoke on how there was a clear growth trajectory in the takaful sector over the years. The sector, however, remains underdeveloped compared to the thriving Islamic finance industry.
"Takaful is a key pillar within the Islamic ecosystem. Although a quantum leap cannot be expected in the takaful industry within a year, there have been a lot of strategic developments which will pave way for the growth of takaful within the Islamic finance landscape."
Al Awar offered various suggestions on how the global takaful industry could come forward to address the challenges facing the industry. "We need to harmonise standards in the takaful industry. In addition, we need to focus on showcasing a concrete legal framework, so that there is no ambiguity in terms of jurisdiction."
Another suggestion that he offered was clarification on the ethical nature of the takaful system, as Muslim consumers are still wary of takaful products.
Another suggestion was the establishment of a global takaful reference body that can organise the industry and deal with emerging disputes. This, he said, will provide a less costly and more effective solution for consumers. He also suggested creating an innovative platform for takaful products that will help with creating niche products. Other suggestions included filling the re-takaful gap and encouraging the presence of different players.
The event also saw the launch of Finance Forward's 2016 World Takaful Report, which offered various insights on the global and regional takaful sectors. Gross takaful contributions in the GCC were estimated at $8.9 billion, showing a year-on-year growth of 12 per cent. The report also revealed that the takaful market is highly concentrated in the GCC and Southeast Asia, with Saudi Arabia and Malaysia predominating these markets.
Finance Forward also pointed out in a previous report that the strong growth of the takaful industry in Saudi Arabia is primarily driven by strong regulatory support.
While many argue that the mandatory requirement by the Saudi Arabian monetary agency - that all insurance companies in the kingdom have to be established based on the cooperative business model - departs from the existing takaful model, it has been revealed that the model actually does more to support the introduction of a Shariah-compliant insurance model in the country.
Sahar Kazranian, acting CEO of Middle East Global Advisors, noted that the UAE is the second largest takaful market in the GCC region, whose gross takaful contribution weighs in at 15 per cent of the total takaful contribution in the region.
Ebrahim Obaid Al Zaabi, director-general of the UAE Insurance Authority, who spoke on the UAE regulatory space, said: "The Insurance Authority of UAE has played a pivotal role in setting out key rules to ensure stability of the insurance industry. Adhering to the regulatory requirements - ranging from adjusting the internal systems to appointing internal auditors and actuaries by 2018 - will be challenging for the insurance and takaful industry but will lead to its growth and stability."
Salmaan Jaffrey, chief business development officer at the Dubai International Financial Centre, spoke on the critical role of the DIFC as a global platform for the re-takaful industry to service the economies of the Middle East, Africa and South Asian regions. "Today, the Islamic insurance industry has gained wider acceptance and appreciation transcending the boundaries of Muslim-based economies. This growing momentum is expected to continue and expand its reach into emerging markets in the MEASA region. Our goal is to create a dynamic Islamic financial system that will support this growth and contribute to the overall development of our economy.