(Sukuk.net Press) The global takaful sector is expected to continue its rapid growth and become a significant contributor to the global "risk transfer" market place, according to a report published by Standard & Poor's Ratings Services.

However, the competitive environment will remain challenging, because members of the traditional insurance market have the ability and tools to match the ambitions of the Islamic sector members, and Takaful companies must demonstrate a credible alternative to the traditional market over and above the initial religious affiliation.

Because Islamic scholars consider the classic risk transfer model through insurance to be unacceptable for use in Islamic communities, the Sharia-compliant "takaful" model has become increasingly popular in a region where insurance markets are otherwise very poorly developed, according to the report, titled "Takaful Spreads Its Wings As An Alternative Insurance Business Model."

The world's Islamic population is estimated to comprise some 25% of the global total: a meaningful "risk-transfer" market by any standard. In recent years, the Islamic, Sharia-compliant "takaful" model for insurance has come to be considered a key factor in increasing insurance awareness and delivering a successful, expanding business platform.

This can be seen most clearly in the Gulf Cooperation Council (GCC) region, which is also capitalizing on rapid positive economic development.

For example, in the United Arab Emirates (UAE), overall market gross premiums grew by over 30% in 2007. Contributions (premiums) within the takaful sector increased by roughly twice this rate, so these companies are growing very rapidly within a dramatically expanding economy.

Similar takaful contribution growth rates are evident in other regions. However, takaful activity is low in absolute terms, contributing less than 10% of the total regional market share.

"The opportunities for increased uptake of takaful insurance in the GCC should be positive," said Standard & Poor's credit analyst Kevin Willis.

"The considerable economic growth in the region, coupled with a sizable, underinsured population, means that there are substantial prospects for further development of personal lines cover.

The ability of the industry to persuade potential policyholders of the need for and benefits of insurance, as well as to successfully meet customer demands, remains unproven, however."

One of the problems facing takaful is the lack of awareness among retail customers of the social and individual benefits of insurance.

That said, the future success and sustainability of this pace of development will depend on a number of factors that, within personal lines, are just as relevant to the traditional as to the takaful regional markets.


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