(Sukuk.net - The Peninsula) Takaful could well play a major role in increasing insurance awareness not only in Qatar, but the rest of the GCC.

Insurance awareness in the GCC is dismally low and perhaps this form of Islamic insurance could help revive the sector as a whole in the region.

According to Standard & Poor's (S&P) 'Islamic Finance Outlook 2008': "Takaful could be the key to increasing insurance awareness and delivering on customer expectations, capitalising on the positive economic dynamics of the region."

Takaful is an Islamic insurance concept grounded in Islamic banking transactions and observing the rules and regulations of Islamic law.

Should the world's average annual insurance premium come to $550 per capita and then be applied to this region, the GCC insurance market has a potential size of $20bn. The figure currently stands at a paltry $4.6bn.

S&P said: "Taking as an example Malaysia, where the Takaful market is expected to contribute 20 percent to the overall market in the medium term, the GCC Takaful market has the potential to reach $4bn at the current level of development." The market is currently at a mere $170m.

However, S&P noted how much actual premium Takaful generates and how quickly remains to be seen and will also depend on the industry's ability to deliver on policyholder expectations.

The GCC insurance market is widely recognised as being underdeveloped. But as S&P said: "The economic boom in the GCC, driven by high oil prices, has led to substantial infrastructure investments across the region, with the corresponding need to insure these risks. There are a number of established insurers in each of the GCC markets who are capable of participating on the new risks arising."

The real opportunities for Takaful lie with the market which traditional insurance firms have been unable to penetrate. The GCC Takaful market is growing at about 40 percent per year and growth has been high.

"It is, however, important to remember this is a new segment of the market and growth at this level is not unexpected. The main challenge for takaful remains to increase awareness - social as well as individual - of insurance among retail customers."

While many international insurance majors have come to Qatar, almost all based at the Qatar Financial Centre (QFC), the fact many have plans to enter the takaful segment, is seen as good news by S&P. they may do so by themselves or through joint ventures with Qatari insurance firms.