JEDDAH — Global demand for Islamic insurance, also know as takaful, is growing, helping premiums to rise and supporting profitability, Moody’s Investors Service says in a report published Monday.

“We expect premiums to keep growing moderately in the next 2-3 years, and the industry will benefit from improved regulation,” said Mohammed Ali Londe, AVP-Analyst at Moody’s. “Takaful insurers’ profitability should stabilize in 2018 and 2019 after falling in 2017 due to discounting in Gulf Cooperation Council countries and rising claims in Southeast Asia.”

Globally, gross takaful premiums, or contributions, increased at a compound annual rate of 9% between 2014 and 2017.

In the GCC region, Southeast Asia and Africa, demand will continue to be bolstered by the widening of compulsory cover in products such as motor, travel and health. The GCC area will also benefit from activity linked to events such as the 2020 Expo and 2022 FIFA World Cup.

Moody’s expects regulatory regimes to strengthen across all takaful markets, with improvements in risk management, underwriting and reserving.

Profitability in south east Asia and GCC countries is likely to remain stable, helped by adequate pricing and improved operating efficiencies, with a return on capital of 8%-10%.

In Saudi Arabia, Moody’s expects proposed increased capital requirements to drive consolidation in the takaful sector.

In Africa, profitability will probably be volatile as regulations evolve, creating short-term compliance and operational hurdles. — SG