Islamic reinsurance moves to displace use of conventional finance
Tuesday, 04 28 2015, Category: Insurance and Reinsurance, Country: World
Islamic reinsurance (retakaful) is getting a face-lift because of new entrants and a widening market for sharia-compliant insurance products, helping move the industry away from long-standing reliance on conventional reinsurance lines.
Takaful is a bellwether of consumer appetite for Islamic financial products; its largest markets include Saudi Arabia, the United Arab Emirates and Malaysia.
But since the launch of the first takaful firm in Sudan in 1979, the sector has struggled with a lack of sharia-compliant reinsurance capacity to help manage excess risk.
So takaful firms reinsure a considerable part of their risk through conventional lines, a practice allowed under the concept of darura, or necessity.
That approach, however, is gradually being challenged as the industry expands. Gross written contributions in takaful will reach $20 billion globally by 2017, the EY consultancy estimates.