Malaysia's Takaful Sector Poised for Strong Growth

The Malaysian takaful sector is expected to grow by 20% annually until 2014 as consumer acceptance grow and regulatory changes provide infrastructure for syariah-compliant insurance.


Takaful is an Islamic insurance concept which is grounded in Islamic muamalat (Islamic banking), observing the rules and regulations of Islamic law.  It is is founded on the cooperative principle and on the principle of separation between the funds and operations of shareholders, thus passing the ownership of the Takaful (Insurance) fund and operations to the policyholders.


An industry report by OSK Investment Bhd reveals that more people and companies will buy into takaful products, providing liquidity in sukuk and syariah-compliant instruments even as the industry is able to increase capacity to cater to the demand.


This increased capacity is in part due to the expected finalisation of the government framework for risk-based capital for Islamic banking and takaful. The industry expects the syariah-compliant framework to be essentially similar to the framework that is currently applied to conventional insurance but will add to the valuation of the takaful sector.


OSK says the new framework for Islamic banking and takaful, coupled with the requirements of the Malaysian Competition Act may trigger mergers and acquisitions among takaful players as they attempt to pool capital and size in order to compete in the market.


With just 13% penetration rate for family takaful, there is a healthy latent growth potential for the syariah-compliant product, says OSK. In comparison, the penetration rate for conventional life insurance is 55% as measured by the number of life policies over population.


Currently, there are 12 takaful operators licensed under the Takaful Act 1984 to conduct family and/or general takaful business in Malaysia. 


The companies are AIA AFG Takaful Bhd, AmFamily Takaful Bhd, CIMB Aviva Takaful Bhd, Etiqa Takaful Bhd, Great Eastern Takaful Sdn Bhd, Hong Leong MSIG Takaful Bhd, HSBC Amanah Takaful (M) Sdn Bhd, ING PUBLIC Takaful Ehsan Bhd, MAA Takaful Bhd, Prudential BSN Takaful Bhd, Syarikat Takaful Malaysia Bhd and Takaful Ikhlas Sdn Bhd.

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