Dubai: Acceptance of the use of insurance serves as a key to the stability of Malaysia’s insurance industry, particularly its Sharia-compliant insurance or takaful sector, according to Standard & Poor’s Ratings Services report.
“In Malaysia takaful has become increasingly popular with investors, the policy holder community (takaful fund members) and the government. Malaysian takaful companies have developed a track record of generating profits in the form of fund surpluses, and of making distribution payments to members (also known as hibah),” the report says.
“This stands in marked contrast with the performance and status of the takaful sector in the Gulf Cooperation Council (GCC) states, even though the Gulf is the largest takaful market. Takaful has not truly flourished in any of the six GCC states, even if we treat the Saudi market as wholly takaful. In the GCC, only five takaful companies in our portfolio of 16 generated fund surpluses in 2013, and none of the five were based in the largest GCC insurance market, the United Arab Emirates (UAE). No GCC takaful company paid hibah to fund members and overall shareholder funds declined for the sector in 2013.”
“Although there are many structural differences between the two insurance markets, Standard & Poor’s considers insurance penetration (premiums/GDP) to be key to Malaysia’s success. In addition, the Malaysian insurance market is dominated by life savings, a line of business that has hardly started to develop in the GCC region. In Malaysia, insurance penetration is four times higher than the average level in the GCC. Even if we compare non-life insurance penetration in Malaysia to the whole GCC market, Malaysians spend twice as much per capita on non-life risk protection as their peers in the GCC region.”