Takaful market to hit US$7.4bn by 2015

Islamic insurance (Takaful) has shown impressive premium growth rates of around 20% since 2000, and is expected to reach US$7.4bn by 2015, according to Moody's Investor Services (MIS).

MIS attributes the rapid pace of growth of Takaful to the difficulties that traditional insurers are facing in complying with Sharia law as a result of their investment strategies.

A typical conventional insurer will commit a substantial portion of its investment portfolio, usually in excess of 80% to fixed-income securities that earn interest.

"Under Sharia, riba [interest] is forbidden. This disqualifies conventional bonds - which usually comprise a substantial portion of an insurer's investment portfolio - as an acceptable asset class," said Timour Boudkeev, vice-president of MIS.

MIS's analysis of a Takaful company is very similar to that for a conventional mutual insurance company, though takes into account some factors that do not typically apply to a Western mutual insurer.

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