Takaful sector is expected to reach $20 billion in gross written contributions by 2017
Demand for Islamic insurance (takaful) products is strong yet accessibility and capacity are among the most pressing issues facing the sector, an industry-wide survey released on Thursday showed.
Takaful serves as a bellwether of consumer appetite for Islamic financial products, a sector which has its core markets in the Middle East and Southeast Asia and is expected to reach $20 billion in gross written contributions by 2017.
Takaful providers are scattered across young insurance markets, where low penetration rates are attracting foreign players such as Lloyd's of London [SOLYD.UL] and Zurich Insurance (ZURN.S).
While pricing has been a perennial concern for most Islamic financial products, the survey identified other factors affecting takaful demand.
The survey, conducted between September and October by the Islamic Insurance Association of London, drew input from 500 respondents mainly risk managers, brokers and insurers across the major markets for takaful.
Over a third of respondents said they have purchased some form of Islamic insurance, but accessibility is a key barrier: 48 percent of respondents said brokers are not offering the option of buying sharia-compliant covers.
This contrasts with the 70 percent of respondents that said they were willing to buy Islamic insurance if offered as an option alongside conventional covers.
Demand was strongest for commercial and healthcare covers, as well as for Islamic reinsurance, the survey found.
The lack of available capacity was another reason preventing 39 percent of respondents from purchasing takaful cover.
The survey covered some of the industry's major markets, with the bulk of responses from Malaysia, Pakistan, the United Arab Emirates and Indonesia.
Last month, Lloyd's of London gave in-principle approval for the specialist insurance market's first sharia-compliant syndicate.
In July, Zurich Insurance completed the acquisition of Malaysia's MAA Takaful, giving the European insurer a foothold in the world's second largest takaful market.
Allianz Malaysia Berhad is also in discussions to acquire HSBC Amanah Takaful (Malaysia) Berhad.
Takaful is based on the concept of mutuality and follows religious guidelines that can prove challenging in the financial sector because they ban the likes of interest and pure monetary speculation.