Indonesia’s takaful carries positive outlook: Fitch

Fitch Ratings, MANAMA: Expansion of Indonesia’s takaful insurance sector has eased to be more in line with the overall industry, however, favourable structural demand factors should help the sector continue building market share within the country’s insurance industry, says Fitch Ratings.

The five-year compound annual growth rate for general takaful contributions stood at 24% in 2015, while life takaful contributions stood at 31%, outpacing conventional counterparts. General and life sharia stood at IDR2.2trn and IDR7.7trn at 10M16, respectively, against IDR50.4trn and IDR109.1trn for its conventional counterparts. Life takaful remained the largest contributor to the takaful insurance market, accounting for 78% of the total.

Demand for takaful products remains low, despite Indonesia having the world’s largest Muslim population. A lack of awareness, which the government aims to address through educational programmes, and an absence of a robust Islamic finance system to support long-term growth restrain the sector’s expansion. Fitch expects guidelines stemming from Indonesia’s Financial Services Master Plan to be positive for the industry from a supervision perspective, helping align it more closely with the policies of conventional peers.

Any consolidation among takaful insurers is likely to be long-tailed, as the “window” operations of existing insurers remain relatively small.

Zain ad

About The Author

Related posts