S&P: Malaysia leads in Islamic insurance

Standard & Poor's (S&P) said it considered acceptance of the use of insurance to be key to the stability of Malaysia's insurance industry, particularly its Shari’ah-compliant insurance, or Takaful, sector.

Malaysian Takaful companies have developed a track record of generating profits in the form of fund surpluses, and of making distribution payments to members (hibah). This stands in marked contrast with the performance and status of the Takaful sector in the GCC states, even though the Gulf is the largest Takaful market. In the GCC, only five Takaful companies in the S&P portfolio of 16 generated fund surpluses in 2013, and none of the five were based in the largest GCC insurance market, the UAE.

Although there are many structural differences between the two insurance markets, S&P 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.