Takaful industry faces slower growth, unstable returns -study

Expansion of the takaful industry is slowing as firms struggle for scale and face growing competition, according to a report by Ernst & Young. Driven largely by Saudi Arabia and Malaysia, takaful globally is expected to grow by 16 percent annually in coming years compared to an average 22 percent rate between 2007 and 2011. But firms have expanded in narrow product segments such as auto insurance which are saturated by competitors, sparking price competition to gain market share. A shift from general insurance to more profitable life business remains unlikely in the Gulf because of comfortable government-funded safety nets. Geographical expansion is one way out, but this is difficult because of expensive regulatory requirements and the lack of a standard approach to sharia-compliance across the world.