New law to spur Indonesia’s Islamic insurance market

Indonesia’s Islamic insurance market will be reshaped over the next decade by a new law that requires conventional firms to spin off their sharia-compliant units, while encouraging more foreign investors to enter the market. The takaful market in Indonesia is dominated by so-called “windows”. The new law, which came in force last month, requires insurers to spin off their windows within 10 years. Most firms are likely to meet the spin-off requirement as late as possible and they will first expand their sharia units to ensure they are big enough to be spun off easily. The rules are expected to spur consolidation among conventional firms.