IslamicFinance.de

The overall profitability of Takaful industry is under strain largely because the industry has yet to break into some of the most profitable lines of business that are dominated by conventional payers, according to rating agency Standard & Poor’s.
“In our view, the takaful sector is underperforming, especially in the UAE, because it lacks the advantages of conventional insurers, which are often larger and benefit from better economies of scale. They have more-established distribution mechanisms and so their revenue generation is less dependent on intermediaries,” said Emir Mujkic, Associate Director, Finance Services of Standard & Poor’s.
The crowded UAE and other Gulf Cooperation Council insurance markets often suffer from overcapacity, which can often trigger aggressive price wars. “In our opinion, Islamic insurance companies require considerable capital investment to become established, yet relatively new companies often come under pressure to generate profits and deliver healthy returns to their investors,” said Mujkic.