Takaful In Malaysia

The local takaful industry is expected to see some merger and acquisition (M&A) activities over the next few years due to the Islamic Financial Services Act 2013 (IFSA) which requires takaful companies holding composite licences to separate their businesses by mid-2018.

The challenge is going to come in a few years as the new IFSA now requires licences to be split for general takaful and family takaful while the minimum capital requirement is going to be RM100 million. Out of 11 takaful players in Malaysia, three are sole family takaful operators and the remaining eight need to split their businesses.

He added that with one of the entry point projects aimed at Malaysia being 75% insured by 2020, a key factor that will help spur growth of takaful players is the ability to provide products in micro insurance and micro takaful.

Looking at the broader market - takaful players and insurers can't just service the middle income to higher income group. You have to look at the lower income group and rural areas hence the ability to come up with those sort of products for the market place will be very important moving forward.

According to EY's report, Malaysia has emerged as the world's largest family takaful market, securing close to three quarters of its domestic market share. The maturity of established regulations across all areas of Islamic finance in Malaysia, including sukuk issuance, has made Malaysia one of the top destinations for global institutions seeking to tap into the strong demand for long-term investments.

The size of takaful assets as at end of March 2013 was RM22.85 billion while the net contribution was RM7.6 billion. Another measure of success is the penetration rate which has increased from 8% in 2008 to 13% in 2012.