Takaful In Malaysia

The Malaysian Takaful Association forecast takaful contributions to increase to US$3.02 billion this year from US$2.44 billion last year, on the back of market penetration rate of 14 per cent, said chairman Zainudin Ishak.

He said to meet the target, industry players needed to come out with more regular premium products such as protection, child education, retirement and medical.

"With only 30-year experience, coupled with 10 per cent market share or maybe less than that, there is an upside for us to offer the regular premium products instead of single premium, which has 50 per cent market share for takaful sector.

"I think if we are able to fix this then there will be an increase in market penetration as well as meeting Bank Negara Malaysia's target of 75 per cent by 2020," he told media briefing at the Takaful Rendezvous 2014 here on Wednesday.

Single premium is a plan in which a lump sum of cash is paid up front to guarantee payment to beneficiaries while the regular premium requires the holder to pay on a monthly basis.

 Zainudin said he expected more mergers and acquisitions (M&As) due to the rapid growth in the sector domestically amid increasing global demand.  "I supposed the period of the M&As probably should be very fertile with the introduction of Islamic Finance Services Act 2013 (IFSA) by the central bank, whereby the current players need to split their licences," he said.

It was reported that over the last two years, M&As in the insurance sector have mainly involved conventional insurers and analysts foresee consolidation in the takaful sector in view of the Financial Services Act (FSA) and the IFSA.

Under the FSA and IFSA, which came into force on July 1 last year, composite insurers and takaful players will, among others, be required to split their life and general insurance businesses under separate licences.

Under these Acts, insurers and takaful players have been given until 2018 to comply with the requirement.