After another positive year in 2009, Standard & Poor's believes the takaful and retakaful (Islamic insurance and reinsurance) sector is likely to continue its grow in 2010.

In a report published on RatingsDirect titled “Takaful Insurance Has Long-Term Viability And Benefits From Expected Growth, But Stiff Competition Persists,” S&P notes that the long-term viability of these sectors remains supported by high expected levels of growth, broadly positive technical results and an increase in profitability, particularly in the GCC region and Malaysia.

Nevertheless, while these optimistic factors should support the growth of the sector,” says S&P credit analyst Neil Gosrani, “we believe that the highly competitive and, in some cases, developing, nature of the local marketplace, as well as the impact of global investment markets on returns, continue to place an ongoing strain on sustainable development.”

In its report, S&P states that due to competitive pressures from within the sector, and from conventional insurers, “success in this market requires careful navigation.”

Since S&P’s first takaful rating in 1997, it has monitored the rapid development of an industry that it says has benefited from the ongoing economic development in its core regions.

Growing from a niche product that serviced limited demand, S&P says, takaful has since reached a critical mass in the past five years, now being firmly established within the global risk management markets.

"We consider the potential for sustained growth in this market is significant, buoyed by the still-low insurance penetration and the growing recognition and acceptance of the concept of insurance and its benefits," added Gosrani.

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