Brunei's takaful growth pushes ahead its Islamic finance ambitions
KUALA LUMPUR: Assets held by the Islamic insurance (takaful) sector in Bruneirecently have grown significantly while those of conventional types of insurance have been declining, a report from the country's central bank showed.
The monthly report from Brunei's monetary authority, known as AMBD, said that in the year ended Sept. 30, takaful assets rose 21 percent to 425 million Brunei dollars ($336 million). Conventional insurers saw a drop of 1.3 percent in assets during the same 12-month period.
The fast-growing takaful sector indicates Brunei is progressing toward its goal of having Islamic financial products account for up to 60 percent of total banking assets in five years, compared with 40 percent at present.
At end-September, Brunei's takaful market accounted for 33 percent of total insurance assets, up from 29 percent a year earlier, according to the AMBD report.
Brunei, which has Southeast Asia's highest per-capita income after Singapore, aims to compete in Islamic finance with regional powerhouses Malaysia and Indonesia. That is part of a strategy to wean itself off dependence on oil reserves, which are expected to run out in about two decades, and diversifyBrunei's economy.
Brunei, Malaysia and Indonesia have the largest potential for retail Islamic banking in Southeast Asia. The combined population of the three Muslim-majority countries is nearly 280 million.
Although insurance assets have seen rapid growth in Brunei in the past decade, industry players say there is still poor awareness about insurance among its population. Brunei has four takaful operators.
Assets of Indonesian takaful firms grew 43 percent to 13.1 trillion rupiah ($1.1 billion) during 2012, from 9.15 trillion rupiah a year earlier, data from that country's regulator showed. Takaful firms accounted for 2.3 percent of Indonesia's total industry assets.
A proposed law in Indonesia that requires takaful firms to be spun off into standalone entities could, when enacted, spur mergers in that market.
In July, Malaysia declared new rules for takaful firms to separate life and general business lines, a move observers said could spur buy-outs of smaller operations.