Increased cost holding firms back
Regulatory burdens are hampering the growth of the takaful insurance market in the Gulf, according to Standard & Poor’s (S&P).
The rating agency said that most takaful firms in the Gulf Cooperation Council are ”still struggling to build a viable business position”.
An S&P report said that increased regulatory cost meant more pressure on a sector already suffering from a lack of scale.
Recent examples include the doubling of the minimum capital requirements in Oman and enhanced liquid asset requirements in Kuwait and the United Arab Emirates.
S&P said that takaful insurers need to differentiate their products or else struggle to achieve profitable growth.
However, the rating agency added that these changes could mitigate future price wars by encouraging risk-based decision making.
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