Islamic Insurance May Be Worth $14 Billion by 2015, HSBC Says

April 9 (Bloomberg) -- The market for takaful, or Islamic insurance, may be worth $14 billion by 2015, a fivefold increase from now, according to HSBC Holdings Plc.
Insurance premiums paid in Muslim nations are equal to between 0.5 percent and 5 percent of gross domestic product, Ajmal Bhatty, global head of takaful for HSBC's Amanah Islamic finance unit, said in an interview today. That compares with between 10 percent and 15 percent in developed markets.
``There is huge potential out there,'' Bhatty said, a day before a presentation to the World Takaful Conference in Dubai, United Arab Emirates. ``Our first focus is on Muslims, but then we can promote takaful as an ethical and fair system to non- Muslims too.''
Takaful is a form of Islamic insurance based on the Koranic principle of mutual assistance. It is similar to mutual insurance in that members are the insurers as well as the insured. Conventional insurance is prohibited under Islamic law because it involves interest payments, which are forbidden.
According to HSBC, Europe's largest bank by market value, the global takaful industry comprises 79 companies offering products in 23 countries. The industry emerged as an alternative to conventional insurers in the 1980s in Malaysia.
``We are beginning to compete with conventional insurers, but our priority now is to sell to Muslims who would not otherwise buy conventional insurance,'' said Parvaiz Siddiq, general manager of Dubai-based Islamic Arab Insurance Co., known as Salama.
Qatar is the Muslim country with the highest spending on insurance, at $444 per person, Siddiq said. That compares with $5,716 in Switzerland, $4,508 in the U.K. and $3,755 in the U.S., he said.
``We do have tremendous growth potential, but to really become global we must focus on creating a platform to attract customers of all kinds, Muslims and non-Muslims,'' said Gautam Datta, deputy general manager of takaful for Bahrain-based Solidarity Co.