Full of hope: High growth assures stakeholders of takaful’s bright future

With nine operators in the Egyptian insurance sector offering takaful (Islamic insurance), sharia-compliant coverage is already a well-established component of the industry. Many market observers, however, feel that compared to its success in the Gulf, the Egyptian takaful story is one of unrealised potential.

Thankfully, the Insurance Federation of Egypt is of the same opinion, and having identified sharia-compliant insurance as one of three key segments for future development, along with medical care insurance and micro-insurance, it has been working with the Egyptian Financial Services Authority (EFSA) to make the legislative amendments necessary to ensure it continues to grow healthily.

At the Third International Forum for Takaful and Cooperative Insurance in Cairo in March 2015, EFSA chairman Sherif Samy highlighted the rapid growth of takaful in the Egyptian market, pointing out that the eight companies that made up the industry at that time had between 2009 and 2014 increased their assets three-fold, while between 2010 and 2015 aggregate takaful insurance premiums for the sector had grown by nearly 400%.

Legal Reform

One key component of Samy’s remarks focused on EFSA’s intention to improve the legal framework under which takaful providers operate. If the Egyptian takaful market is to begin to size up to its Gulf neighbours, it will need to build a strong and flexible regulatory framework.

To this end, EFSA has included a takaful component in the new draft law for Insurance Supervision and Control, the first time that articles governing sharia-compliant coverage have been included in primary insurance legislation.

EFSA’s regulatory responsibilities, of course, extend beyond the insurance sector: amendments to the capital markets law include a provision for sukuk (Islamic bonds), the financial instrument which has shaken up the GCC debt markets and is increasingly popular with both corporate and sovereign issuers. For takaful operators, a growing sukuk arena in Egypt would do much to address the lack of sharia-compliant investment opportunities, which is one of the principal barriers to the continued balance sheet expansion within the segment.

The issue of sukuk guidelines has been a topic of discussion since 2011, when EFSA first proposed the instrument as a means to attract inward investment from the Gulf. However, the sukuk legislation developed by regulators at that time faced opposition from Al Azhar University’s Council of Senior Scholars, which objected to nine of its articles on the grounds that they did not sufficiently comply with the principles of Islamic law.

In the intervening years, talk of a new sukuk law has quieted, although its prospects have been helped by the government’s January 2017 indication that it could issue a US dollar sukuk later in the year, as part of efforts to bridge the nation’s fiscal deficit.


While the sector’s long-term growth will depend on the implementation of sector regulations, short-term indicators suggest the segment is carrying plenty of momentum. Abdel-Raouf Kotb, chairman of the Insurance Federation of Egypt, said takaful growth was expected to reach 20% in 2016.

Sector players are also investing capital in the segment’s future. The Egyptian Saudi Insurance House, for example, which was established as the first takaful operator in the market in 2001, has reportedly reinforced its balance sheet in anticipation of market expansion with a capital injection of LE20m (equivalent to $1.06m as of December 2016), bringing the total to LE120m ($6.36m). Elsewhere, in August 2016 Egypt’s largest insurer, the publicly-owned Misr Insurance, received preliminary approval from the EFSA to set up a takaful company. Local media reported that the new company would have an issued share capital of LE120m ($6.36m).