Rabat – Takaful insurance in Morocco faces significant challenges that hinder its development, according to a recent analysis from Market research firm BMCE Capital Global Research (BKGR).
Takaful is an Islamic insurance concept aimed at providing coverage in compliance with Sharia law.
In a publication this week, BKGR maintained that financial gains in the Takaful segment are limited compared to the investments made.
Despite efforts to promote Takaful products, including an array of offerings, the sector “struggles” with a lack of diversification and an incomplete participatory ecosystem, particularly in terms of capital market integration, the report explains.
The data reveals that Takaful generated MAD 11.8 million ($1.1 million) in premiums during its inaugural year of operation, with a significant portion – 84% – stemming from death insurance.
Fire insurance accounted for 10% of premiums, while individual Takaful investment insurance contributed 5%. However, despite these initial figures, the overall financial performance remains below expectations.
In the first half of 2023 alone, Takaful activity attracted a total premium volume of MAD 29 million ($2.9 million), driven primarily by Takaful “family products”.
The family products covered death insurance, Takaful investment, and variable capital contracts, comprising 90% of total premiums, and amounting to MAD 26 million ($2.6 million).
Other Takaful accounts, however, only reached MAD 3 million ($299,500) during the same period.
The findings, sourced from the Authority of Control and Insurance and Reinsurance (ACAPS), were incorporated into BMCE Capital Global Research’s sector note titled “Insurance Sector in Morocco.”
While the sector is largely underdeveloped, BMCE Capital emphasizes its potential in promoting financial inclusion, targeting populations traditionally underserved by conventional insurance due to religious or ethical reasons.
Analysts suggest that Takaful could enhance the overall insurance penetration rate and stimulate growth in the Moroccan insurance market.
However, the report raises doubts about the profitability of Takaful operations in the current landscape. With a minimum social capital requirement of MAD 50 million ($5 million), the financial returns appear limited, prompting questions about the viability of continued investment.
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