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Plugging the Middle East takaful insurance gap

21 December 2010

Takaful insurance sounds good in theory but a number of obstacles have emerged to making it work in practice.

Read more: takaful insurance Clyde & Co standard & poor's

Takaful – the Islamic alternative to conventional insurance – represents a radical new insurance business model that is firing a potentially very big emerging market in the Middle East.

But although it is a genuine alternative to the familiar product, takaful companies face many of the same challenges besetting their western counterparts.

Heightened competition is one of the biggest challenges facing insurance companies around the world, for example – and takaful firms operate in the same market conditions as conventional insurance companies, says Peter Hodgins, Dubai-based partner with the law firm Clyde & Co. "While they compete among themselves they also have to compete with conventional insurance in their home markets," he says. "So in the Middle East, for example, where rates have historically been fairly soft, there are a substantial number of conventional insurers and takaful operators competing for the same pool of business."

Contrary to popular perception, few individuals or businesses currently...

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