DUBAI: The crowded Islamic insurance industry, which is expected to surpass $8.8 billion in premiums in 2010, will see more consolidations over the next three years as insurers are struggling to be profitable, a report said. Ernst & Young, said on Monday in its annual global report on the Islamic insurance industry, called takaful, many operators in the industry were startups or small players that were finding it hard to make profits in the tough financial environment. Many of the small insurers experienced heavy losses in their investment portfolios during the financial crisis on top of substantial expenses to establish themselves in an overcrowded Gulf market. Mergers and acquisitions in the Gulf would help create financial market leaders for a healthier industry, the report said. However, Justin Balcombe, director and Middle East insurance leader at Ernst & Young, said that consolidation would not happen suddenly or on such a large scale as the economic crisis in the region had eased somewhat. People were expecting recessionary factors to continue for a little longer which might have given distressed values to those assets, Balcombe said on the sidelines of the fifth annual World Takaful Conference, where the Ernst & Young report was released. There hasn t been a big bang approach (to consolidations) that people were expecting but there has been some activity, he said. Balcombe said the industry needed to become more sophisticated, improving underwriting and alleviating pricing pressures. The report said Saudi Arabia and Malaysia were the top two takaful markets in the world, and United Arab Emirates (UAE) and Indonesia were the fastest-growing markets. The UAE had a compounded annual growth rate of 135 percent between 2005 and 2008, followed by the young Indonesian market with a 35 percent growth rate for the same period. -Reuters
