The Securities and Exchange Commission of Pakistan has published a diagnostic study, The Future of Takaful in Pakistan, assessing Pakistan’s Shariah-compliant insurance market and setting out a roadmap and action plan for expanding takaful penetration. The study links the sector’s development to the Federal Shariah Court’s 28 April 2022 judgment mandating elimination of riba by 31 December 2027 and the 26th constitutional amendment requiring complete elimination before 1 January 2028, and reiterates SECP’s strategic target of taking takaful contributions to above 30% of total industry premiums by 2028. Market analysis shows takaful penetration remaining broadly around 11% to 13% in recent years, with family takaful accounting for 12% of life insurance industry premiums in 2023 and general takaful accounting for 11% of non-life premiums. Family takaful first-year contributions were 21% of life first-year premium in 2023 at PKR 8.82 billion, while takaful represented 4% of group life and health premiums, rising to 34% once the social insurance scheme is excluded. General takaful contributions totalled PKR 26.4 billion in 2023, including PKR 1.4 billion from Pakistan Reinsurance Company Limited’s (PRCL) window retakaful, and were concentrated in motor at 34% and health at 26%. Key growth deterrents highlighted include low consumer and policymaker awareness, concerns about Shariah governance and disclosure, limited marketing and a “secondary option” approach by window operators, gaps in conversion guidance under the Takaful Rules 2012, retakaful shortages given the rule-based requirement to reinsure only with Shariah-compliant capacity, and capital and solvency questions for participant funds. The plan of action assigns responsibilities across SECP, insurers, PRCL and the Insurance Association of Pakistan, including developing industry-wide transition and company adoption plans, issuing conversion and surplus-distribution guidance, reviewing the PKR 50 million seed-capital requirement for window takaful operators, strengthening retakaful capacity and considering conventional reinsurance on a necessity basis, and aligning governance and regulation with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) standards. Work is also described as underway with the Institute of Chartered Accountants of Pakistan on takaful accounting regulations to tailor IFRS 17 for takaful contracts.
Securites & Exchange Commission of Pakistan 2025-04-06
Securities and Exchange Commission of Pakistan publishes diagnostic study on Takaful and outlines roadmap to raise market share above 30% by 2028
The Securities and Exchange Commission of Pakistan released "The Future of Takaful in Pakistan," outlining a roadmap to expand Shariah-compliant insurance, or takaful, to eliminate riba by 2027. The study highlights current takaful penetration at 11%-13% and identifies growth barriers like low awareness and Shariah governance concerns. The action plan involves SECP, insurers, and stakeholders in developing transition plans, enhancing retakaful capacity, and aligning regulations with international standards.