Sharia insurance market is mounting

June 28, 2010

Sharia insurance market is mounting of the insurance industry with the more interests expressed by investors to have investment in that the sector.

Bapepam-LK considered the sharia insurance up to quarter III/2009 showed good performance. Life insurance market shares are 4.16 percent and loss insurance and reinsurance are 2.8 percent.

When combined, the total sharia insurance industry market shares are 3.79 percent of the total national insurance industry.

“This is satisfying noting that last year it remained at the level of 2 percent. So there is quite rapid increase,” said Insurance bureau chief of Bapepam-LK Isa Rachmatarwata in Jakarta recently.

In terms of asset, loss insurance has reached 2.09 percent but life insurance is 1.38 percent as the asset accumulation of life insurance industry had happened long before.

“The total sharia insurance assets in quarter III/2009 was at 1.54 percent of the total assets of the industry in quarter I/2009 of 1.32 percent,” said Isa.

Sharia insurance industry, particularly life insurance, is more lucrative with the incoming giant player like AIA Financial and Manulife. Formerly Prudential has entered the market and booked significant returns.

In quarter III/2009, Prudential has booked IDR254.6 billion premium income or rose 22.1 percent as from quarter II/2009.

But President Director of PT Asuransi Bintang Tbk Zafar Dinesh Idham said the government has relaxed the regulation of sharia unit capital fulfillment at least it is the same as the conventional capital gradual fulfillment as stipulated by Government Regulation (PP) No. 81/2009. “For us, the regulation is burdensome,” he said.

On the other side, regulator called for stern measures from old player to take necessary measure to opt whether to continue its business by complying with the minimum capital regulation or to return the license.

“Sharia insurance in quarter III/2009 has showed good performance. Those with less capital should improve themselves and have time to think fast and make rapid decision to stay in the industry, while the new one is not reluctant to join,” he said.

PP No. 39/2008 on insurance business requires insurance company minimum capital with sharia unit is IDR5 billion in 2008, IDR12.5 billion in 2009, and IDR25 billion next year.

Up to quarter III/2009 there are companies with under IDR5 billion fund. One of them, life insurance firm, has returned its sharia business license.