TURKEY: takaful insurance sector expected to further develop fuelled by the participation banking growth

30 June 2016 — Daniela GHETU
"The issuance of new participation banking* licenses and its resultant increase in participation banking market share would spur the growth in the takaful sector in Turkey, as these banks serve as one of the most important distribution channels of the takaful sector," Ramazan Ulger, President, Insurance Association of Turkey stated at a recent professional event organized in Istanbul by The Islamic Financial Services Board (IFSB), The World Bank Group (WBG) and the Undersecretariat of Treasury of the Republic of Turkey.

Mr. Ulger highlighted that there are 60 insurance companies and one reinsurance company operating in Turkey, where life and non-life insurances sector operate separately. The majority of these companies are internationally active and are established companies, making the Turkish insurance market well-integrated with the global insurance sector. While observing that new laws and regulations in the country have increased transparency and eliminated uncertainties for international investors and policy holders, he suggested for the takaful industry to develop a wider range of products to address the needs of individuals and enhance coverage to all segments of the society.

According to Ozgur Koc, President, Association of Participation Insurance, Turkey, the growth in participation banking sector has paved the way for takaful operators to hold funds in interest-free instruments, while regulatory changes in 2007 and 2015 have helped the takaful undertakings to show the 'surplus rebate' in their accounts and make its payment in cash to the takaful participants. He reiterated the country's vision to establish Istanbul as an Islamic financial centre for banking, capital market and takaful industry.

Dr. Ahmet Genc, Deputy Undersecretary, Undersecretariat of the Treasury, The Republic of Turkey, emphasised the importance of takaful in the development of Islamic finance in Turkey. He observed that Islamic finance has grown commendably in Turkey in recent years nad may play an important role in enhancing financial inclusion and providing risk protection to those individuals who do not want to use the services of conventional insurance system due to their faith. Further development is expected to include specific provisions on the takaful sector in Turkey's insurance law to provide clear legal framework and promote the expansion of the takaful sector in the country.

*"participating banking" is the name used in Turkey for the Islamic banking. In participation banking, the interest, considered illicit in Islam, is replaced with dividends paid to depositors from profits derived through various investment instruments


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