The takaful market is on course for even more M&A deals, with Shariah-compliant products set to receive greater acceptance following two acquisition deals involving major takaful operators and banks.
With these acquisitions, the UAE now has 90 insurance and takaful companies, 32 of which are local.
More deals are in the works, according to market sources.
Growing market share
The UAE is seeing increasing demand for Shariah-compliant insurance products and the takaful market is expected to grow to $40bn (£30.81bn, €34bn), with the largest segment being the life and family market.
Takaful operators currently account for a modest part of the UAE’s overall insurance market, commanding a 17% market share.
But the industry is set to see the introduction of world-class takaful products.
The acquisitions are reportedly poised to strengthen the Shariah-compliant Islamic insurance offerings with elevated services for clientele.
Rating agency AM Best said takaful operators continue to gain traction in the UAE insurance market as the segment’s profitability has improved significantly in recent years.
“More deals are expected in the takaful market,” said Anand Singh, senior associate in insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates, which acted as the legal adviser to the Siraj Holding-Al Hilal Takaful transaction.
“The consolidation comes at a time when the Islamic insurance market in the UAE is experiencing a gap in services and offerings compliant with Shariah rules.”
The acquisition deals
Islamic insurer Dar Al Takaful has completed its acquisition of Noor Takaful Family and Noor Takaful General.
Dar Al Takaful bought the sister companies for AED215m ($58.54m, £45.22m, €49.81m).
Noor Takaful was the insurance arm of Noor Investment Group, which sold Noor Bank to Dubai Islamic Bank.
Earlier, Siraj Holding LLC, a private investment firm based in Abu Dhabi, acquired Al Hilal Takaful PSC from Al Hilal Bank, a wholly-owned subsidiary of Abu Dhabi Commercial Bank (ADCB).
Al Hilal Bank was acquired in May last year, following the merger between ADCB and Union National Bank.
Full integration of the three banks was completed in April 2019.
Much before that, Abu Dhabi headquartered National Takaful Company (Watania) acquired a 4.9% stake in Dar Al Takaful, an Islamic insurance company listed on the Dubai Financial Market (DFM).
Building scale, market share
With the acquisition, Dar Al Takaful can add family takaful (life) to its business. It was already offering general takaful including motor, marine, fire, engineering, medical and general accident risks.
The acquisition will allow Dar Al Takaful to build scale and market share in the UAE by consolidating the fragmented insurance market.
“With the acquisition, Siraj Holding marked a new phase of operations for Al Hilal Takaful and established it as the premier provider of various takaful solutions for individuals, employers, and government entities across the UAE,” the company said in a statement.
The firm plans to rebrand and align the leadership and group operating model following the completion of regulatory formalities.
“Our vision is to refine the offerings in the industry and develop tailor-made solutions for today’s consumers in the UAE. We will do this by applying innovative technologies and by developing new approaches. We are also bringing together a league of experts and transform Al Hilal Takaful into a world-class insurance frontrunner and are committed to offering clients outstanding solutions for all their protection needs,” said Siraj Holding chairman Ahmed Khalaf Al Otaiba, at the time of the acquisition.