Etiqa launches Singapore’s first takaful insurance product in years

Demand for Islamic financial products from the Middle East and Southeast Asia is growing.

Etiqa Insurance Pte Ltd. has launched Singapore’s first takaful insurance product in more than a decade, as it tries to bridge the market gap in Shariah-compliant funds.

Etiqa, the insurance arm of Malaysia’s Maybank Group, started selling Invest Future, an investment-linked product that promises wealth build-up consistent with Islamic law, in January.

“Prior to Invest future, there were few Shariah-compliant investment options available in Singapore, particularly in the banking and fund management sector to cater to Muslims seeking products aligned with their religious beliefs,” Raymond Ong, CEO at Etiqa Insurance Pte. Ltd., told Insurance Asia.

/Raymond Ong, CEO at Etiqa Insurance Pte. Ltd.

The global market for takaful — an Islamic insurance system based on mutual assistance and cooperation — is projected to grow 12% annually until 2029 to $57.9b, according to London-based Business Research Company.

There are about a million Muslims in Singapore. But only 5% of them own takaful insurance, Muhammad Ridhwaan Radzi, managing director at Islamic Finance Singapore Ltd., said in a separate interview.

/Muhammad Ridhwaan Radzi, managing director at Islamic Finance Singapore Ltd.

“The rest tend to use conventional products like term, whole life, or insurance-linked products,” he said. “That said, there is a growing number of Muslims using investment-linked products offered by Muslim-friendly insurance groups.”

Insurance companies in the city-state are taking advantage of the growing awareness about Islamic finance and takaful, Helmi Hakim, a financial adviser at Takaful.sg, told Insurance Asia via Zoom.

/Helmi Hakim, financial adviser at Takaful.sg

“This awareness is driven by financial institutions and community outreach efforts, which contribute to the adoption of Sharia-compliant financial instruments,” he pointed out.

Ong said their takaful product, which allows policyholders to jointly protect themselves against a defined loss, covers death or total permanent disability. Customers can also pledge contributions to charitable groups.

Takaful products were last sold in Singapore in 2012, Hakim said. NTUC Income (now Income Insurance Ltd.) has been selling Shariah-compliant investment-linked plans since 1995, whilst others started doing so only recently, he added.

Companies like AXA Insurance Pte Ltd., Manulife Singapore Pte Ltd., Tokio Marine Insurance Singapore Ltd., and AIA Singapore Pte Ltd. followed suit in 2017, whilst Prudential and Etiqa joined the trend in 2023. Maybank Singapore Ltd. has had a global footprint in Islamic finance that includes operations in Malaysia, Indonesia, and the Philippines.

“They were trying to bring in people from Malaysia to Singapore — actuarial experts, product engineers, even reinsurance specialists,” Ridhwaan said. “But even with all that, it still took nearly two years for this product to be launched. So, it’s not as easy as it sounds.” 

“The issue with takaful products is that it’s not a typical premium-based contract. With insurance, you’re buying and selling coverage, but with takaful, you’re donating your money. That’s the first difference,” he added.

Shariah-compliant investment-linked plans steer clear of assets that earn interest, which is forbidden in Islam. They also avoid gambling, speculation and excessive uncertainty.

“The money must also be invested in a Sharia-compliant way,” Helmi said. “This means it cannot be invested in companies involved with activities like pork production, gambling, casinos, alcohol, weaponry, or conventional banks and financial institutions.”

“The question then becomes: How does that contract fit into conventional insurance industry regulations?” Ridhwaan said. “It’s like trying to integrate something foreign to Singapore’s regulatory framework into existing insurance regulations, so it doesn’t fit perfectly.”

That’s where the confusion might arise, even for regulators, he added.

Ong expects Singapore to become the next offshore Islamic financial hub amidst a favourable global environment for Islamic finance and the growing demand from regional markets such as the Middle East and Southeast Asia.

Alice Tan, head of Group Wealth Management at Maybank Singapore Ltd. said other insurers in Singapore could follow suit in the takaful revival.

/Alice Tan, head of Group Wealth Management at Maybank Singapore Ltd.

“With Southeast Asia's significant Muslim population of close to 250 million and rising interest in sustainable and socially responsible investments from the broader market, we expect a growing demand for such solutions,” she said in an emailed reply to questions.

“Singapore’s regulatory environment and status as a leading financial hub further drives the growth of Shariah-compliant products,” she added.

Helmi expects more innovative products beyond investment-linked plans. “Whilst the initial focus might be on investment-linked products, insurers are likely to expand their offerings to include term life, health, and general insurance.”