Malaysia and Saudi Arabia will take up the majority of the premium growth in the global takaful sector, which is expected to reach US$20bn by 2017, a special report released by A.M. Best showed.

The report, however, found out that while the takaful industry is growing rapidly on a global basis, operators in Middle Eastern markets, outside Saudi Arabia, are still struggling with growth and profitability.

AM Best sees significant opportunities for takaful operators given the huge global Muslim population but a number of challenges remain.

Among the challenges are market conditions that lead to fierce pricing competition, developing a niche market position and a loyal customer base, and achieving growth without compromising on profitability.

The report was based on an analysis of 14 Gulf Cooperation Council takaful operators and 24 conventional insurers in the United Arab Emirates.