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Potential of Takaful in Bosnia and Herzegovina

by in Islamic Finance
Implementation of Takaful in Bosnia and Herzegovina

In market of Bosnia and Herzegovina operates only conventional types of Insurance companies. Establishing of Takaful in BIH as alternative model firstly has goal of development of insurance industry, growth of new market using new products and different approach to market. Bosnia and Herzegovina has two main laws. First law allow domestic insurance companies to exist on EU market but also EU insurance companies are able to operate in BIH, second important law imply unity of market of Insurance in BIH. In Bosnia and Herzegovina currently operate insurance companies and one re-insurance. Total share of financial sector, sector of insurance and reinsurance takes 3.86% what implies on great opportunity and potential of insurance development. It is important to mention the fact that implementation of Takaful in Bosnia and Herzegovina is not impossible in its full capacity. Laws of BIH do not recognize Takaful as model of insurance. There are also other limitations but they are mainly the product of previous limitation. The only possible way of implementation of Takaful insurance on market in BIH is to incorporate it into existing legislation and regulatory framework. Establishing Takaful in BIH would be the best as a model of copartnership combined with model of wakala and mudaraba. The advantages of establishing Takaful as copartnership are: Financial power as a real competitor on market; better corporative management; easiness of making decisions. Even Takaful can be incorporated into existing legislation its implementation of business steal would have many obstacles.
Even BIH shows light growth in insurance sector because even in hard economy situation, 24 insurance companies in 11 months last year made 595.765.154 KM but that still is not enough for bigger development. In comparison with other countries, BIH has the lowest premium up to citizen which is 137 KM; where premium of non-life is 111 KM and premium of life is 26 KM. Interesting is that in last years there is evident growth of insuring the property of some of the biggest companies in BIH. Growth of non-life insurance is recorded in: insuring legal protection; insurance of credit; insurance of help and insurance of guarantee. BIH does not have strong life insurance and so non-life insurance in total premium is 81.07%. . In first quartile of this year non-life insurance recorded growth of 7.51%. Car responsibility has the biggest share in this premium with growth of 13.43%. Insurance of property against fire and natural catastrophe also recorded growth.


In my opinion implementing of Takaful would be great potential for BIH and new competition to conventional insurance institutions in BIH. There is a great potential in non-life products for Takaful but also Takaful might work on life insurance in a way to raise awareness and put itself in leading position for life insurance. There is constant growth of insured property or non-life products what can be encouraging for Takaful insurance to establish in BIH. Also great number of Muslims in this country might make great impact on insurance market.
„It is important to stress: for insurance industry there is a market and economic need. Only the right means for its contemporary work have to be found.“ (Zeljko Šain)

Software and Microsoft Dynamics NAV Developer | Establish d.o.o

Visoko, Bosnia And Herzegovina

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