The National Insurance Commission (NAICOM) has said Islamic Finances and Takaful has exhibited resilience needed to confront global challenges such as pandemics, environmental hazards and geopolitical uncertainties by promoting risk-sharing and collective responsibility, helping to mitigate the impact of unforeseen events, enabling families and businesses to bounce back more effectively.

The Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, made this assertion when he delivered his keynote address at the 2nd Edition of the African Takaful and Non-Interest (Islamic) Finance Conference, themed: “Islamic Finance and Takaful; Building Resilience in a Volatile World” held on Tuesday in Lagos.

Represented by the Deputy Commissioner (Technical) Dr. Usman Jankara, Omosehin said Islamic Finance and Takaful have covered the lapses often experienced by the implementation of the conventional insurance policies.

“As we face global challenges such as pandemics, environmental hazards, and geopolitical uncertainties, the resilience offered by Islamic finance and Takaful becomes increasingly vital. The recent pandemic has highlighted the fragility of our existing systems and has shown that sole reliance on conventional models may not suffice in times of crisis.

“In a world where climate change, health crises, and economic instability threaten our livelihoods, Takaful offers a resilient framework that provides not only financial protection but also a safety net that empowers individuals and communities to recover from adversities.

“By promoting risk-sharing and collective responsibility, Takaful helps mitigate the impact of unforeseen events, enabling families and businesses to bounce back more effectively. The principles of Islamic finance and Takaful are especially pertinent in enhancing resilience through risk mitigation, social justice and sustainable development.

“Unlike conventional insurance, which often involves risk transfer and interest, Takaful is a Shariah-compliant form of insurance based on mutual cooperation and shared responsibility. Participants contribute to a common fund, which is used to support those in need, fostering a sense of community and solidarity,” he said.

The Commissioner for Insurance also said the Islamic Finance sector has remained vibrant, valued at $3.8 billion which accounts for 2-3 per cent of Nigeria’s total financial market.

“The sector accounts for approximately 2-3% of Nigeria’s total financial market, valued at $3.8 billion. Sukuk dominates the market at 59.3%, followed by non-interest banks at 39.8%, and Islamic funds and Takaful at 0.9%.

“The Islamic financial industry comprises four non-interest finance banks, five Takaful companies, 15 microfinance institutions, and 10 non-bank financial institutions. Central to Islamic finance is the concept of Takaful, or Islamic insurance.

“Although Takaful currently represents 1-2% of the insurance market, the future outlook is promising, considering the average annual growth rate of over 34% in contribution generation recorded by the industry in the last four years,” Omosehin stated.

He further stated that the Commission is working with relevant stakeholders to ensure the viability of the sector is enhanced while also developing other products while also driving increased acceptability

He said, “The Commission is working with other regulators in Nigeria to develop more Shariah-compliant investment opportunities for Takaful and other non-interest financial institutions in the economy.

“We have and continue to collaborate with international standard setting organizations like the Islamic Financial Services Board, and Accounting & Auditing Organization for Islamic Financial Institutions to provide requisite regulatory guidelines, technical training and support for the industry, among other initiatives.

“The National Insurance Commission has been instrumental in promoting the growth of the Takaful industry in Nigeria through several initiatives. Since issuing the Takaful Operational Guidelines in 2013, the Commission has licensed five Takaful operators, with the concept gradually gaining acceptance.

“The Commission has undertaken several initiatives to support the Takaful industry. The initiatives include the application of risk-based capital system which affords takaful operators a more relaxed minimum capital requirements, the proportionate qualification requirements which facilitate new entrants into the Takaful market in Nigeria, and most importantly, the Market Conduct and Enterprise Risk Management Guidelines for Takaful and Retakaful operators which were issued to ensure best practices and effective risk management” he stated.

He emphasized that Islamic Finance aside offering unique perspectives rooted in ethical principles and social responsibility, also encourages investors to consider the social, ethical, and environmental implications of their financial decisions.