The ongoing Middle East conflict demonstrates the takaful sector's limited direct underwriting exposure to geopolitical events, according to Moody's Ratings.
In a report on the takaful market, Mr Mohammed Ali Londe, VP and Senior Analyst at Moody’s Ratings, said, “Standard policies generally exclude war-related losses, while specialist risks are transferred to international insurers and reinsurers.”
However, he added, “The primary risk transmission channel remains through investment portfolios. A prolonged conflict could weaken economic activity, reduce asset values, increase claims inflation and also hold back premium growth, particularly within GCC markets. Investment income has become a more important contributor to earnings across the takaful sector, supporting profitability improvements in several markets during 2025 and 1H2026.”
Other challenges facing takaful providers include general claims inflation, increasing medical costs and climate-related risks. Overall, takaful sector profitability has improved in some key markets. However, there remains a wide performance gap between the leading takaful operators, which have strong underwriting discipline, diversified business models and advanced risk management, and the rest of the industry.