Pakistan’s insurance industry is moving toward a Sharia-compliant takaful framework as the country accelerates efforts to establish an interest-free financial system. While the transition is expected to strengthen the Islamic finance sector, industry experts say several operational and regulatory challenges must be addressed to ensure a successful conversion.
The takaful segment has recorded steady growth in recent years, reflecting rising consumer interest in Islamic financial products. According to data released by the Securities and Exchange Commission of Pakistan (SECP), family takaful accounted for 15 percent of the life insurance market in 2024, while general takaful represented 14 percent of the non-life insurance sector. Despite this progress, Islamic insurance continues to lag behind other segments of Islamic finance, particularly Islamic banking, in terms of market share and penetration.
Insurance companies have already submitted board-approved transition plans to the SECP, outlining how they intend to convert their operations to takaful models. Industry estimates suggest that the transition could be completed by 2029, subject to regulatory approvals and the readiness of individual companies.
Pak-Qatar Family Takaful Limited (PQFTL) Chief Executive Officer Waqas Ahmad said one of the biggest challenges facing the industry is the limited availability of re-takaful capacity at the international level. Re-takaful providers help insurers manage large risks by sharing a portion of their exposure, but global capacity remains insufficient for high-value coverage. As a result, industry stakeholders are considering transitional arrangements that may temporarily allow the use of conventional reinsurance solutions until adequate re-takaful infrastructure is developed.
Another important issue involves life insurance products, which rely heavily on savings and investment mechanisms. As the sector shifts toward a fully Sharia-compliant model, the development of suitable Islamic investment instruments will become increasingly important to support policyholders’ long-term savings and retirement needs.
Pakistan is aiming to eliminate interest-based financial practices from its economy by January 2028, while the SECP has set a target of increasing Islamic insurance’s share of the overall insurance market to 30 percent by the same year. These goals are expected to accelerate the growth of takaful products and encourage greater participation from both consumers and financial institutions.
The industry is also undergoing significant digital transformation. Regulators have allowed several insurance and takaful operators to introduce digital products, with companies required to launch new digital savings solutions during the year. Many firms are also investing in technology and artificial intelligence to improve customer engagement, streamline operations and expand access to insurance services.
PQFTL recently became the first family takaful operator to be listed on the Pakistan Stock Exchange, a move aimed at supporting its long-term growth and digitalisation strategy. The company has also expanded partnerships with banks, telecom operators and digital platforms to promote micro-savings products and make insurance more accessible to a wider segment of the population.
Despite ongoing reforms and technological advancements, insurance penetration in Pakistan remains below one percent of GDP. This leaves millions of households exposed to financial risks arising from medical emergencies, accidents and unexpected loss of income. Industry leaders believe that increasing awareness, expanding takaful offerings and improving digital accessibility will be essential to strengthening financial protection and encouraging long-term savings among Pakistani consumers.
As economic challenges continue to affect household finances, demand for protection, savings and retirement planning solutions is expected to rise. Industry stakeholders view the transition to takaful not only as a regulatory requirement but also as an opportunity to promote greater financial inclusion and strengthen Pakistan’s Islamic finance ecosystem.