Islamic (Takaful) insurers in the Gulf Cooperation Council (GCC) look set to continue a favorable growth path in 2023. Yet, the adoption of International Financial Reporting Standard 17 (IFRS 17) requires Islamic insurers to update their internal processes and IT systems, resulting in additional costs, time constraints, and other operational challenges, which will likely strain many smaller, under-resourced players.

"While the implementation presents new challenges for all insurers in the region, including Islamic insurers, we expect our ratings on them to remain broadly stable," said S&P Global Ratings credit analyst Emir Mujkic. "However, any significant implementation delays or inconsistencies in financial reporting standards could lead to negative rating actions in isolated cases," Mr Mujkic added.

The adoption of IFRS 17 will improve transparency, making it easier to identify and compare insurers' profit generation and risk management.

Across the GCC region, we still see substantial differences in insurers' level of preparedness for IFRS 17. Many smaller and midsize Islamic insurers that have yet to implement IFRS 17 will likely encounter difficulties, given the lack of resources.

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