Many factors affect the low numbers of insured among Generation Y.
The Islamic insurance industry, or takaful, is struggling to find suitable long term investment opportunities, executives at the Reuters Islamic Banking and Finance Summit said.
The takaful - or sharia compliant - insurance industry has grown at double or three digit growth rates so far as the Gulf Arab region is underpenetrated with insurance products in general, and has also attracted business from conventional peers.
But issues like the absence of long term sukuk, or Islamic bonds, to compliment some of the products are hampering the process of asset deployment.
Speaking at the summit in Bahrain, Abdul Rahman Tolefat, chief executive, Allianz Takaful, said: "As an insurer, if I want to offer annuity products I need to have long term assets to match my liabilities which are still not available."
Tolefat said the firm was in talks with a regional financial institution, urging them to issue a bond earmarked for the industry.
Islamic insurance works like mutual insurance, but there is a clear segregation of the assets owned by members and those owned by the insurer.
Unlike conventional insurance, investments made using the pool of funds have to adhere to sharia law and shun sectors such as alcohol and gambling.
Islamic insurers also keep away from investments in risky assets and prefer fixed income products for parking their funds.
Global takaful premiums total about $2 billion to $3 billion and are expected to reach more than $7 billion by 2015, industry figures show.
While medium term sukuk are available in the market, takaful firms in this space have to compete with big banks who absorb a major chunk of issues, leaving little for takaful firms.
Tolefat said: "The credit rating of corporates who issue sukuk is just not there. I prefer an issue which has an 'A' rating and above. Even if they provide low yields, we don't mind."
The regional sukuk market was dominated by real estate developers that saw strong demand during a property boom that ended in 2008, leading to a lack of highly rated issues.
Nick Frei, chief executive, t'azur, said: "It hampers our ability to issue long term annuity and long term guarantee return products."
Founded by Bahrain's Unicorn Investment Bank, t'azur has operations in Bahrain and Kuwait and started to offer general takaful insurance in Qatar three months ago.
Frei said this was not a major constraint to the company as it could replace sukuk issues by long-term equity funds.
He said: "There are enough sharia compliant instruments out there for us to invest our money sensibly. The only limitation ... is that for sukuk for annuity type assets." (Reuters)