Through such collaboration, the ability for the insurance industry to underwrite and reinsure risks based on the requirements of the region can be significantly enhanced. The growth of the takaful sector has also been commendable over these recent few years. Between 2004 and 2007, the average annual growth rate of the global takaful industry is estimated at 25%, compared to 10.3% for conventional insurance. With the proliferation of players and products, and the rapid pace of development of the sukuk market, Malaysia's  2  BIS Review 131/2009  takaful sector experienced an average annual growth of 20% from 2003 to 2008. Today, the takaful industry accounts for 11.5% of the overall insurance premiums. Takaful companies in Malaysia have also ventured into international markets to expand their business. This positive outlook is expected to continue with the impending entry of new takaful players as well as from the increased participation of international industry players in the takaful market. Of importance is that the industry is well supported by a robust legal and regulatory framework that upholds Shariah principles. In the aftermath of the global financial crisis there has also been a rethinking of the regulatory structure of the financial system. The crisis has exposed serious shortcomings in the supervisory architecture. Increased consideration is being given to a more integrated approach to the prudential regulation of the insurance industry together with the other segments of the financial sector. With the growing significance of the insurance industry, this would result in more consistent prudential standards for regulation.
Of significance is that the global insurance industry on the whole has remained resilient throughout the current financial crisis. The overall aggregate financial position of insurers in the crisis affected countries have continued to be strong, and generally not severely affected by liquidity pressures or exposures in the credit derivatives markets. Earlier losses by insurers in financial market activities had resulted in a shift to "back-to-basics" models, focusing on core underwriting business instead of heavily relying on investments as the main source of earnings. The industry had also benefited from the subsequent upturn in the pricing cycle which has fortified the capital position of insurers and provided the support to maintaining sound underwriting standards. These conditions have placed the industry on a much stronger position to withstand the challenges emanating from this global financial turmoil. BIS Review 131/2009  1  Domestic and external conditions are however expected to remain volatile for some time. Significant uncertainties will persist in the international financial markets and the broader global economic conditions. These conditions will continue to pose significant challenges to the insurance industry. In this environment, maintaining strong capital buffers and sound risk management is even more imperative to ensuring the continued resilience of the insurance industry. With the adoption of Solvency II in Europe and its influence on solvency regimes in other jurisdictions, more countries, including Malaysia, have now moved to adopt more riskaligned capital regimes.