The market for Takaful, or Islamic insurance, is set to more than treble over the next decade, according to Moody's.

The rating agency's report on the Takaful market indicates that total premiums stood at S2bn in 2005 and will increase to more than $7bn by 2015.

Takaful has similarities with mutual insurance and is based on sharing risk between members rather than generating profit.

Timour Boudkeev, Moody's vice-pPresident/senior credit officer, said: "Conventional insurance has been deemed to be in conflict with Shariah (Islamic law) for two key reasons. Firstly, traditional insurance is thought to have a large element of ‘gharar', a term that denotes uncertainty, ambiguity or deception. As the payoff from an insurance policy is dependent on occurrence of uncertain events in the future, the amount of compensation has no predictable relationship with the insurance premium which disqualifies conventional insurance as an acceptable financial product under Islamic law. The second reason relates to traditional insurers' investment strategies. As ‘riba' (interest) is forbidden under Shariah, conventional bonds and other sources of funding are not viewed as Islamically acceptable."