Sunday August 3, 2025
While President of Somalia enacted National Takaful Law Somalia on May 16, 2025, and Central Bank approved insurance/takaful regulations and guidelines on May 24, 2024. It’s another step in the country’s reconstruction journey and new wave in the financial sector that has been protecting several masses from risks globally after 30 years of the collapse of the central government.
The newly enacted National Takaful Law is not Somalia’s first insurance legislation aimed at nationwide risk protection. A significant historical precedent is found in the Official Bulletin of the Democratic Republic of Somalia (February 22, 1973), which documented Law No. 20 of January 15, 1973, establishing compulsory third-party motor insurance.
This earlier law addressed public safety and financial safeguards for motor vehicles, laying the groundwork for today’s progress in the Takaful sector.
Though in its infancy, the insurance law adds much-needed ingredient to an economy experiencing fast growth, such as building the trust of customers, promoting country stability, and building public confidence in Takaful services across Somalia.
The new National Takaful Law only accepts Takaful Insurance, which means insurance designed to meet the needs of Muslim customers who wish to insure their lives and property in accordance with Islamic law. This includes ensuring that their money is being used in a way that is consistent with their values and beliefs and providing peace of mind knowing that their insurance policy is not supporting activities that are considered haram (forbidden) under Islamic law. This means conventional insurance is prohibited in Somalia due to the existing laws and its non-compliance with Shariah principles.
Currently, 12 registered insurance companies, with 8 active right now, are required to follow the new National Takaful Law and register until December 31, 2025, which will be regulated under the Central Bank as per Sharia law. Apart from AMANAH INSURANCE and other Takaful operators include Takaful Africa Insurance, FISO Insurance, Wadaag Insurance, Barakah Takaful Insurance, City Islamic Insurance, Salma Star Insurance, Damal Insurance, Tamim Insurance, Kobciye Insurance, and Som-Takaful Insurance. They offer various insurance coverages, such as Medical, Motor, Travel, Fire, Asset, Engineering, Livestock, Agriculture, GPA, Logistics, and others, with high demand from international, local non-profit organizations (NGOs), multinational, and intergovernmental organizations.
INSURANCE MARKET OPPORTUNITIES
- Diaspora Confidence: As diaspora coming back and invests in the country, the new Takaful Law sends a message to invest in the country with insurance and reduces uncertainty.
- Global Support for Somalia: For example, at COP28, the African Development Bank, through the Africa Climate Risk Insurance Facility for Adaptation (ACRIFA), pledged support to unlock insurance financing for green and climate-smart technologies—offering Somalia a new source of development capital under the Takaful framework.
- New Takaful Law: This new Takaful Law builds trust between clients, insurance companies, the world community, and many more, because when we see new improvements, we see new developments and new expansions of businesses in Mogadishu.
- Insurance Penetration Improvement: The community will trust insurance, and organizations will insure their staff and assets, while local insurance companies can increase in number.
INSURANCE MARKET CHALLENGES
Despite daily insurance challenges from dishonesty, fraud, lack of knowledge, and corruption among the population, which further tarnish the industry's image, there are huge challenges that need to be solved nationwide. These include a robust system of informal family guarantees called “Qaraan”, which are traditional and tribe-based community insurance practices within Somali tribes where individuals depend on their family members or close relatives for financial assistance in times of necessity or unexpected circumstances. This impedes the growth of the Takaful industry in Somalia, making it difficult to spread risk effectively and causing low market penetration. Addressing these challenges requires educational initiatives, constructive engagement with clan elders and leaders who manage, supervise, and control these informal and traditional insurance systems, as well as insurance regulation enforcement and a collaborative approach involving the government, industry stakeholders, and the private sector.
RECOMMENDATIONS
The best time to start acting and collaborating for the insurance sector growth of Somalia is now, with the government, insurance companies, agencies, and brokers needing to take responsibility. For instance:
Government is in dire need of strict enforcement of at least five compulsory classes of insurance, because the enforcement of various penalties as stipulated in the various Acts would be a good start. And this will be solution for insurance penetration and cause insurance to spread like wildfire into the nooks and crannies of the country, like how Travel Insurance is strictly enforced by some European countries as a pre-requisite for visa issuance.
Insurance Companies, Agencies and Brokers is needed double their efforts towards advocacy, collaboration and enlightenment exercises to not just the general public, but this time private sector by using political influencers, and social elites. No doubt the Somalia Insurance Industry has shown some appreciable progress over the past years, but there is still a lot of room for improvement, and all hands must be on deck if it is to catch up with its counterparts.
CONCLUSION
In conclusion, the New National Takaful Law is Insurance revolution in Somalia that will build Somali economic growth in the nearest future by effectively managing risks, promoting economic stability, facilitating infrastructure development, driving investment and capital formation, supporting entrepreneurship, and enhancing social welfare. It will also build community trust day after day, and closer partnership between government, Somali insurers, and reinsurer partners to overcome obstacles while there’s still room for improvement.
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Osman Khalif Salad is the Head of Marketing and Media at Amanah Insurance, he can be contacted via:: osman.kalif@amaanahinsurance.