The Indian subcontinent has seen contributions -- Takaful's equivalent of premiums -- rise 85 percent, Indonesia had a growth rate of 67 percent and Bangladesh 58 percent, the report said.

The takaful industry in the Gulf remains fragmented with smaller players and low penetration rates with Saudi Arabia emerging as the sole growth market due to the rollout of compulsory medical insurance.

"The (Gulf Arab region) is a more competitive market with a larger number of players and will drive growth for the industry," said Ashar Nazim, executive director and Islamic financial services leader at Ernst & Young, in a statement.

"Key takaful markets are characterised by low insurance penetration rates and comparatively high rates of economic growth."

Egypt is also seen growing at a rapid pace as the country could stand to benefit from regional unrest.

UAE-based Salama Islamic Arab Insurance's chief executive said turmoil in markets such as Egypt have resulted in more claims but also raised awareness of Islamic insurance, creating more opportunity for the market.

Still, the industry faces challenges from intensified competition, shortage of expertise and lower return-on-equity in relation to conventional insurance companies, the report said.