BAHRAIN (Bloomberg) American International Group Inc., the world?s largest insurer, yesterday opened a Bahrain-based unit offering policies that comply with Islamic principles as it bids to win new customers from among the world?s 1.6 billion Muslims.

The global market for Islamic insurance, or Takaful, may surge fivefold to $14 billion by 2015, according to HSBC Holdings Plc. Takaful is based on the Koranic principle of mutual assistance in which members are the insurers as well as the insured. Shariah, or Islamic law, forbids the payment or receipt of interest.

AIG Takaful will initially serve Persian Gulf markets and next year plans to expand into Asian countries like Malaysia and Western countries including the US and UK, Charles Bouloux, the unit?s chairman, said in a phone interview from Bahrain yesterday.

?There are about 300 million Muslims we think could become new insurance buyers if the right products, ones that fit their beliefs, are actively sold to them,? Bouloux said.

New York-based AIG?s move comes as the Takaful industry is booming on oil revenue pouring into the Persian Gulf and as Western reinsurers enter the market, providing the underwriting resources lacked by pure-play Islamic operators.

Hannover Re, the world?s fourth-largest reinsurer, started a Retakaful unit in Bahrain last month to provide Shariah-compliant underwriting services globally. Swiss Reinsurance Co., the world?s largest reinsurer, entered the Retakaful business in June and now targets the world?s 50 to 60 Islamic insurers with a life reinsurance product known as Family Retakaful.

Dubai, United Arab Emirates-based Islamic Arab Insurance Co., the world?s largest independent Islamic insurance and reinsurance company, has a total $300 million of capital. The company, known as Salama, operates in Bahrain, Saudi Arabia, Egypt, Senegal, Algeria and Jordan and plans to expand into Asia and Europe.

AIG Takaful will also be known as Enaya, or ?solidarity? in Arabic. It starts with $15 million of capital and a forecast of $10 million premium income for the first 18 months, according to Bouloux, ?which will expand significantly as our capability grows?.

?For a small capital commitment AIG is gaining a platform to sell a whole range of products,? Ala?a al-Yousuf, chief economist for Gulf Finance House EC, a Bahrain-based Islamic investment bank, said in a telephone interview today. ?As major insurers and reinsurers join the Takaful industry, it boosts competition and the industry?s credibility as an alternative to conventional insurance.?

Premium rates, the prices insurers charge, are rising 12 percent to 15 percent a year in Middle East and South Asian markets, Nicholas Walsh, AIG?s group senior vice-president of foreign general insurance, said in a Sept. 17 interview. That compares with an average 9 percent decline in non-life premium rates outside the US in the first half of the year, he said.

Global premium growth rates for Takaful are ?about the same? as those for conventional insurance in the Middle East, according to Bouloux. The unit?s top selling consumer products will probably be personal accident and motor insurance, he said, while corporate sales will focus on products for Shariah-compliant financial institutions.

Bahrain is the Gulf?s traditional financial services hub and since the 1970s has licensed 373 conventional and Islamic financial institutions. Most are offshore entities, acting as representatives for overseas lenders, asset managers and insurers.

Allianz AG, Europe?s biggest insurer, entered the Takaful business in April and is focusing on Indonesia and Malaysia, where economic growth is spurring demand for insurance among Southeast Asia?s 500 million Muslims.