"Takaful markets now span much of the globe but there still exists a large, expanding and untapped Muslim population on almost every continent," said Sameer Abdi, head of the company's Islamic Finance Services Group.
Compared to the reported losses of almost $350 billion of conventional insurers and government-supported enterprises in the United States, Europe and Asia, the takaful market has shown resilience in the global economic crisis, the report said.
However, major takaful operators saw a decline in the returns-on-equity in the last quarter of 2008.
"A young population in core takaful markets will need more coverage as government subsidies decrease and more families require private coverage," the report said.
"Regulatory support and framework, insurance legislation and compulsory coverage will facilitate its growth in the medium term."
The Gulf Arab States, Malaysia and Sudan are the top three takaful markets while the Indian subcontinent, Indonesia, Egypt and Turkey remain the least penetrated Muslim markets, Ernst & Young said.