Takaful: An Alternative Approach to Insurance

April 2024

Author

Shariq Sikander, FSA, CERA

Description

Takaful came into existence in the backdrop of an increased demand for a financial system that brings the concept of insurance in line with Islamic values and the fundamental principles of Islamic finance. Many individuals, particularly in Muslim majority countries like Pakistan, Malaysia, Bahrain, the Kingdom of Saudi Arabia, and the United Arab Emirates, face limited acceptability to formal insurance due to concerns around Riba (interest), Gharar (uncertainty and ambiguity in contracts), Maysir (speculative risk), and other factors. Takaful insurance emerged as a key component of Shari’ah-compliant financial services that aims to cater to individual’s insurance needs, while also conforming to Islamic beliefs and norms.

Report

Takaful: An Alternative Approach to Insurance

Acknowledgments

The author extends heartfelt gratitude to individuals whose dedicated efforts were instrumental in the data accumulation and analysis for this project: Ms. Sidra Mansoor, Ms. Fatima Khan, Ms. Hiba Ibad, and Ms. Rida Hanif, whose diligent work ensured the accuracy and relevance of this paper.

A special acknowledgment to Mr. Syed Shiraz Anwar for his valuable review of the work, and sincere appreciation to the General Insurance Research Committee (GIRC) of the Society of Actuaries Research Institute for providing the opportunity to undertake this endeavor.

Project Oversight Group members:
R. Dale Hall, FSA, MAAA, CERA
Zain Ibrahim, ASA, ACIA
Andrew Peterson, FSA, MAAA, FCA

At the Society of Actuaries Research Institute:
Rob Montgomery, ASA, MAAA, Independent Consultant – Research Project Manager

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