Islamic Insurance Opertunities and Challenges - Revision history

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Islamic Insurance

Challenges & Opportunities

Financial Services Research

Forum June 28th 2005

Overview of presentation

• Why conventional insurance is not allowed

• Principles of Takaful

• Models of Takaful

• The global sector

• Challenges for the future

• Insurance for the low-income sector

• Takaful in Non-Muslim countries

Why is conventional insurance

not permissible?

• Uncertainty (Gharar)

• Gambling (Maisir)

• Interest (Riba)

Earlier forms of Islamic insurance

• Dawania – Mutual indemnification amongst officers during

the rule of Umar Ibn Al Khattab (2nd Caliph)

• Diyyah and Aquilah – Blood money and concept of

removing hardship from victims family by payment of

Diyyah, on a mutual basis, by relatives of offender

• Marine Insurance – Early second century – mutual fund to

cover robberies and mishaps

Fiqh Academy Resolution 1985

• Commerical insurance is prohibited

• Alternative contract confirming to principles of Islamic

dealings is the contract of cooperative insurance, which is

founded on the basis of charitable donation and Shariah

compliant dealings

Principles of Takaful

• Solidarity and joint guarantee

• Self reliance and self sustaining for community well being

• Assist those that need assistance

• Community pooling system

• Shari’ah approved investments and products

“Bear ye one another’s burden”

Takaful models in practice

• Not for profit model

• Ta’awuni model – “cooperative insurance”

• Al Mudharabah model – profit sharing

• Al Wakala model – agency agreement

The Global Takaful sector

• 1979 First Takaful Company established

• 1996 – 30 Institutions transacting Takaful

• 2002 – 50 Takaful operators and four Retakaful providers

• 2004 – 80 Takaful operators, 200 Takaful windows and 12

Retakaful providers

Source: IBB Solicitors, UK – (2005)

The Global Takaful sector

Source: Bhatty (2001)

Challenges for the future

• Dynamic Growth

• Harmonization

• Best practices

• Awareness

• Reinsurance

• Governance

• Low-income sector

• Non-Muslim countries

Insurance for the low-

income sector

Can insurance assist poverty

alleviation?

• The poor are the most vulnerable

• The impact of losses are more severe

• They have minimum means of recovery

• Success of microfinance schemes show the poor can and

want to save

• Savings and credit are used unproductively

• The poor need a safety net to escape poverty

“Insurance is being recognized

as an important tool for

poverty alleviation”

Providing microinsurance

The challenges

• Coverage

• Regulation

• Moral hazard and Fraud

• Adverse selection

• Education and trust

• Technical expertise

• Affordability

• Retention

• Sustainability

Providing microinsurance

The possibilities

• The cooperative microinsurance model

History of organising the poor

Operate for the interest of members by

members

Trust

Ownership and loyalty

Peer pressure

Surplus reinvested or redistributed

Providing microinsurance

The possibilities

• The partner agent model

No-risk fee for microinsurance provider

Better coverage for policyholder

Access to new market

Pooling of risks between informal and formal

sector

Providing microinsurance

The possibilities

• The donor agent model

Access to expertise

Financial sustainability

Guiding hand

The need in Muslim countries

• Social services inadequate or unavailable

• Large sectors of poverty in many Muslim countries

• Over half of world’s lowest developed countries have a

majority Muslim population

• Increasing inequality in Middle East and Gulf countries

“Takaful is the second most

important social institution to

counter poverty and

deprivation”

Omar Fisher,1999

How can microtakaful be

provided?

• Establish informal microtakaful schemes

• Encouragement of pro-poor organisations

• Education of government and donor

agencies

• Involvement of Takaful sector

Technical expertise

Financial assistance

Partner-agent model

Islamic Insurance in Non-

Muslim countries

Takaful in Non-Muslim Countries

Is there a need?

Country Est. Muslim Country Est. Muslim

population population

Argentina 800,000 Italy 600,000

Brazil 1 million Japan 1.3 million

Canada 500,000 Kenya 8.4 million

France 4.8 million Netherlands 500,000

Germany 3 million UK 2 million

Takaful in Non-Muslim countries

Is there a need?

• Fasting growing immigrant population

• Belief in will of God

• Acceptance that insurance is not allowed

• First and second generations are

purchasing insurance

• Increased availability of information

• Development of Islamic financial sector

Takaful in Non-Muslim countries

The challenges

• Dispersed population

• Capital requirements

• Regulation

• Awareness

• Credibility

• Technical expertise

Ruling by the European Council of Fatwa

and Research

“… It is well known that in most non-Islamic countries there

are cooperative and mutual insurance companies. There is

no harm from the Shari`ah point of view to participate in

these services. So, it is unlawful for a Muslim living in a

country where there is such a cooperative insurance

company to make an agreement with a commercial

insurance company…..”

Ruling by the European Council of Fatwa

and Research

Muslims are obliged to purchase their statutory

insurance requirements from the cooperative and

mutual insurer if there is no Takaful company in the

country

The case of Folksam - Sweden

• 350,000 Muslim population

• Fastest growing immigrant community

• Collaboration with Swedish Muslim Council

• Marketing of Folksam products through

representatives of Council in communities and

mosques

• Insurance committee has been established

The Possibilities in Non-Muslim countries

There is a growing awareness and demand for Islamic

financial instruments including insurance in non-Muslim

countries. There is a great potential for established

financial institutes to set up Takaful windows. In particular

the Shari’ah ruling presents an opportunity for cooperative

and mutual insurers to penetrate this niche market with

minimal costs.

Conclusions

• Takaful sector is firmly established

• Growing rapidly

• Micronsurance/takaful is an important tool for poverty

alleviation

• Increasing awareness of Takaful in Non-Muslim countries

• Development of Takaful in Non-Muslim countries can

encourage greater participation into insurance market

Thank you

www.icmif.org/takaful

← Older revision		Revision as of 15:29, 8 November 2017
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← Older revision	Revision as of 02:25, 21 September 2016
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	+
	+
	+	== Top 20 FREQUENT WORDS ==
	+	takaful 23
	+	insurance 20
	+	muslim 17
	+	countries 14
	+	sector 9
	+	model 8
	+	cooperative 7
	+	islamic 6
	+	microinsurance 6
	+	mutual 6
	+	population 6
	+	challenges 5
	+	poverty 5
	+	awareness 4
	+	council 4
	+	established 4
	+	financial 4
	+	growing 4
	+	possibilities 4
	+	providing 4
	+
	+
	+
	+	== DOCUMENT KEY POINTS ==
	+	*million netherlands germany million uk million
	+	*takaful in non muslim countries is there a need country est
	+
	+	*ruling by the european council of fatwa and research a it is well known that in most non islamic countries there are cooperative and mutual insurance companies
	+	*so it is unlawful for a muslim living in a country where there is such a cooperative insurance company to make an agreement with a commercial insurance companya
	+
	+	*the possibilities in non muslim countries there is a growing awareness and demand for islamic financial instruments including insurance in non muslim countries
	+	*in particular the shari ah ruling presents an opportunity for cooperative and mutual insurers to penetrate this niche market with minimal costs
	+
	+
	+	''Please note, This is an auto generated summary based on sentances position in the document and other factors''
	+	== DOCUMENT WORD ANALYSIS ==
	+	=== Main Category ===
	+	: AlHuda Material\takaful
	+
	+
	+	=== KeyWords ===
	+	taka islam insur malaysia productdeferred shariah countries muslim financial retakaful model growth custom partner developed service mutual bankable provided scheme
	+
	+
	+
	+	== RELATED DOCUMENTS ==
	+	:[[A Review of Takaful by Prof. Khawaja Ahmed Saeed]]
	+	:[[Agency Management,Training and Incentive Programme]]
	+	:[[Audit Issue of Islamic Banking]]
	+	:[[Banca Takaful by Faisal Shahzad Abbassi]]
	+	:[[Best Practices from e- Insurance to e-Takaful by Sami Guello]]
	+	:[[Calculated Risks, Measurable Results]]
	+	:[[Challenges & Issues Faced by Takaful Industry by Mr. Imtiaz ]]
	+	:[[Co-Operative Insurance and Takaful]]
	+	:[[Current Achievements of Takaful by Dr. S. J Malaikah]]
	+	:[[International Cooperative & Mutual Insurance Federation]]
	+	:[[Islamic Banking And Finance Malaysia’s Experience And Achiev]]
	+	:[[Islamic Finance & Investment Symposium by Sohail Jaffar]]
	+	:[[Islamic Insurance in 21st Century by Ahmad Feizal]]
	+	:[[Islamic Insurance Opertunities and Challenges]]
	+	:[[Issues and Challenges in Retakaful by Azman Ismail]]
	+	:[[Leveraging BancaTakaful as a Key Growth Channel by Mr. Rohai]]
	+	:[[Life Family Takaful by Mr. P Ahmed]]
	+	:[[Micro Insurance Co-Operative and Takaful]]
	+	:[[Micro Takaful by Shabir Patal]]
	+	:[[Microinsurance and Takaful]]
	+	:[[Microinsurance, cooperatives and Takaful]]
	+	:[[MicroTakaful – the way forward by Capt. M. Jamil Akhtar]]
	+	:[[Opertunities in Islamic Insurance]]
	+	:[[Present Scenario and Future Potentials of Takaful by Kazi Md]]
	+	:[[ReTakaful by Rohail Ali Khan]]
	+	:[[Syariah Compliant General Takaful Products by Sami Guellouz]]
	+	:[[Takaful and Mutuality by Mohd. Masua Billah]]
	+	:[[Takaful by Abdul Rahim]]
	+	:[[Takaful for Microfinance]]
	+	:[[Takaful Opperunities and Challenges By Azeem Pirani]]
	+	:[[Takaful Products Family Takaful Linked Investment Plans by S]]
	+	:[[Takaful World Prospective Middle East & North Africa]]
	+	:[[Takaful]]
	+	:[[Takful - Zubair Mughal]]
	+	:[[Takful Report]]
	+	:[[The Islamic Vision Presentation]]
	+	:[[The Success of Retakaful by Farid Benbouzid]]
	+
	+
	+
	+	== DOCUMENT REFERENCES ==
	+
	+
	+	=== Number of Pages ===
	+	30
	+
	+
	+	=== Published Date ===
	+	2016-09-17 01:18:12
	+
	+
	+	== Full Document ==
	+
	+
	+	[http://45.40.136.134/~hodhood/HodHoodDocuments/IslamicFinance/Takaful/Islamic%20Insurance%20Opertunities%20and%20Challenges.pdf Read the Full Document]
	+
	+
	+	[[Category:Islamic Finance]]
	+
	+	[[Category: Takaful]]