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Hoyle, Mark --- "Takaful Insurance: Squaring the Insurance Circle in Islamic Law" [2012] ELECD 174; in Burling, Julian; Lazarus, Kevin (eds), "Research Handbook on International Insurance Law and Regulation" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on International Insurance Law and Regulation

Editor(s): Burling, Julian; Lazarus, Kevin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849807883

Section: Chapter 20

Section Title: Takaful Insurance: Squaring the Insurance Circle in Islamic Law

Author(s): Hoyle, Mark

Number of pages: 19

Extract:

20 Takaful insurance: squaring the insurance circle in
Islamic law
Mark Hoyle



1. INTRODUCTION
Islamic insurance is usually referred to as `takaful', which essentially means `shared-
responsibility' or `guaranteeing each other'. It is derived from the word `kafl', which
means `guarantee' or `responsibility'. Takaful insurance is based on rules and principles
either derived from, or consistent with, the Sharia (and Islamic law), and can be
characterised as an Islamic form of cooperative or mutual insurance, but one which is
available to the general public.
In order properly to understand the issues facing takaful, the structures and principles
behind takaful must be understood. The legal and regulatory framework surrounding
takaful is still in its infancy, with the most developed systems of Islamic finance and
takaful being found in Malaysia. Although several Middle Eastern, Asian and some
European countries offer takaful insurance products, they do not all have the legal and
regulatory framework in place that is necessary to ensure competitiveness in the market
place, stability, transparency and efficient financial reporting.
This chapter will outline the basic concepts and structures of takaful insurance and
attempt to deal with some of the legal and regulatory issues facing takaful around the
world.


2. TAKAFUL
Under a takaful system of insurance, participants make contributions to a fund to cover
claims for insured events, whilst also benefiting from any returns generated by the
investment of the fund in Sharia-compliant vehicles. Non-Muslims are free to participate
together with Muslims. Unlike conventional insurance, the contributions are ...