Takaful
or Islamic insurance has been growing significantly since the last three
decades when the first takaful established in Sudan in 1979 following several
“fatwa” by Shariah scholars that insurance contracts contradict the Islamic
business principles and contains the elements of gharar, maisir and riba.
With
a steady double digit growth in the last several years and an estimated of 14%
growth in 2014 to reach US$14 billion, global takaful
industry is expected to record US$20 billion
by 2017, according to EY Global Takaful Insights 2014. Even though takaful assets comprise a small
proportion of global Islamic finance assets of about US$2 trillion, it plays an
important and significant role in determining the future of global Islamic
finance.
Takaful
business has been established is many parts of the world today however there
are only three key markets which contribute significantly namely, Saudi Arabia,
Malaysia, and United Arab Emirates (UAE) with total contributions of US$6.8b, US$3.0b
and US$1.3b, respectively in 2014. In
Saudi Arabia, there is no takaful company as per those operated in other
countries like in Malaysia however the insurance and takaful industry is bound
under the cooperative business model which is acceptable to the Shariah
principles.
Global Gross Takaful Contribution by Region,
2009 – 14f
Source:
EY, Global Takaful Insights 2014
Indonesia
as the biggest Muslim population in the world of about 200 million people
recorded merely about US$1 billion takaful contribution in 2014. Besides, there are few other countries with
significant number of Muslim population for instance Turkey, China, African
countries, and CIS regions (former Soviet Republics) such as Kazakhstan,
Tajikistan, Turkmenistan and Uzbekistan, had yet to establish Islamic finance
including takaful extensively. Thus,
there are huge growth potential for takaful in the near future. In fact, there are several initiatives to
introduce Islamic finance including takaful in Rusia, Eastern Europe, and
African countries recently.
In
terms of takaful regulatory framework, Malaysia takes the lead in introducing
the relevant laws and guidelines to promote financial stability and growth in
the country. Islamic Financial Services
Act (IFSA) was introduced in 2013 which consolidates few acts including Takaful
Act with several enhancements in provisions. Among broad range of guidelines
introduced or enhanced by Malaysian authority which directly impacting takaful
are Risk-Based Capital Framework for Takaful Operators, Guidelines on Takaful
Operational Framework, and Shariah Governance Framework for Islamic Finance
Institutions.
Takaful industry is
expected to continue the growth momentum in the near future with new emerging
markets in certain parts of the world.
Thus, this book is intended to address several pertinent frequently
asked questions pertaining takaful business based on current market practices
as a quick source of references for new and existing interested parties.
