December 12, 2023

In Muslim countries where traditional insurance is considered non-Shariah compliant, an alternative insurance model called takaful is used. Takaful (the word is derived from the Arabic verb "kafala", which means "mutual provision of guarantee") is based on the principles of solidarity and mutual assistance, in which the participants of the contract of "Islamic insurance" provide mutual support to each other in case of damage caused to any of them, as well as on a special mechanism of distribution of profits and losses among all participants of the contract, who are exposed to the same type of risks.

A feature of takaful insurance is that the participants in the contract pay their contributions to the company as a gift with the condition that the company will return the money upon the occurrence of an insured event. In the event of a shortfall in the insurance fund, the participants are jointly and severally liable to pay the indemnity at their own expense. Another part of the premiums paid is directed to a special accumulation fund, from which the policyholders are paid a regular income regardless of the occurrence of an insured event in the proportion agreed in the contract. It is usually 50 or 60%. However, investments should be made only in stocks or activities that are not contrary to the principles of Shariah.

The first attempts to introduce takaful insurance were made in 1970 in Egypt, Sudan and UAE. In 1985, the Council of the Islamic Academy of Jurisprudence under the Organization of the Islamic Conference (OIC) issued a fatwa "On Insurance and Reinsurance" that recommended Muslim countries to develop takaful.

Today, the global takaful insurance market is estimated at 31.7 bln. USD by the end of 2022. Experts forecast the takaful insurance market will reach 126.8 bln. USD by 2032, growing at a CAGR of 15.2% from 2023 to 2032.