Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia

Chapter 2

Insurance and Islamic Law: An Introduction to Takaful

The teachings of Islam have to be consulted and considered fully in all aspects of Muslim life regardless of time and era. This is due to the fact that Islam includes comprehensive and flexible doctrines that are applicable to all circumstances. All practices, both new and old, must be filtered through and investigated according to Shari’ah (Islamic law) principles in order to decide whether they are acceptable in Islamic terms; this includes economics, finance, and insurance contracts and transactions. As insurance is a new financial contract, it is crucial that it be examined to ascertain whether it is permissible under Islamic law. This chapter provides a summary of the opinions of jurists and researchers who have examined the insurance contract from the perspective of Islamic law.

The literature review is divided into three parts. The first part deals with the validity of insurance as a concept in order to ascertain whether it complies with Shari’ah principles. The second part goes on to outline contemporary jurists’ views regarding the insurance contract in its different forms (i.e., cooperative, mutual, and commercial). A distinction has been made between the jurists’ individual judgments and their collective verdict to determine whether their decisions differ. The third part looks comprehensively at the various arguments as expressed by jurists and researchers to either validate or invalidate the insurance contract. ...