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

Chapter 3

Takaful Models and Implementations, Trends, and Developments

The Islamic insurance industry usually refers to the word takaful, which is an Arabic verb meaning joint guarantees or solidarity. In practice, it can be defined as a pact among a group of participants to jointly guarantee each other against any risk or misfortune in the future (Syarikat Takaful Malaysia, 2002c). The Takaful Act 1984 of Malaysia defines takaful as “a scheme based on brotherhood, solidarity and mutual assistance which provides for mutual financial aids and assistance to the participants in case of need whereby the participants mutually agree to contribute for that purpose.” The first takaful operating company was established in Sudan in 1979, followed by many companies in the GCC and Malaysia. This chapter concerns the existing practices of the takaful industry, particularly the operational models practiced by takaful operating companies. The models explained in this chapter were explored mainly through the open discussion with takaful companies’ leaders during the interview. Based on discussions during the interview, the author created diagrams for each model, which clarified the flow of contributions. Moreover, a distinction was made between general and family takaful once each model was reviewed. This was due to difference in the takaful company’s structure once general or family takaful is under investigation. Finally, this chapter also discusses the future trends and prospects for this industry, ...