Conceptual, Legal, and Institutional Issues Confronting Takaful
While the last decades of the 20th century saw the emergence of Islamic banking as a significant development in a number of predominantly Muslim countries, takaful (Islamic insurance) has been slower to emerge. This is in spite of the fact that schemes for mutual protection against losses have traditionally existed in Islamic societies. As will be seen from the analyses presented in this book, modern versions of such schemes face a number of highly complex juristic,1 institutional, legal, and regulatory issues some of which are far from being resolved. In addition, it should be noted that the conventional insurance industry also faces major regulatory issues, in which it may be thought to lag behind banking with particular respect to international prudential standards on solvency, capital adequacy and related matters (there being as yet no insurance equivalent to Basel II), and financial reporting. Work is, however, in progress, which will be described briefly below.
The first modern takaful undertaking was founded in Sudan in 1979. Its foundation was due to the solution by a Sudanese Shari'ah scholar2 of a juristic problem: how may the Shari'ah prohibition of trading in insurance (and in indemnities and guarantees more generally) be overcome? Part of the solution lies in the adoption of a mutual structure for underwriting insured ...