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Takaful Islamic Insurance: Concepts and Regulatory Issues by Volker Nienhaus, Rifaat Ahmed Abdel Karim, Simon Archer

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Chapter 11

Investment Portfolios of Takaful Undertakings

Dr. Abdulrahman Tolefat

Although the takaful industry has been gaining substantial growth and interest since the Islamic Financial Services Board began operations in early 2003, there is still an absence of relevant statistics pertaining to the industry. Hence, this research was conducted by the author. The relevant research data gathered and presented in this chapter could be considered as a first step toward understanding the investment behavior of takaful companies.

The hybrid structure of takaful, which is in contrast to that of conventional insurance undertakings, requires special attention once an investment strategy is under investigation. In particular, the investment strategy for each of the funds under the takaful structure should be individually studied. These funds comprise the shareholders' funds of the takaful operator on the one hand, and the funds of takaful participants (policyholders) on the other hand. Moreover, the latter include underwriting or risk funds and, in the case of life (or family) takaful, the participants' investment funds. The underwriting or risk funds include mortality risk funds in family takaful and, in the case of general (non-life) takaful, the relevant underwriting funds (for example, that for motor insurance) referred to below as “general funds.” The reason for the need for individual study lies in the different nature of the liabilities under each fund, which calls for a different ...

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