Transparency and Financial Reporting in Islamic Insurance
Awareness of Islamic insurance (also known as takaful, the Arabic word for “solidarity”) has been increasing in Muslim countries, and this has enhanced the acceptance by the public of Islamic insurance products, be they general or family products. This acceptance has resulted in the establishment of a number of Islamic insurance companies in the Middle East and Southeast Asia, in addition to those companies established in the 1970s and 1980s. Islamic insurance companies are also currently being established in European countries that have a significant Muslim community, such as the United Kingdom.
Islamic insurance companies face the same challenges as conventional insurers. The public and the markets are requesting greater transparency and better financial reporting. Transparency is required in order to better reflect the structure of the companies that are being established, as well as in the reporting of their performance and financial position. Transparency is also requested in connection with stakeholders' rights, including those of policyholders.
An increasing number of conventional insurers have adopted the International Financial Reporting Standards as their main reporting framework to stakeholders. This has helped make financial reporting, to a certain extent, comparable and relevant. However, Islamic insurers have different structures and face different ...