Transcript Document
ISLAMIC INSURANCE SYSTEM
RENAT BEKKIN
PhD in Law, Moscow State Institute of International Relations (University), Ministry of Foreign Affairs of Russia
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CONTENTS
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Insurance in Quran and Sunnah Islamic scholars on insurance Unlawful elements in insurance contract Fatwas on insurance What is takaful?
Key features of takaful Takaful glossary
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CONTENTS (continued)
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Short history of Islamic insurance Types of takaful business Mutual insurance vs commercial insurance Legal regulation Takaful models Takaful worldwide Challenges facing Islamic insurance
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INSURANCE IN QURAN AND SUNNAH "
And help one another in righteousness and piety and do not help one another in evil deeds and enmity
" (Quran : Al Maidah, 2).
"
Be sure we shall test you with something of fear and hunger, some loss on goods, lives and the fruits (of yours toil), but give Glad tidings to those who patiently persevere, - Who say, when afflicted with calamity "To Allah we belong and to him is our return
". (Quran : Al-Baqara,155-156).
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INSURANCE IN QURAN AND SUNNAH (continued) The Prophet said, "
Tie your camel first, then put your trust in Allah
" (reported by at-Tirmidhi and Ibn Majah).
“
He who relieves someone in difficulty will be relieved by Allah in this life and in the Hereafter. And he who protects a Muslim will be protected by Allah in this life and in the Hereafter. Allah helps His slave as long as the slave helps his brother
…” (reported by Muslim).
“
Verily, it is better for you to leave your off-spring wealthy than to leave them poor, asking others for help
” (reported by al-Bukhari).
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ISLAMIC SCHOLARS ON INSURANCE There are three main opinions among Shariah scholars on conventional insurance contract: The insurance contract is permissible with two conditions: that it contains no
riba
clause and that its subject be legitimate.
Only life Insurance is not permissible.
Insurance contains elements of
gharar
,
maysir
and
riba
and therefore is not permissible (
haram
).
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UNLAWFUL ELEMENTS IN INSURANCE CONTRACT
Gharar
(Arabic ‘danger’) - element of uncertainty in the subject matter of a contract or as regards the price of the goods, or any speculative risk.
Gharar
can be characterized as the sale of what is not present.
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UNLAWFUL ELEMENTS IN INSURANCE CONTRACT (continued) Three categories of
gharar
: - excessive
gharar
(
al-gharar al-kathir
); - trifling
gharar
(
al-gharar al –yasir
) ; - average
gharar
(
al-gharar al-mutawassit
).
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UNLAWFUL ELEMENTS IN INSURANCE CONTRACT (continued) Maysir (
Arabic
‘ gambling ’ ): initially, a game of chance that was common in pre-Islamic times among the Arabs. In the broad sense: any action aimed at an easy material gain (without investing work or capital).
“ O ye who believe! Intoxicants and gambling, sacrificing to stones, and (divination by) arrows, are an abomination, - of Satan's handiwork: eschew such (abomination), that ye may prosper ” (
Quran : Al Maidah, 90
).
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UNLAWFUL ELEMENTS IN INSURANCE CONTRACT (continued) Riba (
Arabic
‘ increase, accretion ’ ): in a loan contract, interest on the principal charged by the lender when providing funds to the borrower. In the broader sense: any interest in commercial and financial transactions enabling one of the parties to achieve material gain at the expense of the other party, without providing adequate compensation.
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UNLAWFUL ELEMENTS IN INSURANCE CONTRACT (continued)
Other arguments against the validity of insurance contract:
insurance encroaches on the rights of Allah (insuring one ’ s life); risk is traded, not shared; against the principles of
mirath
; insured has no share in profit of company; etc.
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FATWAS ON INSURANCE
1977 – Fatwa of Higher Council of Saudi Ulama ’ 1978 – Fatwa of Fiqh Council of Muslim World League 1985 – Fatwa of Islamic Fiqh Academy (OIC) WWW.BEKKIN.RU/ENG
FATWAS ON INSURANCE (continued)
1985 – Fatwa of Islamic Fiqh Academy (OIC): “
The commercial insurance contract … which is commonly used by commercial insurance companies, is a contract, which contains major element of risk, which voids the contract and, therefore, is prohibited (haram) according to the Shariah
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WHAT IS TAKAFUL?
Takaful (Arabic ‘ mutual provision of guarantees ’ ): Islamic insurance. System based on the principles of solidarity and mutual assistance, under which the parties to the contract support each other when any of them suffers a loss (which means primarily a monetary compensation).
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WHAT IS TAKAFUL? (continued)
“ takaful means a scheme based on brotherhood, solidarity and mutual assistance which provides for mutual financial aid and assistance to the participants in case of need whereby the participants mutually agree to contribute for that purpose ” (Takaful Act 1984, article 2)
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KEY FEATURES OF TAKAFUL
takaful is free from excessive gharar (al-gharar al- kathir); the installments paid, or a part thereof, may only be used in operations that are permitted by
Shariah;
the takaful business is commonly based on a profit sharing mechanism known as mudharabah; the business of a takaful company is supervised by the Shariah Supervisory Board; takaful, as opposed to conventional insurance, does not contravene the Shariah law of inheritance.
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TAKAFUL GLOSSARY
General takaful Family takaful – – Islamic non-life insurance Islamic life insurance
Mudharabah
Operator – – investment partnership insurer Participant –
Tabarru
’ – policyholder, insured donations of participants Wakeel - agent
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SHORT HISTORY OF ISLAMIC INSURANCE
1979 – Islamic insurance company (Sudan) 1979 - Islamic Arab Insurance Company (UAE) 1984 – Takaful Act (Malaysia) 1985 – Takaful Malaysia Berhad (Malaysia) 1997 – Retakaful company (Asean Retakaful International, ARIL)
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TYPES OF TAKAFUL BUSINESS
General takaful
Family takaful
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GENERAL TAKAFUL
Motor takaful scheme;
Accident takaful scheme;
Marine takaful scheme;
Engineering takaful scheme; etc.
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FAMILY TAKAFUL
Individual family takaful plans;
Takaful mortgage plans;
Takaful plans for education;
Group takaful plans;
Health/medical takaful.
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MUTUAL INSURANCE VS COMMERCIAL INSURANCE
Islamic insurance can be performed in two forms:
Mutual insurance society
Commercial insurance company
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LEGAL REGULATION
Monistic model (Sudan)
Dual model (Bahrain, Malaysia, etc.)
Conventional model (Great Britain, Russia, etc.).
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TAKAFUL MODELS
Pure mudharabah
Wakalah model
Modified mudharabah (mudharabah+ wakalah)
Wakalah model with waqf
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PURE MUDHARABAH MODEL
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WAKALAH MODEL
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WAKALAH MODEL WITH WAQF
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TAKAFUL WORLDWIDE
The number of takaful operators worldwide: - 75 takaful operators (including takaful windows) - 5 retakaful operators Total assets: USD 1,5 billion Contributions: USD 600 mln.
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TAKAFUL WORLDWIDE
Share of takaful in insurance industry
Malaysia: 27 % of total insurance market
Asia Pacific: 9% of total insurance market
Middle East: 63 % of total insurance market
EU and US: 1 % of total insurance market The takaful and retakaful market is expected to grow to $10-12 billion by 2010 .
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CHALLENGES FACING ISLAMIC INSURANCE
Legal regulation
Investment restrictions
New products and concepts
Competitive pricing and service
Accounting standards
Technical expertise
Harmonization of the takaful practises and operations around the world
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CHALLENGES FACING ISLAMIC INSURANCE (continued)
Distribution channels
Lack of insurance awareness
Human resources
Lack of uniformity in Shariah decision on
takaful
Rating
Retakaful capacity
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Azerbaijan Diplomatic Academy Summer School “Islam in the Contemporary International Affairs” , Baku , Azerbaijan, 11-20 July 2008
THANK YOU FOR YOUR ATTENTION!
© R.I. BEKKIN WWW.BEKKIN.RU/ENG