Introduction of Takaful History:
Takaful means ‘Kafala’ which means a guarantee. Takaful lies on the foundation of the principles of Ta’awun (mutual assistance) and Tabarru’ (gift, donate). a group of people guarantees each other assistance in terms of money in case of any mishap. The legitimacy of Takaful based on the Quran and Sunnah was proved by the holy prophet when practiced by ancient Arabs.
It is a not-for-profit setup whereby a common pool for participants (policyholders) is made which is run by Takaful Operator who separates the premium payments into the participant’s account (amount invested in shariah-based activities) and tabarru’ accounts (amount spent on claims in loss events).
There are two types of takaful: general takaful and family takaful. In General Takaful, properties or assets are insured for one year. Following Takaful products are offered: motor/vehicle Takaful, fire Takaful, engineering Takaful and marine Takaful.
In Family Takaful, a person or his family is protected in case of disability and death. Demand for Sharia insurance products is augmenting in European countries like the United Kingdom, France and Germany, Switzerland, Belgium, and Australia. A fatwa committee in Europe, the European Council for Fatwa and Research declared conventional commercial insurance prohibited because of interest, uncertainty, and gambling.
A short timeline of the evolution of takaful history is mentioned below:
1800 to 1975: The first Islamic scholar, Ibn Abidin formed the Islamic Insurance.
1906: Muhammad Baqit, Egypt’s Mufti, acknowledged Ibn Abidin’s description of insurance.
1976: Mutual protection was reaffirmed as adequate insurance during the inaugural international conference on Islamic Economics in Makkah, Saudi Arabia.
1979: The first Islamic insurance company was established in Sudan in 1979.
1984: The Takaful Act was first accepted in Malaysia.
1986: The fundamental concept of takaful was established during the second session of the Council of Islamic Fiqh (jurisprudence).
1990: Scientific publication of Islamic insurance in Islamic Law.
2006: First study on the determinant of takaful demand.
2009: First publication on Governance in Takaful company.
2009: First publication on organizational performance of takaful.
2010: First publication on the efficiency of takaful organization.
2011: First publication on Human Resources of Takaful.
2016: First publication on Corporate Social Responsibility and takaful.
2007: First publication on takaful models.
Establishment of takaful history in 47 jurisdictions across 7 regions:
A short history of the evolution of takaful is discussed in 47 jurisdictions across 7 regions, i.e. GCC, Levant, Asia, Central Asia, Africa, Europe, and others. Here 7 regions are discussed however 47 jurisdictions are discussed briefly in terms of names of a few regions.
Saudi Arabia:
In Takaful History, Insurance was first established in the 1950s via foreign agents and branches. The first local insurer was the Red Sea Company in 1974. In 1977, a legal, religious ruling (Fatwa) was issued by the Permanent Committee no.5 1397H, to disallow conventional insurance.
Pakistan:
In Takaful History, the insurance sector in Pakistan is dominated by foreign insurance companies. Life and general insurance businesses were nationalized in 1972 and 1976, respectively. Which later on were liberalized in the 1990s. In 2003, Pakistan’s Shariah scholars conducted a meeting at the University of Darul Uloom Karachi to address the permissibility of takaful. In 2005, the Securities and Exchange Commission of Pakistan issued Takaful Rules 2005 and established Pak Kuwait Takaful Co. Limited. Takaful Rules were updated in 2012 whereby conventional insurance companies can open takaful window operations to increase the takaful market share.
Sudan:
In Takaful History, the insurance concept was introduced in Sudan due to the agencies and branches of British, Swiss, French, Italian, and Egyptian companies which were operated by local institutions working in foreign trade. Insurance Regulation and Insurance Control Act of 1960 was passed which lay the foundation of General Insurance Company (Sudan). Islamic Insurance Company was established in 1979 to address a critical problem faced by an Islamic Bank.
Insurance controller affiliated with the Ministry of Commerce which transformed into Ministry of Finance. The enactment of the Insurance Supervision and Control Act of 1992 required all insurance companies to operate on the Islamic cooperative insurance model.
Morocco:
In Takaful History, the Moroccan Parliament approved Law 59–13 for governing takaful in 2019 which later amended to Law 17–99 on the Insurance Code that was promulgated on 06/10/2016, after directives of the High Council of Ulema. Supervisory Authority for Insurance and Social Welfare (ACAPS), was established in 2016 based on Law No. 64–12.
In 2021, ACAPS issued a specific circular for takaful regarding takaful licenses to Wafa Takaful, Attakafulia Assurances, and Taaouiniyate Taamine Takafuli. In 2022, La Marocaine Vie and SCR were also granted licenses in 2022.
United Kingdom:
In Takaful History, the UK is a prominent financial hub and market. Some initiatives were taken to encourage Islamic finance. In this regard, licenses were granted to five Islamic banks and issuing sovereign Sukuk. First Takaful was introduced by Takaful UK Ltd., in 1983. In 2006, Lloyd’s of London established the first Takaful syndicate by the Creechurch Underwriting Limited in partnership with the Islamic Arab Insurance Company (SALAMA).
Principal Insurance Holdings Limited, a full-fledged Shariah-compliant Islamic insurer, was authorized by the Financial Service Authority whereby Salaam Halal Insurance (Salaam) in July 2008 was offered.
France:
In Takaful History, Islamic insurance was allowed in the French market via conventional insurance players, brokers, and agents in 2013 like Salam of Swiss Life and Amâne Exclusive Life of Vitis Life (Grassa and Hassan, 2015). Azurite Courtage, an insurance broker, developed takaful products with the partnership of insurance carriers.
Some brokers have to specialize in offering takaful products in the French market such as Noorassur and SAAFI. However, no takaful regulation is issued by the regulatory body in France.
Canada:
A takaful product I.e. home and auto in 2008 was offered by Ansar Cooperative Housing Corporation, with the partnership of Cooperators Insurance Group. According to the Chairman of Ansar Financial Group, the cooperative needed to raise awareness and invest 70% of its premium in fixed-income products. However, there are no takaful regulations in the country.
United States:
Takaful entered North America in general via First Takaful USA in 1996. In 2008, Risk Specialists Companies Inc. (RSC), a subsidiary of AIG Commercial Insurance, offered the first takaful homeowners product for the US market. Zayan Takaful was established in 2009 to offer takaful products. Takaful regulation does not yet exist in the country.
