Takaful

Practical Law Glossary Item 4-500-7080 (Approx. 3 pages)

Glossary

Takaful

A method of providing insurance in a manner compliant with Sharia. Traditional insurance products are not permissible (or haram) under Sharia because they contravene the principles against gharar and maisir. Unlike conventional insurance in which risk is transferred from the insured party to the insurer, takaful transactions are based on the Islamic principles of mutual assistance and risk sharing. In a takaful transaction:

The insured parties (known as participants) establish a fund that is managed by the insurer.
The insurer invests the funds in Sharia-compliant assets.
If one of the insured suffers a loss, he is compensated from the fund.

For more information on takaful in the US, see:

Practice Note, Islamic Finance: US Law Overview.
Practice Note, Understanding Takaful: Ethical and Fair Islamic Insurance.
Islamic Finance Deal Structure: Takaful.

For more information on takaful in the UK, see Practice notes:

Islamic finance: UK law overview.
Islamic finance: development of the UK as an Islamic finance centre.

Takaful | Practical Law

Takaful

Practical Law Glossary Item 4-500-7080 (Approx. 3 pages)

Takaful