Takaful (Islamic Insurance)
Permissibility and structure of takaful
Takaful (Islamic cooperative insurance) is permissible. Participants contribute to a mutual fund (tabarru') with the intention of mutual help. The operator manages the fund as mudarib (investment manager) or wakil (agent). Surplus belongs to participants, not the operator.
Accounting and Auditing Organisation for Islamic Financial Institutions
Full Ruling
Takaful is structured as a cooperative risk-sharing arrangement (ta'awun) based on the contract of tabarru' (donation/contribution). Under the wakala model: (1) Participants contribute premiums as tabarru' (donation) to the takaful fund. (2) The operator manages the fund as wakil (agent) for a predetermined fee. (3) Claims are paid from the fund. (4) Any surplus is returned to participants or carried forward. The mudarabah model allocates surplus between participants and operator in pre-agreed ratios.
Rationale & Reasoning
Takaful eliminates the prohibited elements of conventional insurance: tabarru' removes the 'exchange' nature that creates gharar; the cooperative structure eliminates maysir; and investment of funds in Shariah-compliant instruments removes riba.
Rule Basis (Daleel)
- 01Contract of tabarru' (donation)
- 02Principle of ta'awun (mutual help)
- 03AAOIFI SS-26
Citations & Sources
AAOIFI Shariah Standard No. 26 – Islamic Insurance
AAOIFI · 2010
Ref: SS-26
OIC Fiqh Academy Resolution No. 52/2/6 – Insurance
OIC International Islamic Fiqh Academy · 1990
Ref: 52/2/6