Revisiting Takaful Insurance: A Survey on Functions and Dominant Models

Abstract

Takaful is a growing and fast-developing industry, which offers an insurance policy that complies with Islamic law. Such business is highly recommended by most Muslim scholars because it reflects the real meaning of brotherhood in protecting individual and corporate bodies against loss or hazards to themselves and their properties. As a result, a number of operational models have been applied by takaful operators 1 by adopting one or more contracts, such as Mudarabah, wakalah or waqf. This paper will therefore highlight important issues that deal with the background of Islamic insurance in terms of definition, functions, as well as exploring takaful contract constructions and various mechanisms linking the contract parties. Finally, this paper will highlight the most dominant and practiced models used by takaful operators worldwide.