What is the meaning of retakaful?

What is the meaning of retakaful?

By definition, retakaful (or Islamic reinsurance) is a contractual agreement under which the ultimate takaful provider (i.e., the reinsurer) will be liable for part or all of the risks which the original takaful provider (i.e., the insurer) has insured.

What is the difference between takaful and retakaful?

Just as reinsurance refers to the concept of “insurance for insurance companies,” retakaful refers to “takaful for takaful companies.” Elements of sharia compliance are the main factors differentiating between a retakaful and a conventional reinsurance operation, because sharia advocacy should remain paramount among …

Why is Retakaful important?

The Retakaful performs two functions. First, it helps to secure significant risks of high financial value, as well as unforeseen or extraordinary losses that companies are unable to insure. Second, it allows Takaful operators to increase their hedging capabilities, and thus increase their earnings.

What is retakaful operator?

The party that underwrites and offers capacity for the ceded risks is called the retakaful operator. A retakaful contract governs the relationship between the two parties; thus, the retakaful operators have direct and close relations with the takaful operators.

What is reinsurance and retakaful?

Retakaful is the Islamic equivalent of conventional reinsurance. The party that cedes the risks i.e. the cedant is Takaful Operator and the party that underwrites and offers capacity for the ceded risks is called the Retakaful Operator. The relationship between the two parties is governed by a Retakaful Contract.

What are the benefits of Takaful?

Takaful is a type of Islamic insurance wherein members contribute money into a pool system to guarantee each other. Takaful-branded insurance is based on sharia or Islamic religious law and covers health, life, and general insurance needs. Any claims made by participants are paid out of the takaful fund.

What is the difference between reinsurance and retakaful?

In addition to the requirement to have sharia compliant assets to support Takaful Liabilities, there is a need for a sharia compliant version of reinsurance. The difference between reinsurance and retakaful is that the former provides a means of smoothening the claims experience of the shareholders.

Why is conventional insurance not allowed Islam?

Conventional insurance is not considered to be Shari’ah1 compliant because it includes three key elements prohibited by Islamic law: uncertainty (gharar), gambling (maysir) and interest/usury (riba).

How the retakaful arrangement works in the takaful industry?

Retakaful as a Fardhu Kifayah Retakaful or conventional reinsurance basically involves two parties to its contract whereby the takaful operator or referred to as a ceding company under conventional reinsurance, aims to limit itself from the burden undertaken from assuming portion of the risk insured.

What are the types of reinsurance?

7 Types of Reinsurance

  • Facultative Coverage. This type of policy protects an insurance provider only for an individual, or a specified risk, or contract.
  • Reinsurance Treaty.
  • Proportional Reinsurance.
  • Non-proportional Reinsurance.
  • Excess-of-Loss Reinsurance.
  • Risk-Attaching Reinsurance.
  • Loss-occurring Coverage.

What is the basis of Takaful?

In principle, Takaful system is based on mutual co-operation, responsibility, assurance, protection and assistance between groups of participants. In other words, it is the provision of shared contributions to help those who are in need.

What are the features of Takaful?

Features of Takaful

  • Mutual risk sharing – instead of passing the risk on to an operator like conventional insurance, the risk is shared by everyone under Takaful.
  • No claim cash back policy – if you don’t make any claims within the coverage period, you will get a certain amount of cash back from your Takaful provider.