Science
Conference

COMPARATIVE ANALYSIS OF CONVENTIONAL INSURANCE AND TAKAFUL: LEGAL AND OPERATIONAL FRAMEWORKS

Oybek Mutalov

Science-Conference.com
Date: December 22, 2024
Download PDF

Abstract

This thesis provides a comprehensive comparative analysis of conventional insurance and Islamic insurance (Takaful) systems, examining their fundamental principles, operational frameworks, contractual relationships, and regulatory approaches. The research investigates how these two models differ in their underlying philosophies, risk-sharing mechanisms, profit distribution methods, and investment strategies. Through detailed case studies from Malaysia, Saudi Arabia, and the United Kingdom, the thesis demonstrates how these systems operate in practice and highlights the challenges they face in different regulatory environments. The study finds that while conventional insurance is based on risk transfer and operates on a profit-maximizing commercial basis, Takaful is founded on principles of mutual cooperation, risk-sharing, and adherence to Shariah principles that prohibit interest (riba), excessive uncertainty (gharar), and gambling (maysir). These differences significantly impact operational structures, with Takaful employing models like Mudaraba, Wakala, or hybrid approaches that separate operator funds from participant funds. The research concludes that despite their philosophical differences, both systems face similar challenges in risk assessment, solvency maintenance, and market competition, though Takaful encounters additional complexity due to Shariah compliance requirements and the necessity for specialized governance frameworks.

Keywords

Insurance, Takaful, conventional insurance, Islamic finance, risk-sharing, Shariah compliance, Mudaraba, Wakala, comparative analysis, regulatory frameworks

References

AAOIFI. (2022). Shari’ah Standard No. 26: Islamic Insurance. Manama: Accounting and Auditing Organization for Islamic Financial Institutions. 2. Abu Dhabi National Takaful. (2022). Annual Report 2022. Abu Dhabi: ADNT. 3. Ahmed, I., Rahman, Z., Ahmed, A., & Khattak, M. (2023). The impact of Shariah governance on Takaful operator performance and customer loyalty. Journal of Islamic Accounting and Business Research, 14(1), 78-96. 4. Al-Amri, K., & Zakaria, S. (2022). Efficiency analysis of Takaful and conventional insurance in Saudi Arabia. Risk Management and Insurance Review, 25(2), 201-223. 5. Allianz SE. (2022). Annual Report 2022. Munich: Allianz SE. 6. Archer, S., Abdel Karim, R., & Nienhaus, V. (2021). Islamic Commercial Law and Economic Development (3rd ed.). London: Routledge. 7. Association of British Insurers. (2023). UK Insurance and Long-Term Savings: Key Facts. London: ABI. 8. Aviva plc. (2022). Annual Report and Accounts 2022. London: Aviva plc. 9. AXA. (2022). Annual Report 2022. Paris: AXA. 10. Ayub, M. (2021). Understanding Islamic Finance (2nd ed.). Chichester: John Wiley & Sons. 11. Bank Negara Malaysia. (2023). Financial Stability and Payment Systems Report 2022. Kuala Lumpur: BNM. 12. Billah, M. M. (2022). Takaful (Islamic Insurance): Concepts and Regulatory Issues. Kuala Lumpur: IBFIM. 13. Campbell, R., Webersinke, A., & Reuse, S. (2022). Insurance Asset Management: Investment Strategies of Life and Non-Life Insurers. Risk Management and Insurance Review, 25(2), 167-199. 14. Deloitte. (2023). Global Takaful Market Report 2023. London: Deloitte Touche Tohmatsu Limited. 15. Dickson, P. G. M. (2023). The Sun Insurance Office 1710-1960: The History of Two and a half Centuries of British Insurance (Reprint ed.). Cambridge: Cambridge University Press. 16. Dowd, K., & Blake, D. (2022). Agency theory and financial services: The case of insurance. Geneva Papers on Risk and Insurance: Issues and Practice, 47(3), 456-478. 17. Eling, M., & Kilgus, S. (2022). Insurance regulation in comparison: Insurance regulatory systems in Europe and the United States. Journal of Financial Regulation, 8(2), 187-218. 18.Etiqa Takaful. (2022). Annual Report 2022. Kuala Lumpur: Etiqa Takaful Berhad. 19. Gatzert, N., & Wesker, H. (2023). Corporate governance in the insurance industry: A review. Risk Management and Insurance Review, 26(1), 5-37. 20. Hassan, M. K., & Lewis, M. K. (2021). Handbook of Islamic Banking (2nd ed.). Cheltenham: Edward Elgar Publishing. 21.Hassan, M. K., & Mollah, S. (2023). Islamic Finance: Ethical Underpinnings, Products, and Institutions (2nd ed.). London: Palgrave Macmillan. 22. Hassan, M. K., Paltrinieri, A., & Dreassi, A. (2023). Takaful and conventional insurance: A comparative analysis. International Journal of Islamic and Middle Eastern Finance and Management, 16(1), 67-89.