The International Takaful Summit was held in London on 11 and 12 July 2012 and brought together Takaful and Retakaful practitioners, service providers, and scholars from around the world.
Takaful is a Shariah-compliant mechanism analogous to insurance, although many speakers were at pains to emphasise that it was not simply Shariah insurance. The development of Takaful has followed the strong development of Islamic finance.
Malaysia and the states of the GCC dominate the Takaful market, although the growth rate elsewhere among Muslim communities is strong. Almost a quarter of the world’s population is Muslim and, accordingly, there is a huge potential market to be tapped. Twenty million Muslims live in the EU — of whom over 2 million are in the UK.
One area that attracted considerable interest was the development of micro Takaful, the Shariah sister of micro insurance. As many developing parts of the globe of Muslim, this is a way of providing cover to the poorest. Swiss Re are cooperating in a micro Takaful project with Oxfam. Initiatives in Afghanistan, aimed at stabilising the economic base of that troubled country, were also discussed.
The Summit saw the launch of Dome Advisory Limited’s International Takaful Report: A Shariah and Legal Analysis. The report is a precursor to a lengthier legal treatise, to be published in 2013, entitled Legal Practitioners’ Guide to Islamic Insurance and Reinsurance.
The report, edited by the leading Shariah scholars and lawyers Bilal Khan and Badrul Hasan of Dome Advisory, covers the legal and regulatory basis for Takaful enterprises in various jurisdictions as well as the challenges presented by Solvency II in the EU.
A chapter on Wordings of Retakaful Contracts by Goldberg Segalla partner Clive O’Connell examines the issues involved in drafting Retakaful contract wordings subject to the principles of Shariah. It is possible, under the English Arbitration Act 1996, for the parties to agree that the arbitration is determined under Shariah principles rather than those of English or other law. If this is agreed, however, considerable care is required when drafting the wording.
Principles of law which are usually implied into a contract will not be implied and must be expressed. For example, the remedy for a breach of warranty cannot be assumed but must be spelt out. The parties cannot rely on legal precedent as a guide to interpretation of particular clauses and so those clauses must be drafted with clear and unambiguous language.
Takaful and Retakaful are new areas of risk protection and transfer. There is considerable scope for their growth as ethical instruments within the global Islamic community and possibly outside. Along with micro Takaful, they can help the economic development of a considerable portion of the world’s population. They must not be ignored.
Obtain the full Dome Advisory Limited report here: International Takaful Report - A Shariah and Legal Analysis