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» Challenges For The Islamic Cooperative Insurance Industry

The key issues are:

Changes in the re-insurance market make access to their services easier due to the appearance of established foreign insurance companies providing domestic outlets for Takaful.

Domestic Takaful has some problems due to a decrease in the number of Takaful companies in some countries with some having only one or two thus not being able to spread risk more widely. The hope is that more Takaful companies will emerge. There is also a lack of co-operation between domestic and foreign Takaful companies which further decreases the spread of risk.

Takaful funds achieve either a surplus or a deficit which can both pose challenges:

A surplus currently can be distributed to subscribers who have not received compensation or, to subscribers who have received compensation or whose compensation was less than their premiums. However, these do not follow the donation principle of Islamic insurance. Ideally a surplus should be distributed to all subscribers according to their shareholding without regard to previous compensation.

A deficit poses similar problems as most Takaful companies require that shareholders provide a “good loan” (Quard Hassan) to make up the shortfall. This is then repaid in subsequent years from surpluses. This however clashes with the preferred method of distributing surpluses.

In conclusion, it was suggested that the mechanisms utilized to deal with surpluses and deficits should be determined by consulting the subscribers to the fund.