Takaful Fundamentals: Ethical and Fair Islamic Insurance

Summary

This practice note explains the concept of ''takaful,'' insurance that complies with Islamic religious law known as ''Sharia law.'' Property and casualty insurance as it is sold in the U.S. is contrary to the tenets of Sharia. This practice note explains the basics of Sharia law and why insurance is against its principles. It also explains how takaful insurance evolved to meet the needs of the public while complying with Sharia law. This practice note also explains why life insurance is acceptable under Sharia inheritance law. It discusses Sharia compliant captives and reinsurers, known as retakafuls. It also highlights some of the challenges to using arbitration as a method of dispute resolution.