Currently there are very few Takaful applicants in the market with very few institutions offering this insurance service on large scale. Though the claim for Takaful is for part insurance based and limited to loss of physical property, there are products in the market targeting family and medical coverage based on shariah principles (Ernst & Young, 2009).
As per to (Ernst & Young, 2009) following trends are seen in Takaful market …show more content…
Each country may decide on the particular model that they want to use. According to (Coopers, 2008), implementation of Takaful is been carried out in the form of mudarabah where the participants agree to share their losses by contributing periodic payments in the form of investments. They are permitted to redeem the remaining value of profits after fulfilling the claim and premiums. Furthermore (Coopers, 2008) states that the main difference between contemporary insurance models and Takaful is that, Takaful participants have the right to receive surplus profits. While the participants in a given Takaful mudarabah have the right to share the surplus profits generated, at the same time they are liable for additional sums if the initial premiums paid during a period are not sufficient to meet all the losses and risk incurred during that period. Takaful companies can also create reserves like conventional insurance companies as there is need for insured to make supplemental contributions if claims exceed …show more content…
Hence the asset management business can be run by an entirely different professional asset manager on behalf of the policyholder. Some operators prefer this model for transparency reason and central bank of Bahrain is a good example of this model (Smith, 2009).
Challengers for Takaful Industry
No such facilities like reinsurance in Takaful so the company cannot protect themselves from risk and also limited opportunities for expansion compared to conventional insurance companies.
Many global brands together with other regional players have contributed to enhance the Islamic re insurance capabilities. With these todays there are none re Takaful operators mostly in Malaysia.
Takaful business’s success depends on its assets management therefore it requires financial products and tools to manage the portfolios effectively. Shariah complaint instruments and lack of liquidity in the market is a severe challenge to Takaful operators. Hence to offer competitive products in the market a tool to manage portfolios against market and liquidity risk has to be