Kathmandu. As an essential component of the Islamic financial system, takaful insurance is becoming increasingly popular globally. It is basically a Sharia compliant alternative to conventional insurance. Where risk management is done on the basis of mutual cooperation and responsibility sharing.
In Takaful Insurance, participants contribute to a pool fund. Which provides financial assistance to the member in case of loss.
An essential component of the Takaful system is ‘Tabaru’. A portion of the participants’ contributions are considered donations and are used to help affected members.
According to the principles of Islamic economics, this fund is used to avoid 3 prohibited riba (interest), garar (excessive uncertainty) and masir (gambling). Takaful operators manage the fund’s pool and invest money in condition-compliant areas. Any surplus that arises can be distributed among the participants based on a specific structure.
According to various industry reports, the global takafull market is currently estimated to be around $45 billion. The sector is expected to grow at a CAGR of around 9-11% over the next few years.
According to experts, the Asia Pacific region could lead the expansion of the Takaful region. The sector is expected to grow by 18% by 2032.
Currently, family takaful and general takaful products are playing an important role in the growth of the market. Saudi Arabia and Malaysia are recognized as important hubs for the global Takaful sector. These countries have strong Islamic insurance infrastructures and effective regulatory frameworks.
Meanwhile, the Takaful sector is also undergoing rapid digital transformation. Many organizations are using artificial intelligence (AI) to modernize their sales, underwriting and claim payment processes. Al Raji Takaful, for example, recently gained industry recognition for using AI technology to improve its sales and claims management.
Several regulatory reforms in the Gulf Cooperation Council (GCC) region and initiatives by international organizations such as the United Nations Development Programme (UNDP) are helping to further expand the Takaful sector. These efforts are aimed at increasing the financial security of the uninsured by 2030.
As the global financial system becomes more diversified, the demand for financial products based on Islamic values is also increasing, experts say. As a result, Takaful Insurance will play an even more important role in the global insurance sector in the coming years. –Agency
