Shariah Risk in Takaful Underwriting

Mariyam Shihama


Risk management in Islam is about mutual help and cooperation. Allah (SW) created human beings in such a way human beings must rely on one another to complete their journey of this life. As risks are a part of the natural process of life, solidarity, brotherhood and mutual assistance is needed to maintain the natural process of life on earth. Islam as the only true religion from Allah (SW) and Quran as the complete guidance to human life has taught and shown the Islamic way of risk management through theory and practice. The Sunnah of Prophet (SAW) is a complete model that does not require any addition or subtraction from it. All we need to do is find innovative ways to apply the principles of risk management from the model by adjusting and improvising as per the changes in environment, society and the way of life. This does not mean to change the underlying principles to adjust to the changing environment. Takaful as an alternative to conventional insurance is a contract based on the concept of tabarru which was a promising effort by the Islamic scholars for risk management yet maintaining the basic Islamic principles. It will not possible to practice the principle of aqilah and diya for protection in the current world like how it was practiced during the time of the prophet and hence such innovations are needed. Therefore, this paper aims to discuss the shariah non-compliance risks in the current practice of takaful underwriting. Recommendation is made to develop a common shariah audit framework for takaful operations in order to standardize and maintain uniformity in audit.


Shariah principles, Shariah audit, takaful underwriting



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