The appeal of Islamic
finance and takaful lies in the system’s ethical solid principles, which
include fairness, wealth distributions that promote goodness, and transparency
to encourage economic growth. In the same line, retakaful provides protection
for takaful companies against risks, much like how reinsurance is to insurance
companies. The factor that differentiates retakaful and reinsurance is Shariah
compliance. This article will discuss the growth and challenges of takaful in
the industry.
The future potential of takaful
Takaful is similar to insurance, but
with specific distinguishing differences. Takaful is participatory insurance
that relies on customer risk sharing and cooperative principles approved for
transferring risk to the company as a third party. Takaful is said to surpass
the market performance in terms of growth, and the potential can be noticed in
family takaful.
Difficulties the takaful sector is facing
As much as takaful is
said to outperform the insurance market, there are also certain difficulties
that the takaful sector is facing, such as:
●
Takaful is not fully understood in the
industry. For instance, it does not go on the same line with conventional
insurance, as takaful is limited to an interest-free system.
●
It has expanded tremendously but has left
little time for coordination that concerns collecting information.
●
Takaful is lacking in exposure to the global
market.
However, difficulties
can easily be overcome in this new era where technology is evolving and
emerging. Information on takaful can be shared through various social platforms
and can be advertised all around the global market. Furthermore, the process of
gathering information can be improved with the help of technology and its
operations, such as big data.
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Takaful has
significantly contributed to the insurance sector by showcasing its growth
potential. To know more about the growth and insights of re/takaful, visit the
Malaysian Re website at https://www.malaysian-re.com.my/our-solutions/retakaful.