An SME seeking Islamic insurance assembles several takaful contracts covering property, liability, vehicles and staff protection from operators managing a participants' fund. Such offers are well structured in Malaysia or Pakistan but still do not exist for businesses in France.
Mapping risks before looking for an operator
An SME manager starts by listing exposures: premises and machinery, liability towards clients, vehicles, employees and IT data. This risk map lets the firm ask a takaful operator for a coherent programme instead of a patchwork of contracts with incompatible excesses and limits.
Employees at the heart of the programme
Group protection and health cover fall under family or general takaful depending on the benefits. The page on group insurance under takaful explains how a collective contract pools the risks of a whole team within one fund.
Two separate funds in the operator's books
The IFSB-14 standard distinguishes the PRF, the participants' risk fund that pools underwriting, from the PIF, an investment fund specific to family takaful products with savings. For an SME, this separates claims cover from any retirement savings for senior staff.
Takaful window or independent company
The SECP's Takaful Rules 2012 allow conventional Pakistani insurers to open takaful windows; according to the SECP, Pakistan was the second country to permit this after Indonesia. The background on takaful insurance in Pakistan illustrates how the two coexist.
How takaful differs from a European mutual
Both rest on mutual help, but no reliable source directly comparing takaful with European mutual insurers has been verified. The page on the difference between takaful and a mutual recalls features specific to takaful: tabarru, the wakala fee and compliant investments.
The business owner and the French market
An SME owner in France will not find a general takaful operator: the ACPR has published no specific position, and any offer would fall under the Insurance Code and Solvency II. The only takaful contracts launched in France concern life insurance and funeral cover.
Lessons from the 2008 British failure
Salaam Halal Insurance, launched in the United Kingdom in 2008 by Principle Insurance after raising 60 million pounds, went into run-off less than a year later. For an SME, this precedent underlines the need to check the chosen operator's financial strength.
SMEs established in the Gulf or Asia
A subsidiary in Malaysia can buy cover from operators licensed by Bank Negara Malaysia under IFSA 2013, with no religious condition. In the Emirates, Zurich Takaful operates from the DIFC. The company checks that the local contract truly covers that site's assets and staff.
Operator solvency as a selection criterion
The IFSB has published a solvency standard for takaful undertakings, IFSB-11, and a risk management standard, IFSB-14. A manager can ask the operator which prudential framework it applies and how it would support the fund if a deficit arose.
Governance: three IFSB texts
On 23 November 2009, the IFSB adopted IFSB-8 on governance of takaful undertakings, IFSB-9 on conduct of business and IFSB-10 on sharia governance. These principles provide a framework for judging how transparent an operator is towards participating companies.
Rate revisions and the company's consent
Malaysia's 2018 operational framework bans cross-subsidies between takaful funds and makes any revision of tabarru subject to participants' consent. An SME can therefore insist on being informed and on approving a contribution increase before it takes effect.
Fund surplus and the insurance budget
Under wakala, the surplus goes back entirely to participants, either as a payment or as a reduction in later contributions. For an SME with few claims, this return can lighten the insurance budget, provided the distribution clause is written into the contract.
The manager's roadmap
- Draw up the company's risk map: assets, liabilities, vehicles, employees, data and supply chain.
- Identify licensed takaful operators in each country of operation and ask for their ratings or solvency ratios.
- Compare wakala or mudaraba models, the operator's fee and the written surplus distribution rule for each contract.
- Obtain the sharia board's fatwa and check fund segregation if the offer comes from a window.
- Align excesses, limits and renewal dates so the programme can be managed as one coherent whole.
- Appoint an internal person responsible for claims notifications and for tracking surpluses received each year.
Budget for an SME takaful programme
| Contract | What the contribution contains | Main variables |
|---|---|---|
| Premises package | Property tabarru and wakala fee | Value of assets, activity, prevention |
| Liability | Liability tabarru and retakaful | Turnover, sector, limits |
| Vehicle fleet | Motor tabarru per vehicle | Number and use of vehicles, claims record |
| Group protection and health | Tabarru per employee, possible PIF | Headcount, average age, level of benefits |
| Shared costs | Operator fee or mudaraba share | Chosen model and contractual rate |
File to prepare for the operator
- Articles of association, company registration extract and legal representative's ID
- Latest annual accounts and business forecast
- List of sites, floor areas and insured values
- Staff register and headcount by category
- List of vehicles with registration certificates
- Claims history across all contracts
- Current Islamic financing agreements, murabaha or ijara
Management mistakes to avoid
- Cancelling compulsory insurance, such as motor liability or certain professional covers, while waiting for a takaful offer that does not yet exist locally.
- Choosing an operator purely on a promise of compliance, without examining its solvency or the make-up of its sharia board.
- Spreading contracts across different operators without coordination, which leaves gaps between property, liability and business interruption cover.
- Overlooking that a conventional insurer's takaful window must keep its funds fully separate, and failing to ask for proof of this.
- Taking an annual surplus refund for granted, when neither its amount nor its existence is guaranteed in advance.
What SME managers ask
Can a French SME buy cover from a Malaysian takaful operator?
In practice, a company based in France must insure with bodies authorised to operate there, especially for compulsory insurance. A Malaysian operator can, however, cover a subsidiary established in Malaysia, under the supervision of Bank Negara Malaysia.
Can employees' group health cover be takaful?
In structured takaful markets, yes, through group contracts. In France, compulsory collective health cover goes through authorised bodies and no takaful offer has been identified. The manager can ask the provider how its funds are invested.
Who bears the deficit if the participants' fund runs short?
The operator advances a qard, an interest-free loan provided for by the IFSB-14 standard, repayable only from future surpluses. Participants therefore pay no interest, but distribution of surpluses may be suspended until the loan is repaid.
Is takaful recognised by scholarly bodies?
AAOIFI sharia standard No. 26, approved in June 2006, governs cooperative Islamic insurance. Debate continues over certain commercial structures; each operator's sharia board must justify its choices, and the manager should read its fatwa.
Does the wakala or mudaraba model change the cost for the company?
Cost depends mainly on the risk, but the model determines how the operator is paid: a fixed fee under wakala, a share of investment profits under mudaraba. Surplus sharing also differs, going wholly to participants under wakala and being shared under mudaraba.
Takaful operators and organisations
Al Rajhi TakafulSaudi takaful operator offering Sharia-compliant motor, health, home and protection cover.Takaful MalaysiaPioneering Malaysian takaful group active in family and general takaful for individuals and businesses.Abu Dhabi National TakafulAbu Dhabi takaful company providing Sharia-compliant health, motor, home and business cover.Swiss Re RetakafulRetakaful business of Swiss reinsurer Swiss Re, which holds a retakaful licence in Malaysia, in Kuala Lumpur.Indicative list: assuranceislamique.com has no commercial link with these organisations. Always check the licence with the local regulator.