What you need to know about takaful insurance

Mashrukh Khan: Takaful insurance, the Shariah-compliant alternative to conventional insurance, is experiencing steady global expansion as demand rises for ethical and faith-based financial products.

Under the takaful model, participants contribute to a shared risk pool based on principles of mutual cooperation, solidarity and shared responsibility. A portion of the contributions is treated as a donation, known as tabarru, used to support members facing losses. The system avoids prohibited elements in Islamic finance, including interest (riba), excessive uncertainty (gharar), and gambling (maysir).

Operators manage the pooled funds and invest them in Shariah-compliant assets. Any surplus generated may be redistributed among participants depending on the structure of the scheme.

Industry reports estimate the global takaful market to be worth around $45 billion, with forecasts suggesting a compound annual growth rate (CAGR) of approximately 9–11% in the coming years. The Asia-Pacific region is expected to lead expansion, with growth projected to reach up to 18% annually through 2032.

Family and general takaful products are driving market momentum, particularly in key markets such as Saudi Arabia and Malaysia, which remain global hubs for Islamic insurance.

The sector is also undergoing rapid digital transformation. Companies such as Al Rajhi Takaful have recently received industry recognition for implementing artificial intelligence technologies to modernise sales processes, underwriting and claims management.

At the policy level, regulatory reforms across the Gulf Cooperation Council (GCC) and initiatives supported by organisations including the United Nations Development Programme (UNDP) aim to expand takaful coverage and strengthen financial resilience for many of underserved populations by 2030.

Industry experts believe takaful will continue to play a growing role in the global insurance landscape as financial systems diversify and demand increases for products aligned with Islamic values.