Principles and Practices of Islamic Insurance

This course will provide students with an advanced understanding of Islamic insurance or "Takaful."

Practices that resemble modern-day insurance date back centuries. The Islamic practice of Takaful originated among ancient Arab tribes. It functioned as a pooled liability that required offenders from one tribe to pay compensation to the victims (or their heirs) of another. Takaful has since evolved to include many forms and plans needed in Modern society while still meeting the approval of Muslim scholars.

This course begins with an introduction to insurance and risk management. You'll explore the Islamic perspective on insurance and risk, risk identification, and measurement. From there, you'll review tools of risk management, risk avoidance, and risk financing, as well as insurance as a risk financing tool.

You'll take a closer look at specific Islamic finance products, as well as perspectives on risk taking versus risk avoidance and note milestones in the Islamic approach to risk reduction. Finally, you'll explore the six stages of Islamic insurance development and examine insurance contracts - their purposes, limitations, and sources.

Week 1: Overview of Economic Risk

Introduction

What is Risk?

Risk vs. Uncertainty

Components of Risk and Associated Terms

The Islamic Perspective of Risk

Risks Faced by Financial Institutions

Week 2: Islamic Perspective on Risk Management

Introduction

Islamic Finance Products - Associated Financial Risks

Fundamentals of Enterprise Risk Management (ERM)

Enterprise Risk Management - Process

Islamic Approach to Risk Taking Vs. Risk Avoidance

Milestones in the Islamic Approach to Risk Reduction

Week 3: Principles of Islamic Risk Management

Introduction

Risk Management from an Islamic Viewpoint

Risk Management Framework

Risk Management in Islamic Financial Institutions

Causes for Failures within an Organisation

Use of Hedging Instruments for Risk Minimisation

Managing Risks in Islamic Modes of Finance

Integrated Approach to Risk Management

Week 4: Legal Principles Underlying Islamic Insurance Products

Introduction

Six Stages of Islamic Insurance Development

Proposed Model for Islamic Insurance Contracts

Limitations Imposed by the Sharī‘ah on Insurance Contracts

Fundamental Characteristics of Insurance Contracts

Purpose of Insurance Contracts

Generic Sources of Islamic Insurance Contracts

Specific Sources of Islamic Insurance Contracts