IRP 85 – Retakaful: Risk Sharing vs. Risk Transfer An Examination from the Shari’ah Perspective

Retakāful, which can be apparently explained as ‘takāful for takāful companies’, is in fact takāful for ‘risk pools’ managed by the takāful companies. It is one of the risk management tools used by takāful operators and is a genuine need of takāful companies just as takāful itself is a genuine need of the individuals who participate in it to mitigate the impact of losses to themselves or their wealth.

Both the concepts of takāful and retakāful are based on cooperative risk-sharing, whereby the operator manages the mutual risk fund on behalf of the respective participants who mutually share the losses to any of them. The participants are individuals or groups in takāful, and takāful companies in the case of retakāful. As per Resolution No. 9 of the Jeddah based Islamic Fiqh Academy of the OIC, both takāful and retakāful are non-commutative contracts for co-operative