• This Practice Note provides a high-level overview of the basic principles of Takaful in the GCC.

The word “Takaful” is derived from the Arabic word “kafala”, which means guarantee. This corresponds to the essence of the concept of Takaful, which is a form of Sharia-compliant insurance according to which each participant (i.e., an insured party) contributes a specific monetary sum into a collective pool system (i.e., a Takaful fund) for the collection of contributions from all Takaful participants in order to protect and guarantee the other participants against loss. Each Takaful participant's contribution is based and determined on the type of coverage they seek (e.g., life, healthcare, property, etc.) and their personal circumstances. Therefore, the basis of Takaful is mutual guarantee, cooperation, indemnity and protection of all Takaful participants covered by the Takaful scheme. Thus, the objective of Takaful is to diversify and distribute the risk of loss or damage among the participants.