95
6.2.5. Issues and Challenges
From the interviews with the experts in the Takaful industry in Saudi Arabia, a number of issues
and challenges facing the Takaful industry were identified; while some of them are local
challenges, others are global. The following are the main challenges raised which could be
addressed to improve the Takaful industry:
 The existing regulations hinder innovations in Takaful companies which brings them
closer to conventional insurance. This is clear in the enforcement of the cooperative
insurancemodel by the regulator which does not differentiate between the conventional
insurance model and Takaful and creates difficulties for the Takaful companies to
comply/harmonise between the Shari'ah and legal requirements and prevent them
from practising the ideal Takaful model.
 The absence of Shari'ah governance framework for the Islamic financial services
industry in general and Takaful sector in specific.
 The need for Re-Takaful companies. The existing Re-Takaful companies are suffering
from the lack of expertise, small capital and inability to cover all Takaful risks.
 Lack of awareness among the policyholders and the ability to differentiate between
Takaful and conventional insurance.
 Most of the scholars’ efforts focused on Islamic banking and ignored Takaful, which
resulted in the underdevelopment of Takaful models.
 The regulator focuses more on regulating the similarities between the conventional
insurance and Takaful rather than the differences such as the distinction between the
policyholders and the shareholders’ funds.
 Lack of training for members of the Shari'ah committees in the Takaful companies.
 High competition between conventional insurance and Takaful.
 The imposition of 5% tax in the case of Re-Takaful outside the country.
 The absence of the training and academic programmes on Takaful in academic
institutions.
6.2.6. Lessons learned, Recommendations and Transferring Knowledge
Lessons
Several lessons could be derived from this case study. Two major ones are single out here, which
may benefit other jurisdictions.
1. Need for Shari'ah regulatory framework for the Takaful industry: The most
encouraging part about the Takaful industry in Saudi Arabia is that it is required to be
Shari'ah -compliant by the regulations which is an advantage despite the Shari'ah
concerns about the cooperative insurance model which could be overcome by issuing
detailed guidelines on the model.