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The first modern Takaful was established in Sudan in 1979 (Archer et al., 2009: pp.1-2), which
was developed by Professor Al-Sideeq Al-Dareer - a prominent Sudanese Shari'ah scholar. After
participating in many seminars and conferences, he came up with the idea of insurance that is
cooperative and mutual by nature rather than commercial. He suggested “the adoption of a
mutual structure for underwriting insured risks, whereby the insureds (participants) mutually
insure one another, on a non-profit basis, according to the principle of Takaful (the Arabic word
for ‘‘solidarity’’) ”. To do this, he suggested a solution that treats the policy contributions
(premiums) as a conditional and irrevocable tabarru’ (donation). The insured participants in this
model, are at the same time both insurers and insured and share all the fortunes andmisfortunes
of the fund. (Archer et al., 2009).
2.1.3. Re-Takaful
Takaful cannot be discussed in isolation without exploring all its aspects. To support Takaful
business activities and mitigate risks, Re-Takaful is an important extension of Takaful. This
section defines the theoretical and practical aspects of Re-Takaful and provides a summary from
the Shari'ah perspective.
Re-Takaful is defined as the “Takaful for the Takaful operators”. It is a way for a primary Takaful
operator (TO) to protect itself against unforeseen or extraordinary losses. The TO pays a
premium from the Takaful fund on behalf of the participants to the Re-Takaful company, and in
return, the Re-Takaful operator (RTO) provides security for the risk sharing. The need for TOs
to engage RTO as a means of risk sharing is undoubtedly consistent with the concept of risk
mitigation underlying the concept of Takaful and Re-Takaful. The Re-Takaful arrangement helps
the TO to transfer some or selected risks to ensure the viability of its business and, most
importantly, to ensure that all the policyholders are protected.
Takaful and Re-Takaful are like Siamese twins that are highly dependent on each other. Re-
Takaful functions as the primary risk-mitigating tool for the TOs in the form of providing a
balance of the portfolios of the TOs, assisting them in attaining the homogeneous risks, avoiding
unnecessary exposures of the TO’s portfolio and strengthening of capital for TO as required by
domestic laws or regulations. Re-Takaful mainly involves two parties to its contract – that is, the
TO, which is also known as a ceding company, and the RTO. The TO needs to limit the risks
undertaken from the Takaful participants by ceding it to the RTO that assumes a portion of the
risk transferred by the TO.