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Second, in terms of product offering, the Takaful sector has witnessed varying practices in
different jurisdictions. However, the prevailing products offered in the sector are based on
wakalah model, mudarabah model, hybrid wakalah-mudarabah model, and wakalah with waqf
model (Hassan, Kayed, & Oseni, 2013). Regardless of the models utilised, one key issue is the
regulatory approach for such models. For instance, different jurisdictions have varying
treatments for the surplus in Takaful contractual arrangements. For instance, in Malaysia, BNM
introduced guidelines for the management and distribution of surplus by TOs in its Guidelines
on Takaful Operational Framework 2013. The main controversy on the distribution of surplus
in Takaful undertakings relates to the various Shari'ah opinions on the issue, which is both
related to the product development on the one hand and Shari'ah compliance issues on the other
hand. Hence, this issue will be discussed under the third main point (Mokhtar, Abdul Aziz, & Md.
Hilal, 2015).
The third trend in Takaful relates to Shari'ah compliance. There has been a continuous debate
on the ownership of the surplus in a Takaful contractual arrangement. The three dominant views
of Shari'ah scholars are as follows:
1. Neither the participants nor the TO owns the surplus,
2. The surplus is exclusively owned by the Takaful participants,
3. Both Takaful participants and TO jointly own the surplus.
While each viewpoint and its advocates have adduced evidence from the Shari'ah to support
their respective positions, it suffices to note that the ultimate arbiter on this issue is the regulator
or what was earlier referred to as RSA, and after being properly advised by the Shari'ah scholars
in such jurisdiction.
Before the eventual issuance of the regulatory framework – Takaful Rules for TOs in Pakistan in
2012, there was a considerable controversy in the industry championed by conventional
insurance operators that TOs might not be able to offer proper Shari'ah -compliant products
(Akhter & Hussain, 2012). While some have considered this move as a survival tactic, the
controversy nevertheless delayed the roll-out of Takaful products in Pakistan. In Pakistan, TOs
are required by regulatory prescriptions to deal with RTOs for their underwriting needs.
However, in the absence of RTOs to undertake such risks, they are permitted to deal with
conventional reinsurance companies (Htay, Hamat, Wan Ismail, & Salman, 2014).
In the UK, besides the regulatory framework provided by the Financial Conduct Authority (FCA)
and the Prudential Regulation Authority (PRA), the Takaful sector is largely industry-driven as
demonstrated in the efforts of the Islamic Insurance Association of London (IIAL), which
introduced its Guiding Principles in 2018 to “provide a platform for the provision of Shari'ah-
compliant insurance (Takaful) and reinsurance (Re-Takaful) in the London market.”
The guidelines, which are substantially based on the IFSB standards, were specifically targeted
at commercial insurers that plan to introduce Takaful windows. It provides a faith-based