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legal issues have metamorphosed into new challenges, including the inability of the Takaful
sector to meet up with the fast-paced developments in the conventional insurance industry
(Maysami & Williams, 2006). It appears the Takaful sector is still largely overshadowed by the
conventional insurance in all jurisdictions despite the gains recorded in the Islamic banking and
Islamic capital market sectors. Several challenges identified here include inadequate awareness
among the faith-biased financial consumers, lack of political will in some jurisdictions,
inadequate Re-Takaful capacity, limited investment options, inadequate skilled human
resources, weak regulatory support, inadequate distribution capacity and minimal efforts in
research and development.
5.2.1. Inadequate Awareness
The low level of Takaful penetration in most Muslim jurisdictions speaks volume of the level of
awareness of the value proposition of Takaful byMuslim consumers. It is challenging to compete
with well-established conventional insurance companies, but when one comes up with a good
value proposition through innovative products that are not only Shari'ah -compliant but also
conventionally competitive, then it might be possible to disrupt the existing market.
5.2.2. Lack of Political Will
Some of the jurisdictions that have significantly developed their Takaful markets, such as
Malaysia have relied substantially on political will. Therefore, to improve the Takaful sector in
any jurisdiction, government policies must be tailored to fulfil such objective. Such support is
required not only from the executive arm of the government but also the legislature and the
judiciary. The legislature would pass laws that promote Takaful while the executive implements
such laws for the benefit of the people. The judiciary will mediate in times of dispute to ensure
decisions made are well-thought-out and implemented through its public-interest decisions. In
terms of political will, the regulatory and supervisory authority in a jurisdiction may direct that
all financial services providers in the country should adopt the AAOIFI and IFSB standards and
guidelines relating to Takaful. This will immediately streamline all practices in the industry.
5.2.3. Re-Takaful Capacity
In order to fully underwrite bigger and complex risk, TOs need Shari'ah-compliant Re-Takaful
companies (Arbouna, 2000). There is a limited number of Re-Takaful companies in most
jurisdictions even though the market has seen an increasing appetite on the part of some global
reinsurance giants in Takaful. Such insurance giants that have established their Re-Takaful
subsidiaries include Munchener Ruckversicherungs-Gesellschaft (Munich Re Re-Takaful), Swiss
Reinsurance Company Ltd. (Swiss Re Re-Takaful), AIG Re-Takaful, and RGA Global Reinsurance.
Though some Shari'ah scholars see no objection in utilising conventional reinsurance methods
in Re-Takaful business as they believe the methods comply with the Shari'ah (Gunardi,
Deuraseh, Tahir, & Ahmad, 2013), it is always better to scrutinise the nitty-gritty of such
methods and contractual arrangements involved before accepting such methods.