Jurisdiction(s):
United Kingdom

Key definition

Takaful definition

What does Takaful mean? Takaful describes Sharia-compliant risk protection in which participants pool contributions into a fund to mutually indemnify one another, managed by an operator, rather than transferring risk to a conventional insurer. In UK and Irish practice it is generally structured and supervised as insurance where the arrangement meets the legal criteria for a contract of insurance. The term itself is not defined in UK or Irish legislation or case law; it is a descriptive expression from Islamic finance, with classification relying on general insurance law (including case law on what constitutes insurance and, in the UK, the FSMA/RAO regime). Key legal features...

Takaful: required elements, fund structure, Shari’ah governance and operator models (wakala, mudaraba, hybrid)

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Practice notes

What is takaful?

Takaful stems from the Arabic term ‘Kafala’, meaning to support one another. It is a form of risk protection arranged in accordance with the principles of Islamic law (shari’ah). It provides a distinctive and important substitute for conventional insurance, meeting the protection needs of many Muslims worldwide. Owing, inter alia, to Shari’ah prohibitions on undue interest (riba) and uncertainty (gharar), some Muslim scholars have ruled conventional insurance haram, i.e. impermissible for Muslims. For further details on these barred elements, see Practice Note: Key principles of Islamic finance. As a direct result, until takaful arose, many Muslims across the globe had no practical way to safeguard effectively against risk. Nevertheless, takaful is not limited solely to Muslims; takaful solutions are open to all, regardless of belief or religion. Accordingly, it fills a historic gap that left many without effective cover, yet it remains accessible to non‑Muslims as well, irrespective of background or creed, regardless of belief, religion, faith or conviction. The fundamental idea behind takaful is closely aligned with co‑operative and mutual insurance. Individuals participating in a takaful arrangement must, by choice and together, share a specified risk through mutual assistance and donation. In essence, participants are reimbursed for losses...

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Web page updated on 22/05/2026

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