What is a Takaful Operator?

A Takaful Operator is an organization which manages Takaful Fund and takes up the responsibility of determining contribution amounts, collection of contributions and payments of claims to eligible Participants. In this role the Takaful Operator charges ‘Wakala’ fee for its services.
The Takaful Operator also manages investments of the Takaful Fund in which it also shares in the profits, if any, according to agreed proportion based on ‘Mudaraba’ principles.

What happens if there is a surplus on the Takaful Fund?

One of the unique aspects of the Takaful concept is the sharing of any surplus of the Takaful Fund amongst its Participants. The surplus is calculated after deducting expenses such as claims, net re-Takaful costs, and changes in the technical reserves.

What is a Wakala Fee?

The term ‘Wakala’ (Agency) is derived by from the word ‘Wakeel’ (Agent). It is the fee incurred by a Takaful Operator from the Participants to manage Takaful Fund.

What do you mean by Contribution/ Tabarru?

The contribution for participation is paid to the Takaful Fund as ‘Tabarru’ (voluntary donation.) The ‘Tabarru’ concept is fundamental to Takaful system eliminating from it the uncertainty and gambling elements which are inherent in insurance contracts. Each Participant contributes into the Takaful Fund with the intention of assisting other Participants, and not as premium payment to the company, as done in conventional insurance contracts.

Takaful seems exactly the same as conventional insurance?

In terms of Shariah, insurance is based on a buy-sell agreement whereas Takaful falls under the contract of Tabarru (Voluntary contribution) The Shariah requirements for these two types of contracts differ and this difference makes Takaful an acceptable alternative.

    • The table below highlights the main differences:




Conventional Insurance

Organization Principle

Mutual for Participants Profit for Shareholders


Co-operative risk sharing Risk transfer

Value Proposition

Affordability and spiritual satisfaction Profits maximization


Shariah plus Regulations Secular/Regulations


Participants Shareholders

Management status

Operator: act as a ‘Wakeel’ (Agent) and ‘Ameen’(Trustee) Company Management: act as a ‘Guarantor’ and ‘Owner’

Form of Contract

Cooperative, Islamic contracts of ‘Wakala’(Agency) or ‘Mudaraba’(Profit-sharing) with payment of contribution as Tabar’ru (donation) Contract of Sale with payment of Premium


Shariah compliant, Riba-free Interest-based


Participants’ account Shareholders’ account

Religious Consensus

Considered as ‘Halal’ mode of risk mitigation by Shariah Considered as ‘Haram’ mode of risk mitigation by Shariah

Regulated By

STIA & Shariah Advisors Short Term Insurance Act

Is all insurance Haram and prohibited in Islam because Risk Protection (insurance) is against Tawakkul (total dependence upon Allah SWT)?

No, because no human action changes the will of Allah (SWT) or our destiny. Whether a person participates in a Takaful Fund or not has no effect on future events. However, we are urged to take precautions … just as we make provisions prior to starting our journey. In Hadith narrated by Anas bin Malik when an Arab Bedouin asked Prophet Muhammed (PBUH), “Shall I leave my camel untied and seek Allah’s protection on it, or should I tie it?” The Holy Prophet replied, ” Tie your camel and then depend upon Allah (swt).” [as quoted by Sunan at Tarmizi, 1981]