Retakaful
Takaful for takaful funds: a takaful undertaking cedes part of its risks to a retakaful fund on behalf of its participants.
Retakaful is an arrangement in which a takaful undertaking cedes a portion of its risks, by treaty or on a facultative basis, as a representative of its participants, contributing part of the contribution as tabarru to a common fund that covers specified loss or damage, as IFSB-29 describes it. It plays the role that reinsurance plays for conventional insurers. Where retakaful capacity is limited, some supervisors allow conventional reinsurance under conditions set by Shariah boards.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
TakafulMutual cover: participants contribute to a common fund, as donations, to help one another against specified losses.TabarruThe donation portion of a takaful contribution, paid into the risk fund to meet claims as mutual help.Takaful operatorThe entity that manages a takaful business on behalf of participants, usually for a fee, a profit share or both.