The possibility of Takaful insurance in Malta : an analysis

Abstract

Takaful, the acceptable Islamic counterpart to the impermissible practice that is conventional insurance, has seen remarkable growth over these last few years. Although takaful continues to be dominated by Islam based countries such as Malaysia, this concept has also caught the eye of non-Muslims as evidenced by its traces in Europe. Following Malta's interest in Islamic Finance it was noted that no attention has, yet, been given to the insurance sector. Therefore, this study seeks to provide a preliminary investigation on the takaful mechanism. The study goes further in an attempt to determine whether such a concept may be readily introduced locally by analysing the local awareness, and legislative aspects, to mention a few. In order to achieve this objective, a combination of questionnaires and one-on-one interviews were distributed/carried out with local insurers/agents/brokers and with local and foreign practitioners in the process of facilitating its initiation. Based on the data obtained, it is suggested that although technically takaful can be set up under current legislation, Islamic finance, in general, is still in its preparatory stages in Malta - signifying the absence of the necessary support by banking, funds and capital market sectors. Additionally, it was observed that despite local practitioners being aware of such an Islamic counterpart, they are not prepared to consider its offering mainly due to demand not being so evident. Given that the number of Muslims residing in Malta is too marginal to justify the setting up of a takaful insurance industry at this stage, its capacity lies in servicing neighbouring continents like Europe and North Africa. Alternatively an established conventional insurer may decide to conquer this small market share by mean Briefly put, takaful will not come to Malta any time soon but its viability may surface in the distant future. Recommendations on the way forward will ultimately pursue.