Actuarial model for takaful contributions via optimal retakaful

Abstract

Purpose This paper aims to present an actuarial model of takaful to cover death and permanent total deficit of contributors benefiting from Mourabaha financing for real estate, taking into account modern takaful systems around the world. The main goal of this paper is to design an optimization program that helps to obtain a marketable and profitable takaful product by using the retakaful as a safety and technical support tool. Design/methodology/approach The study adopts an actuarial approach for determining takaful contributions and optimal choice of an adequate form of retakaful to maximize the technical surplus of a takaful company. A resolution method based on genetic algorithms is also developed to solve the optimization program. Findings This actuarial model allows to provide high added-value support to takaful and Islamic finance and also reassures clients of purchasing real estate through the Mourabaha product. Research limitations/implications It should be noted that the choice of an effective Islamic borrower insurance product (takaful borrower) obviously depends on the strategy adopted by the takaful operator (type of takaful, pricing, experience and statistics observed, etc.), the form of retakaful, the behavior of the participants and the nature of the portfolio. Moreover, the program developed in this paper is suitably affordable and is closely linked to the hypotheses. Originality/value The strong point of the present program relies on the case where the reinsurer establishes itself as a partner of choice and to enrich the takaful fund. In addition, the actuarial tools used in agreement with genetic algorithms have made it possible to optimize with efficiency and ease of calculation.

Evaluation of management soundness of Takaful industry in selected countries

“…El Attar and El Hachloufi (2022) revealed the takaful industry’s re-takaful and actuarial value and general Islamic finance. They further emphasised that re- takaful contributes positively to the takaful company, which only makes it possible for the takaful industry to sustain itself with re- takaful .…”

“…Reference 2015, the Muslim population in the UK amounted to 1.6 million (≅ 2.8% of the UK population), but their involvement in the takaful package was considered low (Coolen-Maturi, 2013). The Takaful industry has been adopted in over 75 countries (El Attar and El Hachloufi, 2022). However, different rate of growth of the takaful industry in different regions makes some studies argue that the takaful industry’s market share is growing slowly in some countries (Khan, 2015; Shibu and Kahf, 2022), such as the UK and Australia, where the takaful industry is competing intensively with conventional insurance, which has been in existence for several decades (Md Husin and Haron, 2020) to gain market share.…”

“…The Shariah aspect made it crucial to differentiate between takaful and conventional insurance. Takaful is based on risk sharing (El Attar and El Hachloufi, 2022) among the policyholders, whereas conventional insurance is based on a risk transfer policy (Khan, 2015). Takaful ’s irrevocable donation ( tabarru ) enhances the sector’s risk-sharing paradigm (Alshammari et al , 2018; Muhamat and McIver, 2019).…”

“…Focusing on prominent types of general and family takaful preferences (Rifas et al , 2023) would contribute meaningfully to the takaful literature. Even a recent study by El Attar and El Hachloufi (2022) focused on the death guarantee takaful . This indicates the relevance of the study matter, not only the scope of the study.…”

“…Affordability and pricing also play a significant role in achieving housing investment contracts. For example, re- takaful and actuarial activities of the takaful industry enhance the takaful client to purchase a house using Murabaha products for home financing (El Attar and El Hachloufi, 2022).…”