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An opportunity for Islamic insurance in Oman?

All GCC countries, except Oman, have a thriving Islamic finance segment, and earlier this year the Omani authorities announced that they would give licences to new Islamic financial services entities. The first licence is likely to be granted soon for an Islamic bank. Potential investors are keen to create the first Islamic insurance firm.

Conventional insurance is considered to be in conflict with Shari'ah as it can be seen as a form of gambling, where one party stands to gain benefit whilst one party loses i.e. if a customer makes a claim, then they gain at the expense of the insurance company, or if no claim is made, the insurance company keeps the payment from the customer. Under Takaful policyholders' payments are held in a mutual pool, from which claims are paid. Any surpluses left in the pool, for example if there are low levels of claims, belong to the policyholders, as opposed to the insurance company. The insurance company acts as an administrator of the policyholders funds, for which they are paid a service fee. In this way the policyholders stand to benefit from lower levels of claims, as any surpluses belong to them and not the insurance company.

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Publication:CPI Financial
Date:Jul 10, 2011
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