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Principles and Practices of Islamic Insurance

Islamic Research and Training Institute via edX

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This course will provide students with an advanced understanding of Islamic insurance or "Takaful."

Practices that resemble modern-day insurance date back centuries. The Islamic practice of Takaful originated among ancient Arab tribes. It functioned as a pooled liability that required offenders from one tribe to pay compensation to the victims (or their heirs) of another. Takaful has since evolved to include many forms and plans needed in Modern society while still meeting the approval of Muslim scholars.

This course begins with an introduction to insurance and risk management. You'll explore the Islamic perspective on insurance and risk, risk identification, and measurement. From there, you'll review tools of risk management, risk avoidance, and risk financing, as well as insurance as a risk financing tool.

You'll take a closer look at specific Islamic finance products, as well as perspectives on risk taking versus risk avoidance and note milestones in the Islamic approach to risk reduction. Finally, you'll explore the six stages of Islamic insurance development and examine insurance contracts - their purposes, limitations, and sources.


Week 1: Overview of Economic Risk


What is Risk? 

Risk vs. Uncertainty  

Components of Risk and Associated Terms 

The Islamic Perspective of Risk        

Risks Faced by Financial Institutions 

Week 2:  Islamic Perspective on Risk Management


Islamic Finance Products - Associated Financial Risks        

Fundamentals of Enterprise Risk Management (ERM)        

Enterprise Risk Management - Process       

Islamic Approach to Risk Taking Vs. Risk Avoidance          

Milestones in the Islamic Approach to Risk Reduction          

Week 3:  Principles of Islamic Risk Management


Risk Management from an Islamic Viewpoint          

Risk Management Framework          

Risk Management in Islamic Financial Institutions    

Causes for Failures within an Organisation   

Use of Hedging Instruments for Risk Minimisation   

Managing Risks in Islamic Modes of Finance           

Integrated Approach to Risk Management    

Week 4: Legal Principles Underlying Islamic Insurance Products


Six Stages of Islamic Insurance Development         

Proposed Model for Islamic Insurance Contracts     

Limitations Imposed by the Sharī‘ah on Insurance Contracts           

Fundamental Characteristics of Insurance Contracts

Purpose of Insurance Contracts        

Generic Sources of Islamic Insurance Contracts     

Specific Sources of Islamic Insurance Contracts     

Taught by

Ahmed Iskanderani , Azmi Omar , Khalifa M. Ali Hassanain and Yahya Aleem ur Rehman

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