Insurance, Reinsurance, Takaful and Retakaful as Risk Mitigating Mechanisms

Abstract

Life is full of uncertainty and human being cannot be run away from the misfortune. Since we are not able to predict the future, the best we can do is to manage the risk caused by the uncertainty and misfortune events. The existence of risk has been realized since the beginning of our life and its negative consequence can be severe. Regardless of the religion, it is accepted that risk is one of the factors that are threatening our personal life and business activities. Hence, one of the ways to manage the risks is through insurance and engaging in reinsurance as well. Due to the non-Shari’ah compliant nature of insurance and reinsurance, Takaful and Retakaful play the vital role in risk management, especially among the Muslims. The objective of this study is to highlight the important role of insurance, Takaful, reinsurance and Retakaful as risk mitigating tools. The findings of this paper are value added to the existing literature and it provides the spot light to the researchers for the future research.

Keywords: Takaful, retakaful, risk and risk management