Definition

Takaful is the Sharia-compliant alternative to conventional insurance. Derived from the Arabic root meaning “guaranteeing each other,” it operates on principles of mutual assistance (ta’awun) and shared responsibility. Participants contribute premiums into a communal pool managed by a takaful operator, and claims are paid from that pool. Unlike conventional insurance, takaful prohibits interest (riba), excessive uncertainty (gharar), and gambling (maysir). The operator earns income through management fees or profit-sharing arrangements rather than underwriting profit.

UAE Context

The UAE is the largest takaful market in the GCC and among the top five globally. The sector is regulated by the Central Bank of the UAE, which issued comprehensive takaful regulations under Federal Law No. 48 of 2023 on the Regulation of Insurance Activities. Major UAE-based takaful providers include Abu Dhabi National Takaful, Salama Islamic Arab Insurance Company, and Takaful Emarat. The Insurance Authority has progressively tightened capital adequacy and governance standards to align takaful operators with international solvency frameworks.

Key Data

The UAE takaful market was valued at approximately USD 3.5 billion in gross written contributions as of 2024, representing roughly 30 percent of the total insurance market. Family takaful (the equivalent of life insurance) has been the fastest-growing segment, driven by increased awareness and mandatory health insurance requirements across the emirates.

Vision 2031 Significance

Takaful is central to the UAE’s ambition to become a global Islamic finance hub. The sector supports financial inclusion by offering insurance products acceptable to consumers who avoid conventional instruments on religious grounds. Growth in takaful aligns with the UAE’s broader strategy to deepen capital markets, diversify financial services, and capture a larger share of the estimated USD 30 billion global Islamic insurance market.

Related Terms

• Sukuk — Islamic bonds, another pillar of Sharia-compliant finance.
• Islamic Finance — The broader financial system governed by Sharia principles.
• Central Bank of the UAE (CBUAE) — The primary regulator of the UAE insurance sector.
• Financial Inclusion — A national priority supported by takaful’s accessible product design.