Britain's first independent Islamic insurance company is set to launch after has receiving authorisation by the Financial Services Authority (FSA).
Principle Insurance will provide unique, Shariah-compliant (or Halal) motor and home insurance to British residents from later this year. It will be the first independent Shariah-compliant insurance provider in Britain and will meet the needs of the country's estimated two million Muslims.
Chairman, Mr Abdulaziz Hamad Aljomaih said, " Achieving FSA authorisation is a clear vindication of my belief that Shariah-compliant financial products are not only equitable and profitable but also conform to the modern day principles of international finance, especially from a regulatory standpoint"
Principle Chief Executive, Bradley Brandon Cross, comments: "Some elements of conventional UK insurance, such as the earning of interest, the investment of policyholders' funds and uncertainty mean that it is not in accordance with Muslim beliefs.
While Islamic insurance is very different to conventional insurance in that it is fully Shariah compliant (or Halal) and does not use interest or invest in any industries that go against Islamic teachings (alcohol, for example) it bears some similarities to co-operative insurance.
As with co-operative insurance, policyholders contribute money to a common pool (the Takaful fund), which is then used to pay claims. Any surplus in the Takaful fund is returned to policyholders, while any deficit is protected by the company's shareholders.
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The insurance company is usually remunerated in one of two ways - either by an agreed management fee (Wakala) or a share of the surplus (Mudharaba). Principle Insurance has adopted the Wakala model, as it provides greater transparency.
All the activities of the Takaful Fund are supervised and agreed with a board of Shariah scholars.
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