Sharing and transferring risks in retakāful and conventional reinsurance : a critical analysis

Abstract EN

This study undertakes an analysis of the risks in retakāful whether they are shared by the participating takāful operators (TOs) and retakāful fund, or are transferred to retakāful operators (RTOs).

In the latter case RTOs become liable for deficits where the losses, if any, would directly affect all retained portfolios.

The study finds, notwithstanding the aim of retakāful to allow TOs to reduce the financial impact on their respective takāful fund (TF) arising from catastrophic losses, that there exists a mismatch between the theory and current risk-sharing practice of retakāful whereby RTOs manage the TF on behalf of their respective participants.-