What is a Sharia Compliant Insurance Policy?

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Insurer AIG UK has taken out the first Sharia-compliant guarantee and indemnity (W&I) insurance policy issued in the London M&A insurance market – a move that is part of a growing demand for policies financial institutions based on Islamic principles.

The £ 5,000,000 policy was underwritten by brokerage Risk Capital Advisors through AIG’s MGA strategic partner, Cobalt Underwriting, which offers an ‘Islamic window’ solution.

Sharia-compliant policies, or Takaful insurance, account for around 2% of the $ 1.8 trillion (£ 1.4 trillion) Islamic financial market, said AIG’s head of mergers and acquisitions for the Kingdom United and the London market.

“We are quite focused on emerging markets, which is why we were keen to innovate and move to sharia-compliant M&A insurance,” Angus Marshall told Insurance Business.

Sharia is the code of religious teachings for the religion of Islam, and Sharia-compliant policies are designed specifically to conform to its principles.

“Indeed, Sharia-compliant insurance is not much different from any other type of insurance, except for a few important features which can really be explained by the three principles that guide Sharia insurance: purity, certainty and reciprocity, ”Marshall said. Explain.

Although from a product and process perspective, a Sharia-compliant policy is largely the same as a traditional policy, there are important key requirements. Insurers should not invest funds, or invest in companies that earn income from anything that might violate Islamic principles, such as alcohol.

Policies are also likely to require the mandate of an Islamic scholar; AIG’s policies are reviewed and approved by a certified Sharia specialist in consultation with its Sharia Supervisory Board.

The insurer has had the ability to provide Sharia-compliant policies for a number of years, but its entry into the M&A arena is particularly revolutionary, according to Marshall.

“AIG has been innovative and forward-thinking in Sharia-compliant insurance for quite some time now,” he said. “Particularly for M&A insurance, this is a nice end to our overall capabilities in emerging markets and really demonstrates our commitment to emerging markets. “

Speaking of the deal, Ben Brindle, director of Risk Capital Advisors, added: “We are seeing an increasing demand for W&I insurance from financial institutions managed according to Islamic principles. This is particularly the case in the UK, and we were very happy to be able to provide a solution to the buyer on this transaction with a Sharia compliant policy issued in the UK.


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