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What is Islamic Insurance?

Islamic insurance takes into account the application of Sharia’a provisions and values in all of the Company’s transactions and operations, in congruence with the mechanisms of application of Islamic insurance and relevant international Islamic standards with the aim of strengthening the spirits of cooperation among the individual members of the Palestinian society.

Islamic insurance firms are distinguished by the operation of two main accounts or major separate funds so that each fund is dealt with completely independently from the other fund.

The two funds are known as:

  • The Shareholders Fund
  • The Subscribers (insurance policyholders) Fund

The Shareholders Fund
The Shareholders Fund is comprised of the company’s capital fund paid by the shareholders.

The Subscribers Fund
The second fund is defined as funds deposited by Company’s subscribers or policyholders.

The policyholders fund consolidates all insurance premiums (I.e. installments) paid by all subscribers in exchange for insurance services and from which policyholders receive monetary compensations in the event of accidents.

Management of Subscribers (Policyholders) Fund

The Company manages the insurance portfolio in compliance with Islamic insurance standards.
In return for portfolio management, the Company charges a fixed fee also known as the “agency fee” which is deducted from the insurance premiums.
Therefore the net value of the Subscribers’ Fund is calculated as the total premiums less than the total compensation amounts paid to eligible subscribers in addition to:
Any other expenses such as the “agency fee” paid to the Company and the costs of insurance reinstatement.
Furthermore, the Company invests the surplus from the Subscribers’ Fund in the manner of a Mudharaba firm (i.e. profit-sharing) in the Islamic jurisprudence.

Only subscribers (policyholders) shall have the right to the financial surplus if this fund attains a financial surplus at the end of the financial year. The surplus shall be distributed among subscribers as determined by the Company’ Sharia’a Supervisory Board.

These contractual relations between both funds (subscribers’ and shareholders’ Funds) are monitored and supervised by a Sharia’a supervisory board formed of individuals with competence and expertise to ensure congruence between the Company’s operations and the provisions of Sharia’a and Islamic financial accounting standards.

We hope that this section offers a brief explanation of the application of Islamic insurance.

The presence of Sharia’a Supervisory Board monitoring all functions of the Company and ensuring that its transactions, contracts and policies are compliant with Sharia’a provisions and in a manner that refrains from usury (i.e. riba) or excessive uncertainty (i.e. gharar).

Reflect the spirit of cooperation between subscribers (policyholders) in mitigating any risks that may occur to any subscriber through reparations of any damages and/or losses that they may incur and extend compensation to them from the Subscribers’ (policyholders) Fund which aggregates the value of all insurance premiums (installments) paid by them as donations.

Independent management of the Subscribers’ (policyholders) and Shareholders’ funds. The company maintains two separate accounts; the first account is designated for its shareholders and its capital whereas the second is dedicated for the Subscribers’ Fund.

The Company, represented by the Shareholders Fund, is entitled to the following benefits in return for management of Subscribers’ (policyholder) Fund,:

A percentage of net insurance premiums (subscriptions), as determined by the Sharia’a Supervisory Board in consultation with the Company’s Board of Directors, or (agency fee) in return for Subscribers’ Fund management (or a fixed fee).
Mudharaba (profit-sharing) fee which is a percentage of profits made from the Subscribers (policyholders) Fund, as determined by the Sharia’a Supervisory Board in consultation with the Company’s Board of Directors.

The Subscribers (policyholders) share the net profits that the Company may attain at the end of each financial year.


For more information on Islamic insurance, please refer to the Islamic Insurance Leaflet