INSURANCE IN ISLAM 

Resolution No.-9 (9/2) Concerning Insurance and Reinsurance

The Council of the Islamic Fiqh Academy, during its second session held in Jeddah (Kingdom of Saudi Arabia), from 10 to 16 Rabiul Thani 1406 H (22-28 December 1985):

After having reviewed the presentations made by the participating scholars during the session on the subject of "Insurance and Reinsurance"; And after discussing the same;

Having closely examined all the types and forms of insurance and having an in depth review of the basic principles upon which they are founded and their goal and objectives;

Having looked into what has been issued by the Fiqh Academies and other edifying institutions in this regard;

Resolves

First: The commercial insurance contract with a fixed periodical premium, which is commonly used by commercial insurance companies, is a contract which contains major elements of deceit, which void the contract and therefore is prohibited (haram) according to Sharia.

Second: the alternative contract, which conforms to the principles of Islamic dealings is the contract of cooperative insurance, which is founded on the basis of charity and cooperation. Similarly, in the case of reinsurance based on the principle of cooperative insurance.

Third: The Academy invites the Islamic countries to work on establishing cooperative insurance, in order to liberate the Islamic economy from exploitation and put an end to the violation of the system which Allah has chosen for this Ummah.

Verily, Allah is All Knowing

 

Source from Resolutions And Recommendations Of The Council Of The Islamic Fiqh Academy 1985-2000