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20 J. Int'l L. Islamic L. 208 (2024)
Assessing the Viability of Implementing Mutual Company Structure in Takaful Insurance within Saudi Arabia: A Comparative Study with the United States

handle is hein.journals/jispil20 and id is 583 raw text is: Manchester Journal of Transnational Islamic Law & Practice Volume 20, Issue 2: 208-224, 2024 Assessing the Viability of Implementing Mutual Company Structure in Takaful Insurance within Saudi Arabia: A Comparative Study with the United States Abdullah Mohammed Barakat* Abstract: This article critically analyses the feasibility and applicability of the mutual company structure within the unique framework of Takaful insurance in Saudi Arabia. This article assesses the potential advantages and challenges associated with adopting a mutual company structure in a Takaful insurance setting that traditionally operates through a joint- stock structure. A comparative study was conducted, employing qualitative research methods. The analysis is based on an extensive review of the literature. A comparative framework was developed to evaluate governance, risk management, financial stability, and customer satisfaction. The research findings presented in this article reveal a compelling case in favour of the existing joint-stock structure in Takaful insurance within Saudi Arabia, demonstrating its superiority over the mutual company structure prevalent in the United States. The findings underscore the advantages of the existing joint-stock structure in Takaful insurance, emphasising its financial stability, effective risk management, alignment with cultural and regulatory requirements, customer satisfaction, and market adaptability. This article contributes to the existing body of knowledge by offering a comparative analysis of organisational structures in Takaful insurance, specifically in the unique context of Saudi Arabia. The originality lies in the nuanced examination of how cultural, religious, and regulatory factors impact the effectiveness of mutual and joint-stock structures. Keywords: Mutual Company Structure; Takaful Insurance; Conventional Insurance; Joint- Stock Structure; Saudi Arabia I. INTRODUCTION Insurance firms are primarily categorised as mutual or stock based on the ownership structure of the organisation.1 A stock insurance company is a corporate entity owned by its stockholders and shareholders.2 The policyholders, however, do not directly participate in the firm's profits or losses, as these are only attributed to the shareholders, either in their entirety or partially; on the other hand, the mutual firm is owned by its policyholders, and any profit or loss is attributed to the policyholders.3 Takaful insurance firms are considered non-conventional insurers.4 Takaful is an Islamic alternative to traditional insurance that operates on the principles of social solidarity, * Assistant Professor, Shaqra University, Saudi Arabia. Email: abaraka_(su~eusa; amabarakatthotmaicom. 1 Serap O. Gonulal (ed), Takaful and Mutual Insurance -Alternative Approaches to Managing Risks (Washington, DC: The World Bank 2013). 2 ibid. 3 David Mayers and Clifford W. Smith J, 'Ownership Structure across Lines of Property-Casualty Insurance' (1988) 31 (2) The Journal of Law and Economics 351. 4 Rusni Hassan and Syed Ahmed Salman, 'Takaful vs. Conventional Insurance from the Risk and Solidarity Perspective' Conference: Proceedings of the 30th International Business Information Management Association Volume 20, Issue 2 (208) 2024

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