Takaful Industry Case Study

In a nut shell, according to the discussion that have been discussed before about the risk management of takaful industry and how to faced it in order to avoid the loss in the industry, the takaful operators should know the current challenges similarly with the future. According to Waheed Akhter (2010), there is a few challenges in managing the risk toward takaful industry. A part of that is the challenge in facing the internal control. Based on Basel Committee and IAIS internal controls are very crucial in identifying risk toward financial institution.

While, the insufficiency of an effective corporate governance framework restrained the independence of board of directors (BOD) also give the impact in risk management and poses a challenge to it. On the other hand, the requirement of shariah compliance is one of the challenges as the application of practice that contradicts with the shariah is prohibited. Islamic financial market is one of the issues that can affect the risk management because it is not easy to bear especially for takaful institution to maintain its liquidity position to make prompt claim payment when it was demand to pay it.

Other challenge is a need of private credit rating agencies, this situation is difficult to overcome when there is a problem due to the International Islamic Rating Agency (IIRA) in Bahrain which to judge the shariah compliance and financial strength of the islamic financial institution in rate thousands of counterparties with whom Takaful companies deal. Lastly, the financial engineering poses as the major threat to Islamic Financial Institutions to become competitive in the contemporary business environment because of the different academic backgrounds and the opinion of the shariah scho...

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...ive to ensure both of these elements are managed fairly because both of them are crucial in takaful institution as a financial institution. All types of risks in takaful require specific risk management strategy and need be managed on individual basis.

In managing the risk in financial institution, sometimes the institution need to consider the perception of their customer. For example, to manage underwriting risk management, the operator need the complete information about the customers and analyzed their background. So that, the operator can managed the product that the institution can offer to the customers based on the background of the customers according to the types of risk that the customer want to cover and the tenure. This is sometimes can effects value on customer perception. So, the operator needs to focus also in value creation toward such situation.