Legal Regulation of Takaful Insurance in Libya

Abstract

The immense global economic acceleration has led to an increased and urgent demand for modern, dual-service Islamic financing methods. These methods serve the finance seeker by compensating their losses according to a purely Islamic system free of usury. In return, they also benefit the financing entity by increasing the demand for their contemporary Islamic products. In our current era, there is nothing more crucial than the concept of Takaful Islamic insurance. This system aims to compensate and alleviate the suffering of those afflicted by circumstances that led to the loss of their livelihood, home, or similar, without resorting to conventional commercial insurance companies, despite the fine line distinguishing them in terms of their legal classification.

Furthermore, the matter doesn't stop there. Takaful insurance companies themselves need someone to compensate their losses when a deficit occurs at the end of the fiscal year. This opens the door to the necessity of them reinsuring their activities with Takaful reinsurance companies that possess adequate financial capacity and solvency. In fact, some have even permitted this last-mentioned process to be carried out with commercial insurance companies, but under specific controls and conditions. The most important of these conditions are the unavailability of financial coverage from Takaful reinsurance companies and that the process adheres to what is stipulated by the Sharia supervisory boards within those institutions. These boards, in turn, also oversee the distribution of any insurance surplus, if it occurs, to the capital owners in the Takaful company according to the Islamic standards approved by the Islamic Fiqh Academy. The domestic legislations of countries, especially Islamic ones, have consistently derived their regulating laws for this matter from these principles. Libya is not immune to these circumstances, despite the simplicity and inadequacy of its regulations, as they were not established through the known legislative process but rather through executive regulatory decisions issued by successive executive authorities in the country according to different time periods.