In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 187 (2/20) Cooperative Insurance: Shariah Rulings and Criteria

The Council of the International Islamic Fiqh Academy of the Organization of Islamic Cooperation, holding its 20th session in Oran, People’s Democratic Republic of Algeria, on 26 Shawwāl – 2 Dhū al-Qi’dah 1433h (13–18 September 2012),

Having examined the research papers submitted to the Academy in this and previous sessions concerning Cooperative Insurance: Shariah Rulings and Criteria, Having reviewed the recommendations of the conference on Cooperative Insurance: Dimensions, Prospects and Shariah Status, organized by Academy in Amman, Hashemite Kingdom of Jordan, in collaboration with the University of Jordan, Islamic Educational, Scientific, and Cultural Organization(ISESCO) and Islamic Research and Training Institute of the Islamic Development Bank

Group, on 26–28 Rabīʿ al-Akhir 1431 (11–13 April 2010), Having listened to the discussions on the subject,

Resolves

First: The Academy emphasizes its resolution no. 9 (9/2) concerning Insurance and Reinsurance, that the fixed-premium commercial insurance contract used by commercial insurance companies is a muawada (compensation) contract which contains a high degree of gharar (uncertainty) to an extent that makes it invalid; it is, therefore, prohibited according to Shariah. The alternative that conforms to the fundamentals of Islamic transactions is the cooperative insur- ance contract, which is based on donation and cooperation.

Second: Due to some problems that emerged in the practices of Islamic in- surance companies, in addition to the legal, regulatory and supervisory issues these countries seem to be facing, an integrated conception on cooperative in- surance need to be developed.

Recommendations

First: Assigning to the Secretariat of the Academy, in collaboration with concerned research centers, the task of convening a committee of Fiqh schol-

ars and experts to formulate an integrated project comprising Shariah rulings and standards that constitute the bases of cooperative insurance, including its Shariah-acceptable forms, in order to facilitate sufficient resilience of applica- tion. Among such rulings and standards are the following:

1. Concept and essence of cooperative insurance in Islamic

2. Comparison between cooperative insurance and commercial insurance with regard to:

   1. Comparison between Shariah-acceptable cooperative insurance and international principles of cooperation.
   2. Comparison between Shariah-acceptable cooperative insurance and principles of commercial insurance.
3. Identification and description of relationships between the parties of co- operative insurance, with particular emphasis on description of relation- ships among participants in the insurance fund, and relationship between the insurance base and the party entrusted with management.
4. Shariah rulings and criteria for assessment of remuneration of manager and insurance base.
5. Shariah rulings on insurance surplus and insurance deficit when they
6. Shariah criteria on participation in and withdrawal from the cooperative insurance base.
7. Shariah rulings on liquidation of the cooperative insurance
8. Shariah rulings and criteria on reinsurance.
9. Principle of profit and loss
10. Principle of “Substitution” and what relates to
11. Principle of bearing and issues relating to

Second: The draft project which the committee will prepare should be sub- mitted to the forthcoming session of the Academy for drafting a resolution in the light of previous paragraph.

Indeed, Allāh is All-Knowing.