Conventional insurance products are in conflict with Islamic beliefs for three reasons. Insurance involves an element of uncertainty, gambling and the charging of interest, which are prohibited by the Koran.

In Sudan in the 1970s, a concept called Takaful insurance was created to circumvent these problems. The policies of British Islamic Insurance Holdings (BIIH) will include a contract specifying the nature of the risk and the period covered that is clear to the participants. Every participant pays their contribution into the Takaful fund and the pool is invested in Sharia-compliant, non-interest-bearing investments to maximise the fund value.

Administration of the scheme, management of the contributions and other associated services are usually undertaken by an agent, appointed by the participants.

The agent is paid a fee that can be deducted from each contribution before it is placed in the fund, whose running costs and any insurance claims arising are met by it.

Lloyds TSB and HSBC introduced Sharia bank accounts aimed at the 3 per cent of the UK population that is Muslim in 2006. While there is no legal requirement to have a bank account, there is to have car insurance and this means that a Sharia-compliant insurance market could become very big business. British Muslims collectively have an estimated spending power of £20.5 billion.

Abdulaziz Aljomaih, the BIIH chairman, has said that the insurance premium paid annually by Britain’s Muslim population is broadly equal to that of the entire Gulf region.

The market for Sharia-compliant providers is expanding fast and there are more than 300 Sharia-compliant financial institutions in the world, helped by the high price of crude oil, which has sent billions of petrodollars flooding into the Gulf.

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