Islamic Insurance: A Modern Approach to Islamic Banking

By Aly Khorshid | Go to book overview

6

THE DEVELOPMENT OF ISLAMIC BANKING AND INSURANCE IN SAUDI ARABIA

A case study

Introduction

As the stronghold of Islam where the Shari'a is the supreme law of the land, Saudi Arabia would have been expected to tackle the problem of insurance by establishing a scheme of 'Islamic' insurance following in the footsteps of countries like Malaysia. In actual fact, commercial insurance companies cannot be set up and registered in Saudi Arabia, and no insurance regulations have been enacted - except certain provisions concerning marine insurance in the Commercial Court Regulations 1 from which the validity of insurance transactions in the Kingdom are inferred.

The case remains that a Saudi Arabian insurance market has not officially been recognized by the State (Faris 1983:114), although in practice it is largely composed of segments similar to those constituting the insurance market in the States of the Gulf Cooperative Council. However, in Saudi Arabia all insurance business is transacted under the umbrella of commercial firms (ibid.: 113). Being not yet officially legalized, the insurance companies are not practically accepted or licensed to perform in isolation from other commercial activities of the agent, who is usually a merchant or a trader. This wide gap between legal theory and practice is a common feature of many of the States of the Gulf Cooperative Council. In the last two decades very many new insurance companies with a majority of Saudi interests have been established and registered outside Saudi Arabia (ibid.: 114), although almost all of their operations are within the territories of Saudi Arabia. These companies are subsequently referred to as 'national' companies. Foreign insurance companies are still operating side-byside with the newly formed 'National Insurance Companies'.

Due to the absence of any official statistical data in connection with the Saudi Insurance Market, as well as the absence of any official record for the number of insurance companies in Saudi Arabia, and since various foreign insurance offices are accustomed to entering and leaving the market without any governmental supervision, the real scale of insurance activity within the

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Islamic Insurance: A Modern Approach to Islamic Banking
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Tables ix
  • Introduction xi
  • Acknowledgements xiv
  • 1 - The Meaning of Insurance in Islam 1
  • 2 - Riba (Usury) and Gharar (Risk) 31
  • 3 - Pre-Modern and Modern Jurists' Standing on Insurance 44
  • 4 - The Development of Mutual Insurance in the West 97
  • 5 - The Development of Islamic Banking and Insurance in Malaysia 113
  • 6 - The Development of Islamic Banking and Insurance in Saudi Arabia 132
  • 7 - Basic Principles for an Insurance Scheme Acceptable to the Islamic Faith 155
  • 8 - Conclusions 166
  • Appendix 1 173
  • Appendix 2 180
  • Appendix 3 183
  • Appendix 4 206
  • Notes 208
  • Bibliography 216
  • Index 223
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