Transforming Conventional Insurance Companies into Sharia-Compliant Companies: A Case Study – Yemen

Abstract

The Islamic Takaful insurance sector has witnessed significant and rapid growth worldwide, expanding across both Islamic and non-Islamic countries. This expansion has prompted conventional insurance companies to introduce Sharia-compliant Takaful products, either through designated windows, by establishing independent subsidiaries, or by undertaking complete transformation in accordance with Sharia principles. This research aims to examine the feasibility of converting conventional (commercial) insurance companies into Sharia-compliant entities within the commercial insurance sector in Yemen, where conventional insurance products are currently offered. The study employed the descriptive-analytical comparative method in the theoretical framework, and the analytical-statistical method in the practical framework through the design of a comprehensive questionnaire addressing the study’s theme. The questionnaire encompassed the factors influencing the decision of conventional insurance companies in Yemen to transform in line with Sharia rulings. These were grouped into five main factors: clarity of Sharia rulings among the managers of conventional insurance companies; the willingness of these managers to adhere to Islamic Sharia principles; expectations of achieving an insurance surplus (additional profits) following transformation; the availability of qualified, experienced, and professional human resources; and finally, the success of existing Islamic Takaful companies. The study sample focused on the five largest conventional insurance companies in Yemen, and data were processed using the SPSS statistical package. The findings revealed ambiguity. Concerning the Sharia rulings related to the operations of conventional insurance companies among their managers, which weakened their motivation to undertake transformation. However, the remaining factors investigated demonstrated a significant positive effect on the decision to convert conventional insurance companies to Sharia-compliant operations, as highlighted in the study’s findings. The research concluded with several recommendations, most notably: the necessity of clarifying the Sharia rulings governing the activities of conventional insurance companies for their managers in accordance with the resolutions of fiqh academies and Sharia boards of Islamic financial institutions; and the prohibition of conventional insurance companies from offering Islamic insurance products unless this is carried out through a gradual and comprehensive transformation plan. Additional recommendations were also presented in the study.