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A proposed contribution model for general Islamic insurance industry

Lukman Ayinde Olorogun (IIUM, Institute of Islamic Banking and Finance (IIiBF), International Islamic University, Kuala Lumpur, Malaysia)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 20 April 2015

1339

Abstract

Purpose

This paper aims to consider a contribution model of a general Islamic insurance industry which allowed the return of underwriting profit to the Islamic insurance participants. The objective is to create a justified and equitable means of computing contribution which maximises the expected ownership right of the Islamic insurance fund.

Design/methodology/approach

The accumulation of funds and claims paid were characterised in form of accumulation and decay function over a period of time. It provides necessary and sufficient conditions for their existence and uniqueness. Mathematical derivative procedures were adopted to derive the underwriting returns to be returned to the Islamic insurance participants. Lastly, this paper recommends the incorporation of underwriting returns’ variable into the traditional actuarial model and provides theoretical justification for the process.

Findings

Then, the derivation of underwriting returns through convolution of accumulated funds and claims paid views in the form of Laplace Transform led to a conjecture and proved. Thereafter, the proposed and adjusted model was arrived at.

Originality/value

This study, to the best knowledge of the researcher, is the first attempt in the quantification of Islamic insurance industry. Thus, the model is the first attempt of creating a justified way of calculating the Islamic insurance participants’ contributions.

Keywords

Citation

Olorogun, L.A. (2015), "A proposed contribution model for general Islamic insurance industry", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 8 No. 1, pp. 114-131. https://doi.org/10.1108/IMEFM-04-2014-0032

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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