Comparative Analysis of Risk Management Strategies: Study Between Takaful Operators and Companies Conventional Insurance

Abstract

This study aims to analyse and compare risk management strategies between takaful operators and conventional insurers from the perspective of operating models, contract structures, as well as approaches to risk. The objective of this study was to identify the key similarities and differences in the risk management mechanisms of the two models as well as to assess the impact of the Shariah framework on the practices of takaful operators. The study uses a qualitative approach through the analysis of the content of documents such as the company's annual report, Bank Negara Malaysia guidelines, and relevant academic literature. The findings show that takaful operators emphasise the concept of risk sharing (ta'awun) and Shariah compliance through the monitoring of the Shariah Committee, while conventional insurers operate on the basis of full transfer of risk to the company with an emphasis on commercial profit. Although both use similar actuarial knowledge and financial instruments, differences in fundamental objectives and operating structures result in different risk management approaches. This study suggests that the takaful model has the potential to offer an ethical and inclusive financial protection system that can be used safely.