Comparison of the mathematical model for the efficiency of Takaful insurance and its application in Saudi Arabia

Abstract

Takaful insurance system was introduced in Saudi Arabia in 1979 which was gradually implemented. The country contributes 40% to the global Takaful insurance market, however, better practices are required to be adapted to increase efficiency of Takaful insurance organizations in Saudi Arabia. The aim of this research is to study Takaful insurance in the light of mathematical models to recommend its application in Saudi Arabia. The research has mainly compared most recent two researches for Takaful implementation in Saudi Arabia, i.e., by Benyoussef and Hemri (2019) and Almulhim (2019) while emphasizing on the hybrid Takaful model proposed by Puspita, Kolkiewicz andTan (2020) which is led by numerical stimulations. The research concluded that the Takaful insurance organizations are operating efficiently, however, the challenges such as bankruptcy risk, loss accumulation, etc., had limited the ability of Takaful insurance organizations to improve and expand. Moreover, the mathematical model of Almulhim (2019) was better to find out efficiency of the Takaful insurance organizations in the insurance sector of Saudi Arabia while Puspita, Kolkiewicz andTan (2020) encourages the wider implementation of hybrid Takaful in Saudi Arabia. Thus, concerning the outcome of the research, it is expected that the growth of the Takaful insurance system will provide more benefit to Saudi Arabia where this system could be used for investment and insurance.