Market Overview

A.M. BestTV: Qard Hasan Loan System Creates Conflicts for Takaful Insurers, Says A.M. Best Associate Director


In this A.M.BestTV episode, Salman Siddiqui, associate
director, analytics, A.M. Best, said takaful-oriented insurers
often rely on an interest-free loan system, known as Qard Hasan, to
cover policyholder deficits, and that over-reliance on the system can
create longer-term issues. Click on
to view the entire program.

"Companies are very reliant on Qard Hasan because policyholder funds
continue to make losses or deficits year after year," said Siddiqui.
"A.M. Best analysis has shown that, over the past 10 years, on an
aggregate basis, takaful companies in the Middle East and North African
(MENA) region have generated policyholder deficits year after year, with
the accumulated deficit increasing over the same period. This has caused
a need for Qard Hasan to actually increase year after year across the
MENA region."

Siddiqui also highlighted A.M. Best's takaful-specific methodology.

"As part of the methodology, A.M. Best examines the capital adequacy of
the policyholder fund on a risk-adjusted basis. If there is no surplus
in the policyholder fund, then clearly the company does not have capital
adequacy. … The methodology also requires a look at the balance of
earnings between the shareholder and policyholder accounts.
Over-reliance on Qard Haran means that there is an imbalance between the
two funds, which will be a negative for the optimum performance
assessment of these takaful operators," said Siddiqui.

To access a copy of this briefing, titled, "Takaful Trends; Breaking the
Reliance on the Qard' Hasan," visit

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