Wethaq Takaful Insurance Company: Company Analysis

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Wethaq insurance company got established in 2000, it was the first national Takaful Company in Kuwait. Its establishment raised a serious concern in many sectors of Kuwait economy because the company offered insurance premiums that complied with the Islamic sharia laws according to (Kettell, 2010, p. 98). Takaful is an Islamic alternative insurance service in Kuwait. Therefore, the law got enacted in 1961 allowing Takaful, but Wethaq was the first company to be licensed by the ministry of commerce. Its starting capital got contributed by several Islamic institutions in Kuwait, and they included the Kuwait finance house, the International inventor co., International murabaha co. and the International investment group. All these contributed capital amounting to 10,000,000 KD giving it enough strength to be operate successfully right from its establishment.

Types of Takaful products offered

Wethaq Takaful Insurance Company offers several products to its customers, and this diversity of products makes it possible for them to take care of insurance needs for the state. For example, they have a product for motor vehicles where they insure motors against accidents. Fire and property also get insured by the company so that incase of fire or other eventualities happening to property, the company can compensate for its customers. They have products to cater for those in construction and engineering industry because they are prone to many accidents in their work (Collard, 2005, p. 45). Therefore, the company offers insurance services for engineering equipment and persons making it safer for their businesses as chances of operations ending up paralyzed by perils are minimal. In addition, they have products; to cater for financial institutions for the banking sector also they have products to cover hearth services for its customers. For example, when a client gets admitted to a hospital, the company settles their bills regardless of the amount as the policies provide for that. Marine and aviation is not left out since there are hazards associated with them, so the marine operators and their property are also insured by the company. The aviation sector has its products and planes and jets in Kuwait get insurance covers from this company (IBP, 2009, p.67).

Types of Business models

This company uses Ta’ awuni model which requires sharing 100% of the insurance surplus (profits) with the participants. This Model encourages the Islamic virtue of brotherhood, unity, cooperation and solidarity. The profit is shared between the company and insurance participants. The profits are divided into two parts with one share going to donations to meet the mortality liabilities or loses and the other going to investments. In case, the company is in deficit the participants join to assist hence enabling the company to continue its operations. Furthermore, the company’s model can be described as Wakalah- Mudarabah Model because everybody involved takes charge in sharing of both losses and profits. So customers learn from the company on how they should pay for the expected services and from there premiums get drawn for the clients. Then when all members make their contributions towards the premiums, all the cash is put in a pool known as Takaful from where all members get assured of security as explained by Asma (2011). This security includes compensating for damages caused by natural calamities or other hazardous events. Each policy holder then makes donations towards the insurance business and this is the money that basically take care all compensation cases. For example, if a house covered by the Takaful products unlucky burns down in a fire incident, donations made to the company by the policy holders is used to take to compensate the owner of the building. Then after ensuring that every charge are settled from donations the surplus remains property of the members of the company hence termed as their profits. Wethaq started its operation with the wakalah- mudarabah model and because sharing of surpluses among its members have existed throughout its operations. After all expenses get deducted, the surplus is returned to the policyholders’ kitty and this money is put in reserves for further investments. The shareholders who are the insurer manage the Takaful funds for the policyholders and they get paid for that Asma (2011). This is one of the many ways through which Wethaq company make money, and this is possible because the policy holders trust the insurer with their money hoping that one time they will show up in an accident (Ṣabrī, 2008. p. 68). Then the insurers who are the shareholders manage the money through making profitable investments that quickly generate many funds for the company. When in catastrophes occur, then the insurer comes out to meet the set promise to its customers and by doing this they policyholders get satisfied as their long term investment has been honored. This is true since people set aside their savings to secure their assets for any occurrences that may happen leading to losses.


Greatest indicators of the success and growth of the Wethaq is its reported 30% in the rate of growth from Share capital in 2005(20625) to 2007. Furthermore, the gross claims demonstrated a compound annual growth rate of 33% increase in 2005 to 2007. Majority of these claims were derived from fire and motor policies segment of their Takaful.

However, it was unfortunate that the company reported losses in 2005 but they have been more profitable in 2009. This is also the reason why the company a 20% compound annual growth rate decline in 2002 to 2005. Among all the segments of the company, in the year 2009, the group with the highest contribution to the total gross written premiums has been derived from the non-motor at 78% which include policies for fire, marine, and engineering. Motor, on the other hand contributes to 11%, health 33, and family takaful 6% of the total gross written premiums. While the gross written premiums for 2006 amounted to AED 1,589.05 million, the net profit totaled to AED 92.0 million.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Gross written premiums 1666598 2258436 1798591 2364218 1573098 1658749 1786281 1832918 2485221 2136428
Net Premiums Written 1265498 1852693 1329813 1963579 1125897 1286578 1256358 1353624 1911315 1798162
Net Premiums Earned 1162589 1781259 1141265 1862589 1002586 1126875 1056058 1238529 1896398 1645973
Gross claims paid 700589 698265 654825 721564 701258 706266 610115 600105 599002 625456
Net claims paid 564100 576962 469452 502654 385654 489365 601589 650000 751214 692564
Claims incurred 642325 620589 537250 611235 452632 542156 714362 796358 852261 814239
Net Underwriting income 192632 201245 187241 190221 172521 180296 200362 210652 230251 214251
Invested Assets 1652485 1632548 1754231 1365249 1625863 1365289 1856324 1698256 1745368 1963241
Loss Ratio 46.80% 49.60% 47.80% 46.80% 48.60% 49.50% 50.60% 50.60% 52.30% 46.30%
Expense Ratio 14.00% 19.00% 16.00% 14.00% 17.00% 19.00% 20.00% 20.00% 25.00% 13.00%
Combined Operating Ratio 60.00% 58.60% 58.60% 60.00% 59.40% 58.00% 57.00% 57.00% 50.00% 63.00%

Loss Ratio

Expense Ratio

Combined Operating Ratio

Net Underwriting income

Sharia-Compliance: Discuss how sharia compliant is the insurance company in theory and in practice

Wethaq Takaful Insurance Company is a company that complies with sharia law in carrying its operation because the spirit of brotherhood and solidarity is promoted. Especially its insurance surpluses are shared among the participants as expected by the sharia law (Sabri, 2008, p.87). This company is run by Islamic leaders who ensure that Islamic laws are followed in its operations. The basic foundation at which the operations of Wethaq Takaful insurance company are founded is based on the Islamic principles in the insurance company. This means that the Takaful is in accordance with the Muslim community’s traditions and principles, and this provides the most salient distinction between the Takaful and conventional insurance policies. In basic operation principles, all values of Islamic religion get adhered to in everyday operations of the insurance company. As provided by the company, their core business function is the provision of policies that comply with Islamic sharia laws. The compliance of the company with Islamic traditions can be best reflected in the fact that it avoids the elements of interest and vague stipulations in the agreement on the contract. This means that promises of the company to its clients have to be met without any act of mischief as the Islamic religion condemns liars. The Sharia compliance of the Takaful policies offered by the Wethaq Takaful Company can also appear on some core principles of operation (Ṣabrī, 2008, p. 88). These principles include the existence of cooperation among all policy holders with the goal of the promotion of the common interest whereby both the insurer and the policy holder must have an engagement contract. This contract must be signed by both parties to ensure that no cooperation is enhanced. Finally, every member who owns a Takaful from the company pays a subscription to be able to provide assistance for the needy in the community. This assistance including helping the insurer to handle losses and liabilities, it is coordinated in the form of a pooling system, and divided among the needy people in the community. Therefore, this results to the elimination of risks with regards to subscription and compensation; an advantage is not taken at the cost of other members; and the instrument used for investments are also Sharia compliant.

Any other section

Insurance companies too face some risks and they should look for bigger insurance companies to insure with them. Some of the risks that insurance companies face are the Assets risk and these are risks that might affect companies’ assets. Risks under Asset risks are namely; concentration risks, credit risks, liquidity risks and market risks. There are operational risks that face companies in terms of its activities towards meeting the objectives of the company (Ṣabrī, 2008. P. 98). These arise due to errors in premium pricing, poor sales, system failures among many other aspects. Fraud may also fall in this category and this is where funds end up with individuals illegally posing difficulties to insurance companies. Although Wethaq Company has its basics in Islamic laws, its risks are similar to those faced by other insurance companies.


Asma, 2011. Wethaq Takaful insurance co. Web.

Collard, E. 2005. MEED, Volume 49, Issues 40-51. Virginia: Economic East Economic Digest, ltd.

IBP USA Staff. 2009. Islamic Financial Institutions (Banks and Financial Companies) Handbook, London: Int’l Business Publications.

Kettell, B. 2010. Islamic Finance in a Nutshell: A Guide for Non-Specialists, New York: John Wiley and Sons.

Ṣabrī, N. R. 2008. Financial markets and institutions in the Arab economy, New Zealand: Nova Publishers.

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