Shariah Risk Exposure in Takaful Company Investments in Malaysia

Takaful Company is one of the Islamic financial institutions licensed as Sharia-compliant financial institutions by Bank Negara Malaysia (BNM). The main areas of risk management in takaful are sharia compliance, investment management, and human resources. Shariah compliance is a continuous process, and the takaful company needs to be responsible for ensuring that the entire operation is Shariah compliant. Sharia non-compliance will result in serious losses not only to customers but also to stakeholders, the takaful company, and the industry as a whole. Therefore, this study will examine the exposure to sharia risk in takaful company investments. Next, this study will analyse what approaches are practiced to manage shariah risk in takaful company investments. This study applied the qualitative method by interviewing 11 informants who are responsible for managing the takaful companies sharia compliance activities. Next, all collected data will be analysed through content analysis and thematic analysis using the qualitative data analysis program Nvivo. The results of the study show that there are shariah risk factors for takaful company investments, including changes in the status of sharia-compliant securities and not disposing of non-shariah-compliant securities, as well as the lack of expertise and experience of investment fund managers related to shariah compliance investment activities. In summary, the takaful company will manage shariah-risk investment according to the guidelines and regulatory framework of the Malaysian Securities Commission and screen all investment securities through a shariah review process.