Regulatory Framework and Market Dynamics Related to Retakaful:

A Comparative Study of Saudi Arabia and the USA

Abdullah Mohammed Ahmed Barakat

 

Abstract: This article critically compares the regulatory, operational, and financial dimensions of Retakaful (Islamic reinsurance) in Saudi Arabia with those of conventional reinsurance in the United States, focusing on their implications for economic resilience, ethical investment, and global market integration. It adopts the Retakaful model, excluding alternative Islamic views such as that of Prof. Mustafa Al-Zarqaa.1 As Islamic finance grows, Retakaful (Islamic reinsurance) provides a Shari’ah-compliant alternative to conventional reinsurance, based on mutual risk-sharing rather than risk transfer. The article examines whether Retakaful offers a more sustainable and ethically aligned framework, and investigates the barriers to its global adoption. Using a qualitative methodology, this article compares Saudi Arabia’s Retakaful regulation under the Saudi Insurance Authority (SIA) with U.S. reinsurance oversight by the National Association of Insurance Commissioners (NAIC) and the Federal Insurance Office (FIO). Drawing on statutory texts, industry reports, and academic literature, the research highlights key differences in regulatory oversight, investment strategies, and consumer protection. Findings suggest that Retakaful’s principles of cooperation and surplus-sharing offer a more equitable model than the profit-driven U.S. system. This article contributes to Islamic finance scholarship and the discourse on ethical risk management, advocating for regulatory harmonisation to support the integration of Retakaful into global reinsurance markets.