Islamic Financial Services: UK gets first Islamic insurance company

Regulated by the Financial Services Authority, Salaam Halal and Salaam Insurance are trading names of Principle Marketing Services Limited, and policies are underwritten by Principle Insurance Company Limited.

The company's website does an excellent job of explaining many of the principles behind Islamic financial services - although it does accidentally dip into controversy with the comment that the consumption of alcohol is "haram" or forbidden - there is widespread differences amongst Muslims as to whether there is an absolute ban, whether the ban is in public or whether it is forbidden to become intoxicated which is not the same as consumption being forbidden.

Interestingly, that debate does matter: for companies that are run on Shariah law principles must only do certain types of business. The interpretation by Salaam Halal is that it cannot do business with those who are in a business that deals in alcohol.There are other limitations mentioned, too.

Like all Islamic financial services businesses, Salaam Halal has a Shariah council which advises on the company's policies. Therefore there may be different policies from company to company. In due course, as the market widens, it is possible that a different company's Shariah council will form a different view.

The company is offering the following products:

• Halal Car insurance
• Halal Contents insurance
• Halal Buildings insurance
• Halal Life insurance
• Halal Business insurance

The UK has approx 2.7 million Muslims. Although there have been a number of Islamic banking products, and an Islamic bank, in the UK for several years, takaful is a new introduction.

The fundamental difference between takaful and occidental insurance is how risk is laid off.

Takaful is, in effect, a group guarantee scheme where the participants contribute to and claim from a pool. Third party investors are not permitted.

Under the occidental (in effect the Lloyd's of London model) premiums are collected from policyholders and the pool is provided by third parties - in Lloyd's - speak, "names" who share in the profits - or losses - of the syndicates they form part of.