In this chapter we are going to discuss the structure of the optimal incentives for takaful (Islamic insurance) operators (TOs). This is based on a recently published paper by Khan (2015). As emphasized by Khan, the main difference between conventional and Islamic insurance, relevant to the structure of optimal incentives, is that, while the conventional insurance contract is a contract of risk transfer, the Islamic insurance contract is one of risk-sharing.
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The interested reader is referred to Khan (2015) for details.
References
Basov, S., and M.I. Bhatti. 2013. Optimal contracting model in a social environment and trust-related psychological costs. The BE Journal in Theoretical Economics (Contributions) 13: 1–14.
Khan, H. 2015. Optimal incentives for takaful (Islamic insurance) operators. Journal of Economic Behavior and Organization 109: 135–144.
Mas-Colell, A., M.D. Whinston, and J.R. Green. 1995. Microeconomic theory. Oxford: Oxford University Press.
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Basov, S., Bhatti, I. (2016). Optimal Incentives for Takaful Operators. In: Islamic Finance in the Light of Modern Economic Theory. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-28662-8_14
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DOI: https://doi.org/10.1057/978-1-137-28662-8_14
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