Britain's first Shariah-compliant insurance company was launched yesterday, offering motoring policies in line with the Islamic legal code.

Salaam Halal insurance uses Takaful principles, whereby the risk is spread between all policy holders.

In contrast, conventional insurance policies shift the risk from the policy holder to the insurance firm.

People taking out a policy with Salaam Halal pay contributions into a pool, with that money then put into Shariah-compliant investments – avoiding companies that are involved in alcohol or pay interest. The central pool of funds is used to pay any claims that arise, and at the end of the year, if the pool is over-funded, the excess will be distributed back to policy-holder through a discount on their premium.

The policies are aimed at Britain's 1.6 million Muslims, who constitute 2.7 per cent of the total population, according to the 2001 census.

"The launch of Salaam insurance – the first independent, fully Shariah-compliant takaful operator available in this country – is a significant step for the growth of Islamic finance in the United Kingdom," said Abdulaziz Hamad Aljomaih, the chairman of Salaam insurance.

The group, authorised and regulated by the Financial Services Authority, an independent watchdog, hopes to launch home insurance policies later this year.

In 2004, Britain authorised a 100 per cent Islamic bank, the Islamic Bank of Britain. And the traditional bank Lloyds last year launched Islamic finance products.


The number

100%: Shariah-compliant bank was set up in the United Kingdom in the year 2004