A sharia-complaint insurance firm has been launched in the UK with the aim of offering insurance services that are based on Islamic legal principles.

The company Salaam Halal insurance will provide motoring insurance services initially, but will later in the year also venture into home insurance policies.

Salaam Halal applies Takaful principles that allows for risk spreading between policyholders as opposed to conventional insurance which shifts risk to the insurance company alone.

Customers purchasing policies from the insurance firm will make contributions to a pool and the money is put into sharia-based investments only.

Claims that may arise are settled with funds from the central pool and if at the end of the year the pool is over-funded, what is in excess is refunded to the policyholders through a discount on their premium.

Chairman of Salaam insurance, Abdulaziz Hamad Aljomaih commented that the launch of the firm was a major step towards the growth of Islamic finance in the UK.