Question Summary:
Is exchange traded derivatives and occupational specific insurance permissible in Islam.

Question Detail:

1. Is exchange traded derivatives permissible in Islam.
2. Is a professional person allowed to have occupational specific insurance, where if a person becomes ill or injured and is unable to work, the insurance will pay for his salary for the period he cannot work?

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
1. Shari’ah explicitly renounces and prohibits transactions involving all forms of usury (Riba), excessive uncertainty (Gharar), gambling (Maysir), as well as trading of debt. Furthermore, in order for a sale to be valid, Shari`ah specifies that the commodity and underlying assets must be Halal, currently existing in its physical sellable form, and in the ownership of the vendor. Hence, these conditions evidently render impermissible the trading of derivatives.
Moreover, futures transactions are not permissible since Shari`ah disallows a sale or purchase to be affected for a future date and since in majority of the future sales delivery or possession is not intended. Islam does not allow the trading of such promises and the trading and charging of premiums for such promises.
 
2. All forms of insurances, including occupational insurance, are prohibited in Islam. Conventional Insurance constitutes usury (Riba), gambling (Maysir) and excessive uncertainty (Gharar) all of which is prohibited in Islam[1].
 
And Allah Ta’āla Knows Best
Hanif Yusuf Patel
Student Darul Iftaa
UK
Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net