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The purpose of this paper is to examine how the board of directors effectiveness (BODE), financial determinants, Takaful-specific determinants and the Takaful firms’ financial stability are related to the Shari’ah Supervisory Board’s quality (SCQ).

Using hierarchical regression analysis, the authors examine the determinants of financial stability of Takaful insurance and the authors test the moderator role of SCQ over 2016–2022 on a sample of 19 listed Takaful firms in 10 countries in the Middle East and South Asia region.

The findings reveal that SCQ negatively moderates the positive relationship between BODE, the Takaful model, diversification strategy, solvency, liquidity and Takaful financial stability. Shari’ah governance plays a crucial role in improving the financial soundness and the Shari’ah compliance of Takaful insurance.

This paper includes two main limitations. The results are restricted to the Middle East region and South Asia and may not be generalized to other areas. The study presents data from only 19 Takaful firms.

This kind of investigation is of immense relevance to enhance the understanding of governance and soundness of Takaful companies. Furthermore, it serves as a guide to the recruitment of Shari’ah board members, the choice of Takaful model and appropriate strategy to increase its financial stability.

This research studies the financial stability of Takaful insurance and the moderating role of SCQ, unlike the majority of other works that focus on financial performance.

The purpose of this paper is to examine the Shariah governance mechanisms of takaful insurance and their impact on its financial performance.

The effect of Shariah governance mechanisms on financial performance is analyzed over 2012–2018 on a sample of 11 takaful listed insurances in the Middle East region. Using multiple regression models, four hypotheses addressing Shariah governance mechanisms are tested.

The findings generally reveal that Shariah governance has an impact on the financial performance of takaful insurance. The Shariah Supervisory Board (SSB) size, the members’ reputation and their qualifications are the main determinants of financial performance for listed takaful insurance.

This paper includes two main limitations that may affect the accuracy of the finding. First, the results are restricted to the Middle East region and may not be generalized to other regions. Second, the sample is dominated by UAE, i.e. 4 takaful insurances out of 11.

Both Shariah governance and regular governance have an impact on the financial performance of takaful insurance. Yet, the effect of Shariah governance is more robust. To improve its financial performance, takaful insurance should expand the size of the SSB, hiring reputable scholars and recruit doctors in Islamic economics.

This research studies takaful insurance, unlike the majority of other works that have focused on Islamic banks.