2. Takaful New

8/12/2019 2. Takaful New

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TAKAFUL


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Conventional Insurance

How Qimar & Riba exists in Conventional Insurance

Mode of Takaful

Mudarabah Model

Wakalah Model

Wakalah based on Waf Model

Re Takaful

!""lication of Takaful

Presentation Outline


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Definition

# ! wa$ to "rovide securit$ % and com"ensation to what is

valuable in the event of its loss dama'e or destruction based

on the "rinci"le of risk takin' and s"eculation()



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!ccordin' to *hariah rules there are two aspectsofConventional Insurance namel$+

,( Conce"tual !s"ect

-( .ractical !s"ect

*o far as the Conce"t of Insurance is concerned it is tocover the risk of loss or #fortunate man$ hel"in' theunfortunate few)(

The conce"t is not onl$ reco'ni/ed but also a""reciated andrewarded b$ Islam(



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0Hel" $e one another in ri'hteousness and "iet$ but hel" $e

not one another in sin and rancor0

.rinci"les of Muwalat Maail and 1afalah and

establishment of Islamic welfare state b$ the Hol$ .ro"het2*!W3 Waf and Tabrru are exam"les for reco'nition ofthis conce"t(

Al-Maidah verse# 2

Conceptual Aspect


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Conventional Insurance is forbidden due to two reasons+

,( Qimar or Ma$ser

-( Riba

*ince the above two thin's have been clearl$ "rohibited b$

Islam the$ cannot be 4ustified on the conce"tual as"ect of

hel"in' victims of various accidents or losses(

Practical Aspect


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QIMAR or MAYSER has been clearl$ "rohibited b$ Quran

and Hadith of the Hol$ .ro"het 2*!W3( It has two basic

elements which are "rohibited namel$+

,( 1hatar

-(


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Taleequl milki al alkhatr, wal mal fil janibain

To conditionali/e the ownershi"%"rofitabilit$ on uncertain

event where mone$ is involved on both sides(

However if mone$ is not involved on both sides i(e( one

"art$ voluntaril$ 2without an$ com"ensation3 declares #We

shall com"ensate $ou on a "articular event of loss) it would

not be Ma$ser(

Khatar


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=exicall$ it means uncertaintyand technicall$ it means+

>ncertaint$ of the counteract or

*ub4ect matter or

.eriod in a commutative contract(

Gharar


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The element of


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Problems

The "artici"ant contributes a small amount of "remium in a

ho"e to 'ain a lar'e sum ?KhatarKhatar

The "artici"ant loses the mone$ "aid for the "remium when

the insured event does not occur ? GhararGharar

The com"an$ will be in deficit if the claims are hi'her than

the amount contributed b$ the "artici"ants ? GhararGharar



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The element of Riba in the commercial insurance contract

exists in two wa$s+

Direct Riba? @xcess on one side in case of exchan'e

between the amount of "remium and the sum insured(

Inirect Riba? The interest earned on interest based

investments

RIBA


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Islamic Co-operative Insurance(TAKAFUL)


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Coo"erative Risk?sharin' for .rotection(

Clear se're'ation between .artici"ant and 5"erator(

*hariah Com"liant Investment strate'ies(

!voidance of Riba 2interest3 and Ma$sir 2


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!ifference "#$ Insurance % Takaful


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& It is a "usinessinstitutions' operate(venture "ase( on theprinciples of )Contract*+

& Risk transfer mechanism$here the insure(su"stitutes certainty foruncertainty+

Insurance Takaful

& It is a co-operativeinstitution "ase( on theprinciples of )Ta'a$un',mutual co-operation

& Risk sharin. mechanism/as such no transfer ofrisk is involve(+

!ifference


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Mo(els of Takaful


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Currentl$ there are three kinds of Takaful model bein'

o"erated worldwide+

.ure Mudarabah Model

Wakalah Model 2h$brid of Mudarabah & Wakalah3

Wakalah based on Waf Model

Mo(es of Takaful


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The "artici"ant and the o"erator enter into a Mudarabah

contract from the be'innin' of the relation for

indemnification and share of the underwritin' results(

The *ur"lus is shared between the "artici"ants and thetakaful o"erator in an a'reed ratio(

This model allows the takaful o"erator to share in the

underwritin' results from o"erations as well as the favorable"erformance returns on invested "remiums(

Mu(ara"ah Mo(el


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COMPANY

ADMINISTRATION

& MANAGEMENT

EXPENSES

INVESTMENT

BY COMPANY

PROFITS FROM

INVESTMENT

TAKAFUL

CONTRIBUTION

PAID BY

PARTICIPANT

GENERAL

TAKAFUL

FUND

GENERAL

TAKAFUL

FUND

OPERATIONAL

COST OF

TAKAFUL

/RETAKAFUL

SHARE OF

SURPLUS FOR

THE PARTICIPANT

SURPLUS

COMPANY

PROFIT

ATTRIBUTABLE TO

SHAREHOLDER

TAKAFUL CONTRACT

BASED ON PRINCIPLE

OF AL-MUDHARABAH

SHARE OF

SURPLUS FOR

THE COMPANY

*+,

-+,

Mu(ara"ah Mo(el


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Shari"a .oncerns

The relation between the "artici"ants is that of tabarruB and

not Mudarabah #.rofit *harin') canBt be a""lied here(

onation cannot be Mudarabah ca"ital at the same time( In a Mudarabah contract a "rofit is to be 'enerated to be

distributed( .rofit is not the same as A*ur"lusB 2excess "f

"remiums over claims reserves and ex"enses3 and in the

insurance context no "rofit can be 'enerated b$ definition(

Mu(ara"ah Mo(el


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Shari"a .oncerns

The sharin' in underwritin' sur"lus itself is somethin' which is

similar to makin' this into a commercial business venture and

not a mutual contract for assistance and "rotection(

The reuirement to "rovide Qard Hasanah 2in case of a deficit3

in a Mudarabah contract b$ definition is a'ainst the conce"t of

Mudarabah which is a "rofit sharin' contract and a Mudaribcannot be a 'uarantor(

Mu(ara"ah Mo(el


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Coo"erative risk sharin' occurs amon' the "artici"ants

whereas the takaful o"erator earns a fee for services 2as a

Wakeel or !'ent3(

The o"erator earns an u"front deductible fee and shares the"rofit of investments it does not share the results of

underwritin'(

The o"erator ma$ also char'e a Afund mana'ement feeB and"erformance incentive feeB

0akalah Mo(el


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PROFIT / LOSS

ATTRIBUTABLE TO

SHAREHOLDERS

INVESTMENT

BY FUND

PROFITS FROM

INVESTMENT

TAKAFUL

CONTRIBUTION

PAID BY

PARTICIPANT

GENERAL

TAKAFUL

FUND 70%

TO 75%

GENERAL

TAKAFUL

FUND

OPERATIONAL

COST OF

TAKAFUL

/RETAKAFUL

SHARE OF

SURPLUS FOR

THE PARTICIPANT

100%

SURPLUS

COMPANY

PARTICIPANT

0%

SHARE OF PROFIT

FOR THECOMPANY

!0%

MANAGEMENT

EXPENSES OF

COMPANY

TAKAFUL OPERATOR FEES

FOR

ADMINISTRATION EXPENSES"5% TO #0%

PR(/I! S0ARI%G (%

M$DARA&0A &ASIS

0akalah Mo(el


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The share?holders create a Waf fund to extend the hel" to

those who want cover a'ainst financial losses(

The "artici"ants donate to the fund and the o"erator

mana'es the fund(

!ll underwritin' results belon' to the fund which itself has a

le'al entit$(

0a1f Mo(el


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PROFIT / LOSS

ATTRIBUTABLE TO

SHAREHOLDERS

INVESTMENT

BY FUND

PROFITS FROM

INVESTMENT

DONATION

PAID BY

PARTICIPANT

$AF

FUND

75% TO

70%

$AF

FUND

OPERATIONAL

COST OF

TAKAFUL

/RETAKAFUL

SHARE OF

SURPLUS FOR

THE PARTICIPANT

100%

SURPLUS

COMPANY

PARTICIPANT

0%

SHARE OF PROFIT

FOR THECOMPANY

!0%

MANAGEMENT

EXPENSES OF

COMPANY

$AF

INITIAL DONATION

BY SHAREHOLDERS

TO CREATE $AF

FUND

TAKAFUL OPERATOR FEES

FOR

ADMINISTRATION EXPENSES"5% TO #0%

PR(/I! S0ARI%G (%

M$DARA&0A &ASES

0a1f Mo(el


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! Waf Dund is established b$ the shareholders of Takaful

Com"an$ throu'h the contribution of ACedin' amountB 2"art

of the Ca"ital3(

The Cedin' amount of the Waf will remain invested(

!n$ "erson b$ si'nin' the "ro"osal form contributin' to the

Waf and subscribin' to the "olic$ documents shall become

the member of the Waf fund(

0a1f Mo(el


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The Waf fund shall work to achieve the followin' ob4ectives+

a3 To extend financial assistance to its members in the

event of losses(

b3 To extend benefits to its members strictl$ in accordance

with the Waf eed(

c3 To donate to Charities a""roved b$ the *hariah*u"ervisor$ Eoard

0a1f Mo(el


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The Waf Dund will la$ down the rules for distribution of its

funds to the beneficiaries and will decide how much

com"ensation should be 'iven to a subscriber%member(

The Waf will become owner of all contributions and has theri'ht to act as a le'al entit$ as "er its terms for investment

com"ensations and dealin' with the sur"lus amounts(

0a1f Mo(el


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The Takaful Com"an$ ma$ distribute the sur"lus amounts onthe followin' three basis+

a3 ! "ortion ke"t as reserve to miti'ate the future losses(

b3 ! "ortion distributed amon' the "artici"ants to differentiate

it from the conventional insurance "rocedures(

c3 ! "ortion utili/ed for the charitable "ur"oses ever$ $ear(

0a1f Mo(el


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If the fund is liuidated the outstandin' balance after "a$in'all dues and "a$ables will be utili/ed to charitable "ur"oses(

The Takaful com"an$ while mana'in' the Waf Dund will

"la$ two different roles simultaneousl$+

a3 5"erator%Mana'er

b3 Mudarib

0a1f Mo(el


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!s 5"erator%Mana'er the Takaful Com"an$ will "erform all

functions necessar$ for the o"erations of the Waf a'ainst a

Wakala fee to be deducted from the Contributions of the

.artici"ants(

!s Mudarib of the fund the Takaful Com"an$ will mana'e the

investment of the excess funds of the Waf into *hariah

com"liant investments and will "artici"ate in the "rofit of the

fundBs investments at a s"ecified ratio of "rofit(

0a1f Mo(el


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!n Islamic alternative to conventional reinsurance based on a

*hariah com"liant a""roved conce"t for reinsurance(

Takaful 5"erator "a$s an a'reed "remium from its takaful

fund to the Re Takaful o"erator in return for the Re Takaful5"erator "rovidin' securit$ for the assurance that the Takaful

5"erator is "rotected(

Re-Takaful


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Application of Takaful


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Takaful can be used to cover +

.ro"ert$ e('( house factor$ mosue offices

Fehicles 2car motorc$cle etc((3


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T2A3K 4O5

Documents

2. Takaful New