Takaful for S.A by Zubair Mughal

8/8/2019 Takaful for S.A by Zubair Mughal

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Zubair MughalChief Executive Officer

AlHuda : Centre of Islamic Banking & EconomicsEditor in Chief.Islamic Banking and Finance News , True Banking.Regional HeadTakaful Pakistan Limited.

An Introduction to

Takaful(Islamic Insurance )



` Introduction to Takaful ( Islamic Insurance )` Di fference b/w Convent ional Insurance & Takaful` Takaful Through T im e`

General & Faim

ly Takaful Types` Re-Takaful` Takaful Models Worldw ide.` Takaful - Target Market



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A lHuda Center of Isla mi c Bank ing andIsla mi c Econo mi cs (CIBE); A

p ioneer ing effort to pro m ote Isla mi c

Bank ing and F inance in Massesthrough A dv isory, Educat ion, Tra in ing,Publ icat ions, A wareness and Pract ice,with a v iew to support, susta in, spread

and supple m ent SBP and Govt.in itiat ive for pro m ot ion of Isla mi c

Bank ing and F inance.



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` Educat ion & Tra in ingsx Post Graduate Di plo m a in Isla mi c Bank ing & F inancex Cert if ied Courses

` A dv isory and Consultancyx Isla mi c F inanc ial Model ingx Feas ib ility Reportx Strateg ic Plann ing

` Research & Product D evelop m ents` Shar iah A dv isory` Publ icat ions

x True Bank ing Magaz inex Isla mi c Bank ing & F inance Newsx SukuK Portalx Takaful Blog

` Internat ional Conferences & Workshops` A wareness and Pro m ot ion

x A wareness Ca m pa igns



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www.alhudac ibe.co m

Online Magazine on Islamic Banking

www.sukuk.com

.pkwww.truebanking.co

m.pk



` ³ Takaful´ is the Sharia Compliant brand name

for the Islamic alternative to conventionalinsurance. Its based on the principle of Ta¶awan or mutual assistance.

` Takaful comes from the Arabic root-wordµkafala ¶ ² guarantee.



` Takaful means mutual protection and jointguarantee.

` Operationally, takaful refers to participantsmutually contributing to a common fund withthe purpose of having mutual indemnity in the

case of loss.



The contract between the insurer & insured istechn ically wrong fro m the shar ia perspect ivebecause of

` Interest (R iba)` Gharar (Uncerta inty))` Ga m bling (Qa m ar & Ma is ir)` R isk Transfer Issue



` Mutuality and cooperation.` Takaful contract pertains to Tabarru as against Aqd ± e-

mu¶awadat in case of conventional insurance.` Payments made with the intention of Tabarru (contribution)` Eliminates the elements of Gharrar, Maisir and Riba.` Wakalah/Modarabah basis of operations.` Joint Guarantee / Indemnity amongst participants ± shared

responsibility.` Constitution of separate ³ Participants¶ Takaful Fund .́` Constitution of ³ Shariah Supervisory Board.´` Investments as per Shariah.



` Piety (individual purification)

` Brotherhood (mutual assistance)

` Charity (Tabarru or contribution)

` Mutual Guarantee

` Community well-being as opposed to profit maximization .



Issue Conventional Insurance Takaful

Organization Principle Profit for shareholders Mutual Benefit for Participants

Basis Risk Transfer Risk sharing

Value Proposition Profits maximization Affordability and spiritual

satisfaction

Laws Regulations Sharia plus regulations

Ownership Shareholders are Owners Participants

Management status Managed by Company Management Operator

Form of Contract Contract of Sale Islamic contracts of Wakala or

Mudarbah with Tabar ¶ru(contributions)

Investments Interest based Sharia compliant, Riba-free

Surplus Profit of Insurance Company. Distribution to Participants onpro rata basis.



` Origins in the First Constitution of Madina.

` Serious efforts were made in modern times, in 1970s to comeup with an Islamic alternative to the conventional insurance.

` The first Takaful company was set up in Sudan in 1979, almostsimultaneously followed by another one set up in Bahrain.







The number of Takaful operators worldwide is now estimated at:

` 180+ Takaful companies

` 11 Retakaful companies

` In 46 Countries.



` General Takaful ± offers all kinds of non-liferisk coverage. It is normally divided intofollowing classes:

x Property Takafulx Marine Takafulx Motor Takafulx

Miscellaneous Takaful



` Term Life Takaful

` Whole Life Takaful

` Endowment Takaful

` Universal Takaful

` Marriage Plan`

` Education Plan



Currently few ReTakaful companies worldwide offering a relativelysmall capacity:` Sudan (1979) National Reinsurance.` Sudan (1983) Sheikhan Takaful Company.` Bahamas (1983) Saudi Islamic Takaful and ReTakaful Company.` Bahrain/Saudi Arabia (1985) Islamic Insurance and Reinsurance

Company.` Tunisia (1985) B.E.S.T. Re` Malaysia (1997) ASEAN ReTakaful International.` Dubai (2005) TakafulRe by ARIG.` Lloyds of London to have a ReTakaful Syndicate in 2007.` SwissRe has formed a separate ReTakaful Pool` MunichRe set up ReTakaful Co. in Malaysia 2008



` People who do not insure due to religious reasons.

` People who insure and are insensitive to religious reasons.

` People who currently do not insure at all.



` Wakalah Based on Waqf Model : The participant's donate thefund and operator charge an agency fee.

` Pure Mudarabah Model : The participants and operator enter into modarabah Contract.

` Wakalah Model : An Agency Agreement is made betweenparticipants and Operators on the basis of Wakalah ( Agency

agreements)





Participants

Pool of Contributions

Participants Contribution



Participants



Investment inShariah ComplaintAvenues

Profit from Investment(Part of the profit goes to theCompany for acting asmudarib)



Participants



Wakala Fee Claims Re-Takaful Expense etc.

Investment inShariah Complaint Securities

Profit from Investment(Part of the profit goes to the

Company for acting as mudarib)



Participants



Wakala Fee Claims Re-Takaful Expense etc.






Participants



Wakala fee, Claims, Re-Takaful Expenses

SURPLUS



Company for acting as mudarib )



Participants




SURPLUS






Participants



SURPLUS

Contingency Reserve Charit Distribute Amon Partici ants







Participants



Contingency Reserve Charity Distribute Among Participants

SURPLUS







Participants




SURPLUS







Participants



SURPLUS


Wak ala Fee Claims Re-Takaful Expense etc.


Profit from Investment(Part of the profit goes to theCompany for acting as mudarib)

+ +

-

=



InvestmentIncome

OperationalCost of Takaful

/ ReTakaful

Claims & Reserves Surplus

(Balance)

P A R T I C I P A N T S¶ T A K A F U L F U N D(P.T.F.)

Mudarib¶sShare of PTF¶s

InvestmentIncome

WakalahFee

Investment

Income

ManagementExpense of

theCompany

Profit/Loss

S H A R E H O L D E R S¶ F U N D (S.H.F.)

Participant

WAQF

Takaful

Operator

Share

Holder

Wakala-Waqf Model

Investment bythe Company



` Skepticism.

` Lack of uniformity in Models & Shariah decisions.

` Regulatory issues.

` Capacity constraints.

` Limited Investment avenues.

` H.R. issues.



Documents

Takaful for S.A by Zubair Mughal