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اسل فكتا
Islamic Insurance (Takaful)
Dr. Kamaru Salam Yusof (2016)Lecturer, FBMS, Unissae!ara Brunei Darussalam
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Faculty of Business & Management Sciences, UNISSA, BruneiDarussalam
Tings to consi!er
1. Arabic term vs english term2. Your role – to understand, lecturer role –
to help you understand. – Don’t hesitate to ask, visit, talk, email,
wasaping etc.. !n time – plssssss "lecture, tutorial,
submit#$. Your class – your home.
%. Attendance – must and record "maybe un¬iced#
'. (witch o) your *on and tablet "e+cept..#. -at and drink – i* need and not disturb
others
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Faculty of Business & Management Sciences, UNISSA, BruneiDarussalam
"ur course
• /ecture• 0 can ask• roup mail
• eading material• /ibrary research• 3ui4•
5resentation• test• e+am
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Aims
• 6orrect perspective on 7slamic 8aka*ul
• 8heory and application o*7slamic 8aka*ul
•
Able to utili4e the rules o*taka*ul in line with the (yariah/aw
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contents
• !rigin 9 development o* insurancepractice
• !rigin 9 development o* taka*ulpractice
• overnance principles in taka*ulpolicy.
• :ormalities 9 considerations ininsurance contract – common law 9syariah
• 5ractice o* taka*ul – principles 9
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To#ics to co$er• 7ntroduction to risk management• 7ntroduction to insurance 9 its history.• 7ntroduction to taka*ul 9 its history• elation between taka*ul, banking and other 7slamic
:inancial (ystems
• Di)erent between 7nsurance and taka*ul• Detail discussion on riba, gharar 9 maysir in insurance• !perational :ramework o* 8aka*ul 9 6lassiakalah• ?ow implement both contracts in taka*ul• ?ybrid
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To#ics (cont%)
• ;runei and =alaysia @ which model• e&taka*ul• (hariah 7ssues in 8aka*ul• :AB about taka*ul *rom the (hariah view• egulatory :ramework *or 8aka*ul• Discussion on ;runei Act 9 =alaysia Act
• 8aka*ul@ opportunities 9 challenges• 6ontemporary issues on taka*ul@ *rom
general society
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eferences & te'tooks
% *ssential gui!e to takaful@ Dr-ngku abiah Adawiyah -ngku Ali 9?assan (cott 5. !dierno. 6-8
"6enter *or esearch 9 8raining, C/#
+% Takaful A stu!y -ui!e. asser Yassin, Eamil amly. "7;:7=#. Cuala
/umpur.
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1once#t of fate (2 & 2)
• 5rophet saw and ;edouinG why notyou tie the camel – 8ie&up, thenH..
• 7mportant o* making e)orts to reducethe loss.
• 5rophet Eoseph G
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isk in takaful
• !ne way to *ul
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isk%% From 3ere4
• *rom uncertainty inG1.
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ty#e risk
Types Desc Egs.
Pure Possibility loss or
no loss
Fire, flood, death
of breadwinner
etc.
Speculative Possibility of
profit, loss or no
loss
Investment, Stock,
shares, horse
race..
Fundamental RiskEffect economy/
large numbers.
War, famine,
earthquake
Particular Risk Effect individualsnot all
Motor accident
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5o3 to treat te risks4
• 8he strategies to manage threatstypically includeG1. Avoiding – eliminate
2. eduction "mitigate#
. etention "accept and budget#
$. 8rans*erring
%. (haring'. eutralise or hedge the risk
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/at is risk management
..identi
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risk management concept
2 basic part o* human1. uncertaint regarding loss &&J risk K
change o* loss
2. peril cause loss – the*t, accident, sickness, Lood, premature
death, 8! 8A6C/-
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8opic M 2
7nsurance@ concept,history 9 it’s hukm
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5istory of insurance ()• 8he
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5istory of insurance (+)
• Achaemenian monarchs werethe
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5istory of insurance (6)• 8he ancient Athenian
Qmaritime loanQ advancedmoney *or voyages withrepayment being cancelled i*the ship was lost.
• 8he reeks and omansintroduced the origins o*health and li*e insurance c.
'OO ;6- when they createdguilds called QbenevolentsocietiesQ which cared *or the*amilies o* deceasedmembers, as well as paying*uneral e+penses o*members.
• uilds in the =iddle Agesserved a similar purpose. 8he
8almud deals with severalaspects o* insuring goods.;e*ore insurance wasestablished in the late 1th
century, Q*riendly societiesQe+isted in -ngland, in which
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5istory of insurance (7)• in 12th 6entury, a*ter the
establishment o* (elFuk state inAnatolia, (elFuk (ultan hiyas ad&Din Caykhusraw 7, introduced a*orm o* state insurance whichreimbursing the traders *or theirloss *rom the state treasury, i* theywould be robbed within the (elFukterritory.
• (eparate insurance contracts "i.e.,insurance policies not bundledwith loans or other kinds o*contracts# were invented in enoain the 1$th century, as wereinsurance pools backed by pledgeso* landed estates.
• 8he
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5istory of insurance #ost8enaissance (9)• 7nsurance became *ar more sophisticated and
speciali4ed varieties developed.
• 8he will o* obert ?ayman, written in 1'2S, re*ers to twopolicies he has taken out with a wealthy /ondonerG oneo* li*e insurance and one o* marine insurance.T7n the late
1'SOs, =r. -dward /loyd opened a co)ee house thatbecame a popular haunt o* ship owners, merchants, andships’ captains, and thereby a reliable source o* thelatest shipping news. 7t became the meeting place *orparties wishing to insure cargoes and ships, and those
willing to underwrite such ventures.
• 8oday, /loydNs o* /ondon remains the leading market"note that it is not an insurance company# *or marineand other specialist types o* insurance, but it works
rather di)erently than the more *amiliar kinds o*insurance.
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5istory of insurance #ost8enaissance (:)
• 7nsurance as we know it today can be traced to thereat :ire o* /ondon, which in 1''' devoured 1,2OOhouses. 7n the a*termath o* this disaster, icholas;arbon opened an oPce to insure buildings. 7n 1'SO,he established -nglandNs
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Faculty of Business & Management Sciences, UNISSA, BruneiDarussalam
To!ay 5istory of insurance (;)
• 7nsurance as we know it today can be traced to thereat :ire o* /ondon, which in 1''' devoured 1,2OOhouses. 7n the a*termath o* this disaster, icholas;arbon opened an oPce to insure buildings. 7n 1'SO,he established -nglandNs
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T5* 1"N1*
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/5= INSUAN1* IS
5AAM4(*-TT)
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Faculty of Business & Management Sciences, UNISSA, BruneiDarussalam
*lements in insurance
1.riba
2.harar
.maysir
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Faculty of Business & Management Sciences, UNISSA, BruneiDarussalam
ia 8 !e>nition
• /iterallyG addition, increase, to growto rise.
• 8echnicallyG the premium that mustbe paid by the borrower to the lenderalong with the principal amount as acondition *or the loan or *or an
e+tension in its maturity
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1om#aring et3een ?akat & ria(6@6)
ا و أ في و ب ر
م
ب ن ت
م
آ
آمت ه ! ا "#$ % مربو ف & # ! ا
'()ف ! ه ا * ه + "%ر ,- ./ ن
ا 0123و + 4)39(
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ia #ractice! y e3 & its ?ulm(7:@8:)
5- 6! 7 8م $ # ر! 9 : 4ا ا! %; ن ف -
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-eneral ty#es of ria
1. Al&Duyun & increases arising *rom debts"loans#1. iba Bardh G the increase "interest# on the
principal sum o* the loan is agreed upon atthe point o* contract.
2. iba Eahilliyah or iba asiahG the increaselevied on the borrower *or late repayment or*ailure to repay the loan
2. Al&buyu’ – commercial transaction1. iba ;uyuN or iba Al :adl G e+cess which is
taken in e+change o* speci
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1omo!ities of ria3i
1. old
2. (ilver
. Dates$. >heat
%. (alt
'. ;arley
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ia in insurance
2 situation1. amount received by insured
– greater than instalment• *adl
• nasiNah
2. companyNs pro
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Ty#e of garar
1. *ahish – substancial prohibited
2. yasir – trivial tolerated
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-arar in 3at a2!4
• harar e)ect on a3d mu’wadhah"changed contracts& bilateral# 9 noton a3d tabarru’ "donation or charity
contracts & unilateral#
= u ’ w a d
h a h 8abarru
’
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-arar in insurance
li*e 9 general
• subFect matter not uncertain untilevent – pay more get nothing
– pay less get more
• shariah & must know all particulars
relating at time o* contract.5olicyholder not in*ormed amount o*compensation
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maysir
de
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3or!
• 8echnically, "8aka*ul# *rom theتكاeconomic point o* view means mutualguarantee provided by a group o*
people living in the same societyagainst a de
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Meaning of takaful
1. esponsible
2. uarantee
. taka*ul & Foint guarantee, share
responsiblity
aspects mutuality happen•. ?elp
•. esponsibility•. protection
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conce#t
• system where participantcontribute to common *und andintend to Fointly guarantee eachother.
• when participate
–seek protection – Fointly co&operate
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Dalil of Takaful
5:2}
Cو D ت! ا ر ! 6ا $ } @ 1وا*an" #el+ ou one anot#er in ri!#teousness an" +iet-
As&(unnah A ه #$ Eا Fي بي 4ر% ر, أ ن $: GH ب Cر BIا 34ا"9J فر ? %K4 ن + أر ا ?تت Aا
8#L ب ي ف 38ت D ف.
M%: أ + 2D ف س ه $ Eا N ي 6# ا J او 3> ت Bف
$ Aت8 $ ا 3رأ, M%: 2A ," أ "6$ . ( *# O 8# ر,
P Q6ا Rا(Xarrated by Abu ?urairah "r#, who said thatG once twowomen *rom the tribe o* ?u4ail clashed when one o* them
hit the other with a stone, which killed her and also the*oetus in the victim’s womb. 8he heirs o* the victim
brought an action to the court o* the ?oly 5rophet "s.a.w#,who gave a verdict that the compensation *or the
in*anticide is *reeing o* a male or *emale slave while thecompensation *or killing the woman is the blood money
"diyat#, which to be paid by the WA3ilah’ "the paternalrelatives# o* the accused.
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5istory of takaful
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5istory of takaful
• Ancient Arab tribal custom and thecompanions o* the 5rophet.
• 8he custom o* Xal$aila#, it is mutuallyagreed among the tribes that i* a person iskilled unintentionally by a person o* adi)erent tribe, the accuser’s paternalrelatives will take the responsibility to makea mutual contribution *or the purpose o*
paying the blood money to the victim’srelatives.
• 8his practice o* having a *und that poolscontributions *rom a group o* people to
assist others in need was *urther encouraged
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Takaful in mo!ern 3orl!
• 8he
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*$olution in takaful
• 1UU && taNawuni – (udan
• 1US$ && mudarabah –
malaysia• 1US$ && wakalah – gul*
• 1UU' && wa3* & south a*rica
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Takaful as in!ustry to!ay
• ow practiced by over 'O companiesin 2 countries.
• =ore recently, retaka*ul, the
e3uivalent o* conventionalreinsurance, has been developed,initially in =alaysia.
•
At present, most 8aka*ul operatorsreinsure to conventional reinsurers,and this is considered acceptable solong as there is no practicable
(hari’ah compliant alternative
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Takaful in #resent !ay
spirit1. helping *riend – *east
2. repair house. =oving
$. khayrat *und
•. All are not contradict
•. but not commercial
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TakafulEs gro3ing sare of te -11 insurancein!ustry
• >ith a *ocus on 8aka*ul, (audi Arabiatops the world rankings, holding %Z
o* total global contributions,according to the latest released
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uling of takaful (+)
taka*ul must base on1. =utuality
2. co&operation
5rinciples
. shared responsibility
$. Foint indemnity
%. common interest
'. solidarity
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1ase stu!y
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Insurance in Brunei
• American 7nternational Assurance"A7A#
• Asia /i*e Assurance (ociety /imited
• reat -astern /i*e Assurance 6o /td
• A\A 7nsurance ";# (dn ;hd
• ;orneo 7nsurance (dn ;hd
• Aiva 7nsurance (dn ;hd
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Takaful in Brunei
• 8A7;
• 8aka*ul 7slam
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#oint !iGerent
• ?as elements o* ]7;ADA?• ?as element o* 8A]A>0 "=utual
6ooperation#•
?as elements o* 8A;A0’ "Aim o*(incere Donation#• o elements o* 7;A’ "7nterest 0sury#• o elements o* =A7(7 "ambling#• o elements o* ?AA "0ncertainty#• (haring o* investment 5ro
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#oint !iGerent +
not buying and selling, but anarrangement a group o*
individuals pay a
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3y takaful acce#te!4
1. co&operate on common good
2. pay contribution to assist
. considered donation
$. donation intended to divide losses
%. element uncertanty eliminated &inso*ar made clear
'. not aim deriving advantage *romothers
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insurance 4 ItEs s#irit4
• spirit ok e+cept
D7(60((7!
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Fun!amental !iGer
insurance• it contract• 2 parties• paying premium in return
• guarantee pay compensation in case• probabilistic contract
8aka*ul• taka*ul operator not insurer•
participant insurer each other• operator as administrator
– =anaging – investing
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De>nition of contract A2a!()
• 6ontract comes *rom the Arabic Na3adameans binding or cemented.
• 7n language understanding is the bond,bind. 7t said bond "al&rabath# intention isto gather or collect two ends o* the ropeand tied one on the other.
• 7n the BurNan al&a3du words contained in
the letter o* Al&=aidah paragraph 1, thathumans are asked to meet a3ad.
De>nition of contract A2a!E
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De>nition of contract A2a!(+)
• 8echnically & engagement contract,agreement and consensus "itti*a3#.
• 7n this connection the role 7Fab "statement tothe bond# and 3abul "declaration accepting
the bond# is very inLuential on the obFect.• According to =usta*a A4&_arka a legally
binding contract is per*ormed by two ormore parties who are e3ually eager to attach
itsel*. 8he will o* nature hidden in the heart,there*ore declaring each must disclose in astatement called 7Fab and 3abul.
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1 t t f !
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1ontents of a2a!
De
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1ontracting #arties
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1ontracting #arties(e'am#les)
T i f
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Ty#e 8 rief
• 7n relation to (haria bankingpractices and in terms o* the
intent and purpose o* thecontract itsel* can beclassi
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Ty#e contracts (!etails)
8hose contracts that are permitted canbe divided into three broad
categories as *ollowsG
1. 8rading 6ontracts.2. 6ontracts o* 5ro
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Tra!ing 1ontracts%
• "A# 6ash (ales – "i# ormal cash sales – "ii# (ar* "*oreign currency e+changes# – "iii# -+changes between ribawi materials o* di)erent kinds and o*
the same basis "gold with money or wheat with palm oil# – "iv# ;ai Al&Dayn "debt trading as in ;ills o* -+change#
• ";# De*erred payment sales "debt
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1ontracts of #artici#ation (e2uity >nancing#ro>t saring)
"i# =usharakah "Foint venture pro
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Su##orting contracts
"i# ahnu "mortgage#"ii# Ca*alah "guarantee#"iii# >akalah "agency#"iv# >adiah "sa*e custody#
"v# Bardh ?asan "benevolent loan#"vi# ?iwalah "trans*er o* debt#"vii# 8abarru’u "donation#"viii# ?ibah "gi*t#"i+# >ak* "endowment#
"+# 7braa’ "rebate#"+i# =u3asah "set&o)#
T f t t
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Ty#e of contracts
1ontracts in takaful
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1ontracts in takaful
6ompany"operator#
5articipant5articipant
+ ty#e of contracts in
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y#takaful
• Amongst participants
• ;etween participants and
operatorMu!ara
a
/akala
JuEalaia
3a2af
taarru in takaful
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taarru in takaful
• by participants• agree to pay to taka*ul *und
• not speci*y *orm o* donation – hibah
– wa3*
U
TaarruE
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TaarruE
• 8abarru contract is the contract thatis intended to help others and simplyhope pure pleasure and reward *rom
Allah,• Absolutely no element o* seeking the
return, or a motive. 6ontract that
includes this type include rant, 7bra,>akalah, Ca*alah, -ve, ahn andBirad
Mu!araa
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Mu!araa
• =udharabah is a contract where theowner o* capital entrusts his *unds toan entrepreneur who contributes
skills in a business and the pro
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ycon!itions are
1. 6ontract& Absolute and in de
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Te essential elements are necessarycon!itions are (+)
$. 6apital"i# 7n money only
"ii# ot debt
"iii# (peci
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Mu!araa in takaful
• give capital to others & trade it &sharing pro
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Mu!araa in takaful (+)• ;asically, Mu"ara%a# is de
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Mu!araa in takaful (7)
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Mu!araa in takaful (7)
• 7t is the responsibility o* the operator to sa*eguard theinterest o* the participants in order to ensure thebusiness will not be seriously a)ected by the loss thatmight Feopardi4e the credibility and con
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3akala
• agency• participant & actual owner
• operator – agent
• principal & appoint agent – taka*ul aktivities
– 7nvesment
– entitle agency *ee
/akala in takaful
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/akala in takaful
• 8he term aala# in Arabic means agency.• 8here*ore under the structure, an agency relationship is agreed
between two parties to conduct a certain business undertaking.• ;ased on this premise, the model describes an agency agreement
between the operators, acting as the agent or ail- to theparticipant as the principal to manage the participation o* the latter ina variety o* taka*ul products provided by the operator.
• 7n return *or rendering the agency services, the operator is permitted tocharge a *ee under the agreement. 8he *ee is payable *rom the taka*ulcontribution paid by the participant. 7n this sense under the abovemodel, management e+penditure can be charged to the taka*ul *und asup*ront charges.
• ;y this model, the operator earns its revenue *rom the agency *eedescribed in the a*orementioned as well as returns on the investmento* its shareholders` *und. ?owever, there are also operators practisingthe above model who charged per*ormance *ees on its roles andservices o* managing the investment o* the taka*ul *und. 7n the evento* a cancellation or surrender, the participant will be re*unded o* thenet balance o* his contribution, i* any, a*ter deducting all the up*rontcharges such the aala# *ees and other management e+penses *romthe taka*ul *und.
Juala 1ontract
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Juala 1ontract
• Eu’ala is a contract in which one o* theparties "the Eail# o)ers speci
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Ju ala is !istinguise! from Iara on te follo3inggroun!s
"a# Eu’ala is valid despite uncertainty o*work deeming the determination o* there3uired result by the o)eror assuPcient.
"b# Eu’ala does not re3uire acceptance."c# -ntitlement to compensation depends
on completion o* work and delivery o*result.
"d# Eu’ala is valid even i* the other party isnot known."e# As a rule, Eu’ala is terminable, while
lFara is binding.
uKala in takaful
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u ala in takaful
• commitment to pay & reward *orper*ormance o* task
• participants appoint operator to
manage• payment based on actual
per*ormance
3a2f
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3a2f
• relin3uish a right over property *orgeneral enFoyment
• in taka*ul *und only, management still
tru wakalah or mudarabah• participant lose the right over their
contribution
• operator as trustee
/a2f in takaful (!etail L
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)• 8he term af re*erred *or this model e+plains the
contract o* taka*ul that underlines the agreement orconsent o* the participant that the taka*ul contributionpaid in return *or participating in the taka*ul product tobe credited by the operator into the taka*ul *und inaccordance with the principle o* af or endowment.
8o begin with, a wa3* account has to be established bythe operator within the taka*ul *und. 8o this e)ect theoperator is re3uired to relin3uish some kind o* Xseedmoney as af to generate the said af account.
8his af account o* the taka*ul *und will be investedsimilar to the three business models hereinbe*ore.
8he af *und shall work to achieve the *ollowingobFectivesG
• a# 8o e+tend
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+)• All the e+penses related to the underwriting
and operational cost o* taka*ul shall becharged to the af *und. As manager, thetaka*ul operator will per*orm all *unctions
necessary *or the operations o*theaf against a aala *ee to bededucted *rom the contribution paid by theparticipants. As Mu"ari%, the operator willmanage the investment o* the taka*ul *undincluding its af account in S#aria#&compliant investment avenues and willshare its returns on the investment at anagreed ratio similar to the pro
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6)• 7t is important to note the di)erent principles
o* S#aria# are used in the taka*ul contract to e+pressthe consent o* the participants *or their contributionsto be credited into the taka*ul *und *or the purpose o*undertaking the concept o* Foint guarantee asencapsulated in the term taka*ul. 7n contrast to
the af model, the other three models applied theprinciple o* tabarru to the contract.
• 7t is a basic *eature o* the model below thatthe af :und will lay down the rules *or distribution o*its proceeds to the bene
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re$ision
• isk management• 7nsurance – concept, history 9 hukm.
• 8aka*ul – concept 9 history
• Di)erences between taka*ul 9insurance
• !perational *ramework *or taka*ul
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T"
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#rinci#les
• participant benecation
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classi>cation
general *amily
-eneral takaful
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-eneral takaful
• short term• paid credited to *und &&J invested• tabarruN more apparent• all contribution go to common pool• no saving• surplus distributed• 6ategori4e
–
=otor – non motor•
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Family takaful
• long term &&J 1O to O yrs• eg G education, pension, death etc• distribute contribution
– partici account – special account &&J tabarruW
• eceive –
savingdividenspecial account & eventhappen 9 paid until maturity – savingdividen
mo!ern takaful oGere!
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mo!ern takaful oGere!
• -ducational• etirement
• >a3*
• critical illness
• Disability
• accidental death
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Malaysia Analysis
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1ontracts in takaful
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1ontracts in takaful
underlying• between participant & tabarruN
•
between operator 9 participant
see pic
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T"
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Insurance system
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Insurance system
• 0nderlying contract – sale 9 purchase – 6ustomerI policy holder buy policy and
paying *or premium.
• 7nsurer provides protection• All the premium, pro
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Takaful system
• 5articipants contribute the donation.• 6ompany only as a agent or manager
• 8aka*ul *und –in principle& pro
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• 8he operation o* taka*ul within the non$ti3ari sector are based on purecooperative model.
• 8he operation o* taka*ul within the ti3arisector can be structured on a number o*business models as shown belowG – i. aala# model
– ii. Mu"ara%a# model
– iii. Mu"ara%a# 4 aala# mo"el also knownas #%ri" model
– iv. af model
<
ure coo#erati$e mo!el
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#
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Tiari Mo!els (+)
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( )
• >hen =alaysia commenced taka*uloperation in accordance with the 8aka*ulAct 1US$, the al$Mu"ara%a# mo"el wasintroduced by the operator, (yarikat
8aka*ul =alaysia (endirian ;erhad.• ;runei too adopted the Mu"ara%a#mo"el when taka*ul was
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( )
• !n the contrary, when (udan launched itstaka*ul operation based onthe ta5auni or cooperative principle, itadopted the aala# mo"el, as seen in
the business Low o* her taka*ul debutant,7slamic 7nsurance 6o. /td o* (udan.• ?owever, with the advent o* taka*ul
business in the late 1UUOs in the ul* and=iddle -ast, the %ri" mo"el began totake shape.
• 6urrently, all newly established taka*uloperators, including in =alaysia, havechosen the %ri" mo"el.
Tiari Mo!els (7)
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( )• !n the other hand, af is a
relatively new model and so *ar nooperator is known to have used it.
• 8he principle o* af as a model *or
taka*ul operation was
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Mu!araa mo!el
Takaful L Mu!araaMo!el
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Mo!el• ;asically, Mu"ara%a# is de
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( )
• 0nder this arrangement, a pro
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• 8he contract will de
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• :or the *amily business it includes themortality surplus to be allocated to theeligible participant as declared by theactuarial valuation at the end o* every
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Mu!araa mo!el (:)
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• 7n the event o* such loss, it is incumbentupon the operator to make good the lossby ar" or loan by the shareholders.
• An important *eature to note is that under
the Mu"ara%a# mo"el, managemente+penditure is not charge on the taka*ul*und instead it is borne by theshareholders` *und.
• evenue o* the latter is its portion *romthe pro
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Mu!araa mo!el
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Basic mu!araa mo!el
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Basic mu!araaim#limentation
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im#limentation
Mu!araa mo!el (;)
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• 8here*ore, under the above business model,the participant and the operator enter into acontract o* the Mu"ara%a# *rom inception,*or indemni
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• /i*e insurance is said to be as high aseighty "SO# percent o* ithout these e+penses charged tothe *und, taka*ul operators practisingthe Mu"ara%a# model, as seen in
=alaysia and ;runei, have been ableto share the underwriting pro
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Mu!araa mo!el (@)
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• (imilarly, as there is no up*rontleakage o* the instalmentcontribution to cover management
e+penses or agency cost, aparticipant o* a long&term *amilyproduct would be re*unded all theinstalment meant *or his savingsinclusive o* its returns on investmentshould he chose to cancel orsurrender the participation in the
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• 7n this regard, the uni3ue di)erenceo* taka*ul against the conventionalinsurance is very clear. 8he di)erence
is not only *rom the underlying basiso* contract or aa" that is *oundedon S#aria#, but also *rom thebusiness operation which isadvantageous to the consumers.
Mu!araa mo!el (+)
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• onetheless, some scholars and 7slamic Furisprudents e+pressed concern on thesuitability o* applyingthe Mu"ara%a# contract *or taka*ul
operation. According to them, it is notappropriate to link a contract o* tabarru’between participants to pro
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Takaful 8 /akala Mo!el
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• 8he term aala# in Arabic meansagency.
• 8here*ore under the structure, an agencyrelationship is agreed between two
parties to conduct a certain businessundertaking.
• ;ased on this premise, the modeldescribes an agency agreement between
the operators, acting as the agentor ail- to the participant as theprincipal to manage the participation o*the latter in a variety o* taka*ul products
/akala Mo!el (+)
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• 7n return rendering the agency services,the operator is permitted to charge a *eeunder the agreement. 8he *ee is payable*rom the taka*ul contribution paid by theparticipant.
• 7n this sense under the above model,management e+penditure can be chargedto the taka*ul *und as up*ront charges.
• ;y this model, the operator earns itsrevenue *rom the agency *ee described inthe a *ore mentioned as well as returnson the investment o* its shareholders`*und.
/akala Mo!el (6)
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• ?owever, there are also operatorspracticing the above model who chargedper*ormance *ees on its roles andservices o* managing the investment o*
the taka*ul *und.
• 7n the event o* a cancellation orsurrender, the participant will be
re*unded o* the net balance o* hiscontribution, i* any, a*ter deducting allthe up*ront charges suchthe aala# *ees and other management
Basic 3akala mo!el
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Im#lement te 3akalamo!el
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mo!el
-eneral takaful 3akala
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Family takaful 3akala
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/akala #rolem
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• 5roblem• operator cannot share pro
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5yri! Mo!el
Takaful L 5yri! Mo!el
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• As the term denotes, taaful#%ri" model is a combination o* thetwo principles above.
• 0nder the model, a relationshipbetween the operator whichcombines the role o* entrepreneur or
Mu"ari% as well as the agentor ail o* the participant, whilst thelatter in the capacity as both providero* capital or sa#i%ul$mal and principal
5yri! Mo!el (+)
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• ;y this arrangement on the part o*the operator, an agency *ee can beremunerated as up*ront charges *rom
the taka*ul *und whilst at the sametime will have the right to pro
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• 7n this regard, the Mu"ara%a# contract isapplied on the investment activity only.• 5ro
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• 8here*ore to the operator it has threesources o* incomeG aala# *ee andpro
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-eneral takaful yri!
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Family takaful yri!
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5yri! Mo!el (9)
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• 8he above model underpins the cooperativerisk sharing taking place among participantswhilst the operator earns a *ee *or theservices provided as agent or ail- o*participant.
• 7n other words the operator derives part o*its revenue *rom up*ront deductible *ee onthe contributions.
•
8hus, unlike the al$Mu"ara%a# model, thismodel enables the operator based on theagency arrangement to charge the taka*ul*und to cover both the managemente+penses as well as the agency cost.
5yri! Mo!el (:)
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• 7n addition, there is pro
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• evertheless, the main concern o*the aala# hybrid model is the un*ul
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• 6ombination• wakalah in underwriting• mudarabah in investment
• operator entitled 2 – agent &&J manager – mudarib &&J investor
• Abu Dhabi ational 8aka*ul• more accepted
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/a2f Mo!el
/a2f mo!el
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Takaful L /a2f Mo!el
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• 8he term af re*erred *or this modele+plains the contract o* taka*ul thatunderlines the agreement or consent o*the participant that the taka*ulcontribution paid in return *orparticipating in the taka*ul product to becredited by the operator into the taka*ul*und in accordance with the principleo* af or endowment.
• 8o begin with, a wa3* account has to beestablished by the operator within thetaka*ul *und.
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/a2f Mo!el (6)
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• 8he af *und shall work to achievethe *ollowing obFectivesG – a# 8o e+tend
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•
All the e+penses related to the underwriting andoperational cost o* taka*ul shall be charged tothe af *und.
• As manager, the taka*ul operator will per*orm all*unctions necessary *or the operations o* theaf against a aala *ee to be deducted *romthe contribution paid by the participants.
• As Mu"ari%, the operator will manage theinvestment o* the taka*ul *und includingits af account in S#aria#&compliant investmentavenues and will share its returns on the
investment at an agreed ratio similar to the pro
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• 7t is important to note the di)erentprinciples o* S#aria# are used in thetaka*ul contract to e+press the consent o*the participants *or their contributions to
be credited into the taka*ul *und *or thepurpose o* undertaking the concept o* Foint guarantee as encapsulated in theterm taka*ul.
• 7n contrast to the af model, the otherthree models applied the principle o*tabarru to the contract.
/a2f Mo!el (:)
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• 7t is a basic *eature o* the model belowthat the af :und will lay down the rules*or distribution o* its proceeds to thebene
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N*/ M"D*C
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• >adiah – 0nder review
• solve problem
– ownership o* the *und – sharing o* surplus
– entitlement to the investment pro
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• intro by 8a3i 0thmani• shareholder o* the operator donate to
the wa3* *und
• *und invested, return to participants• tabarruN *und *rom participants as
part o* wa3*
• wa3* *und *romG – donation shareholder participants
yri! 3akala & 3a2f(+)
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•
lose ownership• monies &&J wa3* & used *or bene
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intro
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• 7etaaful is the 7slamic alternative to thereinsurance industry. 7n the conventionalinsurance industry, an insurancecompany reduces its risk o* paying largeclaims by insuring a portion o* its riskwith another insurance company.
• 8he third party is called a reinsurer, and ithelps the insurance company insituations involving natural disasters,
widespread
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can be traced to the early days o* 7slam when
the 5rophet himsel* instituted what can beregarded as ma5il al$i3tima5 or socialinsurance between the Mu#a3irun andthe 9nsar .
• 8hough the insurance as well as thereinsurance business has undergone a lot o*developments and innovations since the timeo* the 5rophet, it can still be brought into
harmony with the rulings and re3uirements o*the S#ari5a# as e+plained by =uslim
Furists.0nless this harmony is e)ected, theinsurance as well as the reinsurance business
De>nition re8takaful
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• De
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•
7n a nutshell, a taka*ul company pays premiums toa retaka*ul company so the retaka*ul companyassumes a portion o* the taka*ul company’s risks.
• >hy is retaka*ul important 7n reality, a taka*ulcompany can’t bear the whole risk o* covering itsparticipants’ claims. 7* disaster strikes, the taka*ul*und may be depleted 3uickly and becomeinsolvent, in which case everyone theparticipants, the shareholders, and the taka*uloperator loses.
• ;y splitting the risk with a retaka*ul company, the
taka*ul operator is much better able to managethe company through periods o* high claims. 8here*ore, retaka*ul ensures the stability o* taka*ulcompanies and the entire industry
Nee! For etakaful InIslam
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• Eust as the 5rophet recogni4ed the need *or ma5il al$i3tima5 or the system o* Wa3il to protect =uslims againstany *uture loss or damage, so also is there the need toprotect the operators o* this important work o*8aaful *rom part o* the losses and risks that mayaccrue *rom the policies they underwrite. 8his will helpto spread the losses and risks involved inthe 8aaful business as well as lighten the
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•>ho involved – 8aka*ul holder
taka*ul operators retaka*ul operators.
Ty#es
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8reaty• 0nder standing agreement
– usualy annual basis• Accepted by 8! i* *all
within the scope.:acultative• 6ase&by&case basis• optional
Facultati$e
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•
(pecial cases 9 on individual risk basis – :amily – group *amily – =ortgage
•
=ethod – operator present the risk – re&taka*ul study the in*o 9 decide to accept or
not – -+ample
• risk & OZ 8! & OZ 8!• contribution & OZ 8! & OZ 8!• /oss & OZ 8! & OZ 8!
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5o3 retakaful 3orks
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1. etaka*ul operates the same way thattaka*ul does. 8he only di)erence is thatparticipants "policyholders# o* regulartaka*ul products are individuals,
businesses, and other commercialorgani4ations.a# 7n a retaka*ul contract, participants
"policyholders# are various taka*ulcompanies, and the *und operator is theretaka*ul company.
b# !* course, retaka*ul companies need tooperate according to sharia law and mustmake any investments or hedges
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5o3 retakaful 3orks (6)
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$. 8he contributions or premiumscollected by the retaka*ul company*rom the taka*ul operators areinvested based on the wakala,mudaraba, or wakala&mudarabacombined contract, and pro
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• Mu"ara%a# contract is applied to 7e8aaful operationsas an alternative to interest – based securities in whichthe conventional insurance investment their surplus*unds. 8his account in taka*ul is re*erred to as5articipant Account "5A#.
• 7n 8aka*ul, clients are investors and are re*erred to
as 7o%%ulmal while 8aaful operators assume the roleo* entrepreneur and are re*erred to as =udarib. 8heywould invest the pool o* *unds into S#ari5a# compliantinvestments and speci
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*ellow participants who su)er *rom a de
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1. /ike the rest o* the 7slamic
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. 6urrently, more than two do4endedicated retaka*ul operators are inoperation, as well as si+ retaka*ulwindows. 8he
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tale com#arison
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(ee page no %1
SariEa ulings An!e2uirements
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•
7n view o* the above and the need o*the 7etaaful business in 7slam, it isproposed that the same S#ari5a# rulings andre3uirements governing the 8aaful businessin 7slam should also govern the 7etaaful
business.• ;oth the 8aaful business and the 7etaaful
business in 7slam are in the same businessoperation, they are both concerned with themanagement o* risks with one insuring
against risk and the other reinsuring againstit. 7n line with the resolution o* =uslim
Furists, 7etaaful business should there*orebe based on the principle o* mutuality andcooperation.
• 6ontrary to the conventional contract,the 7slamic contract o* mutual
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cooperation will be *ounded on sharedresponsibility, charity and indemnity.7slam supports the insurance or 8aafulcompanies coming together to cooperate
among themselves *or the Foint sharing o*losses and risks.• 7n con*ormity with the contract o* mutual
cooperation, the 8aaful companies will
help one another with a de
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7t will be used to assist any o* 8aaful companies that
re3uires compensation against loss without obtainingany bene
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that accrue *rom the 7e$8aaful businessinvestments will be shared. 6ertain portion o* thepro
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• ot allowed i* re&insured truconventional
• -+cept transitional. why –
la dharar wala dhirar – 0sing tabarruW agreement
– -ndorsed by :atwas
D% /aaEs $ie3 on re8takaful
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•
permissible with conditionsG – minimum possible – to the need only
– not collect pro
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' conditions be*ore re&insuranceG
1. retaka*ul
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• darurah principle – limited.5resent days
• re&insured is e+empted
• X..harm is measured by theirdegree..
1allenges in re8takaful
•
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•
/imited capacity – :und• 6ompetition
– to stay shariah compliance
• ating – *ew got A&rating
• /ack o* e+pertise – management, underwriting, accounting and
marketing –
need educational tools 9 training• 8ransparency in reports
– accounting methods, management, governance
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Discussion on saria$ie3
1. 5aper M 1G Critikan taka*ul
2. 5aper M 2G (hariah issues
Issues
1 7ssue M 1 & 8abarru’ and mu’awadhah
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1. 7ssue M 1 & 8abarru and mu awadhah
2. 7ssue M 2 & 8abarru’ and ilti4am bi al&tabarru’
. 7ssue M & 6ombination between more thanone a3ad.
$. 7ssue M $ & 8he validity o* hibah%. 7ssue M % – nomination
'. 7ssue M ' – surplus distribution
. 7ssue M – the tabarru’ concept
S. 7ssue M S – =ortgage ate 8erm 8aka*ul
U. 7ssue M 1O – standardi4ation or deversi
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1. bilateral or unilateral• donation &&J unilateral
• claim by donor &&J bilateral
• bilateral &&J attract riba, gharar 9maysir
2. 7* tabarru’ are uni, sodemand by operator &&Jbilateral
Ouestions & ans3ers
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1. B& 8aka*ul is a3d muNawadah "bilateral# –contain riba, maysir etc. – AnswerG
• Adopted *rom ma4hab =alik ilti4am bi ttabarruW• uniteral *rom both side
2. B& promise Wwa’d’ not a contract so whyclaim may arise – AnswerG
• =aliki & unilteral promise is binding•
-nglish law – i* a promise is made under a deed,it will be binding.• 1$OU & 7slamic :i3h Academy
Ouestions & ans3ers (+)
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.B & gharar still persist –e+tend o* gharar – how
• gharar yasir – tolerable
• taka*ul are uniteral – so nogharar.
• uncertanties are tolerable in
gratuitous contract
Ouestions & ans3ers (6)
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$. B & underwriting surplus & takedonation back or allow to share aspro
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T"
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•
/ocal – special legislation
• malaysia 9 bahrain
– no special• no special treatment
• no hurdles – 0C
•
7:(; standard• 6ore principles o* 7A7(
risk face! y takaful
•
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•
asymmetric in*o• shariah risk
• solvency risk
• market risk
Issues% Un!er3riting
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• A7D( su)erers• partner vs spouse
• diyat *or women
• not based on 7slamic criminal law
• have to underwriting everythings
Issues consumer#erce#tion
•
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want similar to conventional services• due to religious or service 3uality• ade3uate e+plaination•
plan really needed• reasonable premium• ePciency in processing 9 paying
investment managementcorporate social responsibilities
callenges
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:rom the article
5o3 to im#ro$e4 (ISA)
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1. =ore regional 9 global investment&linked taka*ul *und .
2. Diversi*y investment o* taka*ul *und
outside the country.. 7nvest mainly in sukuk
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*ISI"N
*ISI"N
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1. >hat is the relation betweeninsurance, banking, capital market 9monetary system
2. >hat is the key area that need toimprove intensively in taka*ulmarket 5ls e+plain how that areae)ect the taka*ul.
*ISI"N +
•
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>hy the people need insurance• ?ow the people manage their risk
• >hich type o* risk are insureable
>hy• >hy the insurance is haram
• ?ow you can proo* the maisir is e+ist
in insurance
*ISI"N 6
•
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8he taka*ul are same with theinsurance in term o* pay and claim.6an you counter that accusation?ow
• >hy the taka*ul come later thaninsurance
• 8he reason why the people acceptthe taka*ul system.
*ISI"N 7
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1. Di)erences between 6onventional7nsurance 9 7slamic taka*ul & princess2. 8he history o* taka*ul@ origin, past 9
contemporary & elle. Application o* modern taka*ul@ the
mudarabah model & so*yuddin$. Application o* modern taka*ul@ the
wakalah model & i44udin%. Application o* modern taka*ul@ the hybrid
model & isma
*ISI"N 9Takaful et3een myts & facts
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1. 8aka*ul 9 3ada’ 9 3adar2. :orm o* gambling
. -lements o* uncertainty
$. (till involves the buying 9 selling