Takaful Business Model PDF

TAKAFUL BUSINESS MODEL  Types of Takaful Model ► Ever since the introduction of a cooperative model in Sudan in 1979, three main models have emerged in different parts of the world. ► They are: 1. Mudharabah Model (Malaysia) 2. Wakalah Model (Middle East)...

TAKAFUL BUSINESS MODEL  Types of Takaful Model ► Ever since the introduction of a cooperative model in Sudan in 1979, three main models have emerged in different parts of the world. ► They are: 1. Mudharabah Model (Malaysia) 2. Wakalah Model (Middle East) 3. Wakalah-Waqf Model (Pakistan)  Concept of Takaful ► Takaful:- ✔ derived from an Arabic word which means joint guarantee ✔ whereby a group of participants agree to jointly guarantee among themselves against a defined loss ► Tabarru:- ✔ tabarru means donation, gift or contribution. A participant agrees to relinquish, as a donation, a certain proportion of the contribution into a takaful fund to assist other participants faced with difficulties ✔ it embraces the elements of shared responsibility, joint indemnity and mutual protection ✔ it is the core of the takaful system that makes the uncertainty element allowable under the takaful contract  Main Elements Cooperative risk-sharing All transactional Clear aspects, are in segregation compliance to of roles each Shariah Law parties Incorporates tabarru’ Avoids riba (donation) or and maisir waqf (endowment) Concept to eliminate gharar  Mudharabah Model ► Mudharib – Rabbul Mal ► Practiced in Malaysia, Brunei & Indonesia Family Pure General Mudharabah Family Modified General  Pure Mudharabah ► Under the pure mudharabah model all direct and indirect expenses are charged to the shareholders’ fund and their share of profits which come in the form of underwriting surplus and investment returns. ► At the end of financial year, if there is surplus from the fund after meeting all liabilities and direct expenses such as retakaful costs, it will be shared between participant and the operator in the proportions that have been agreed to the outset of the takaful contract. Mudharabah Mudharabah Model – Family Takaful Flow of Fund Pure Mudharabah – General Takaful Flow of Fund for General Takaful  Modified Mudharabah ► Under the Modified Mudharabah model all management expenses (direct or indirect) are charged to the Takaful fund. Modified Mudharabah – Family Takaful Modified Mudharabah – Family Takaful Modified Mudharabah – General Takaful Modified Mudharabah – General Takaful  Wakalah Model ► Wakalah or agency is a commercial relationship between parties where one is the owner of the business and the other acts on behalf of the owner for a fee. The fee is based on the services rendered. ► Under this model, Takaful participant as the principal will appoint Takaful Operator as wakil or agent to manage the participation of the former in a variety of Takaful products provided by the Takaful Operator. ► In return for rendering the agency services, the Takaful Operator is permitted to charge a fee under the agreement. The fee is payable from the Takaful contribution paid by the participant. ► The operator is paid a pre-agreed management fee for the services rendered in respect of underwriting, management and investment of the fund. Wakalah Model Wakalah Model- family Takaful  Wakalah Waqf Wakalah-waqf model is a modification of the wakalah model whereby a waqf (endowment) fund is created by the company through a ceding amount (part of the capital) to compensate the beneficiaries or the participants of the takaful scheme. The participants when making their contributions would agree to donate a small portion of their contribution as tabarru’ which will be placed in the waqf fund. The Wakalah-Waqf Model is currently being adopted only in Pakistan, namely the Pak-Kuwait Takaful Company Ltd. The most important key success factor for this model is to have a good claims ratio so that the waqf fund will not require a loan from the Shareholders all the time. THANK YOU