Page 19 - Insurance Times February 2016

are multiple times than Premiums -both of these are The commitment to distribute technical profits to poli-

Gamblings. cyholders

RIBA: It is earning Interest from Investments and using In- The avoidance of investment in Non-Shariah- compliant
vestment Income to pay Losses to Insureds- these are pro- assets
hibited in Islam.
Takaful Model

HARAM: Investment in elements of Pork- Alcohol- Pornog- TAKAFUL OPERATOR'S FUND
raphy- Gambling etc. are prohibited in Islam. Share Capital + Investment Returns on Capital
Fees of Operators and Management Expense Payouts.
Thus Takaful means Islamic Insurance which is Shariah Com-
plaint. Insured- Insurer and Shareholders all are covered in TAKAFUL OPERATORS
this Co-operative concept of Insurance. 'Takaful Re' also is Create
an extention of the same principles based on Co-operation
of Takaful Reinsurer and Insurers of Takaful Markets. TAKAFUL MUTUAL FUND
Out of
In 1985, thus Takaful Insurance and Takaful Reinsurance
were agreed as Islamic Insurance and Reinsurance which Premiums-Profit and Investment Income
are Shariah - Complaint.

Takaful Model:-

Takaful is a system of RISK SHARING with FUND SHARING. SHAREHOLDERS FUND POLICY HOLDER FUNDS
Dividend Payouts Or from
Takaful Mutual Fund is constituted out of Premiums i.e. From Profits +
Contributions by all Policy Holders. It is collected and kept Overall Profits
as Takaful Pool Fund by the Takaful Operator who is Admin- Investment Returns
istrator to manage the FUND.
Members i.e. Policy Holders get Interest Free Loans from
Policies affected by valid claims get Losses from the Takaful Operators Fund. Thus Welfare of Takaful Members is assured
Insurance Company. The Pool Operator makes payments of by Co-operative Insurance Structure of Takaful.
losses out of the Takaful Mutual Fund to the Policy Holders.
Takaful Terminology

Many policies remain claims free. Moreover Investment i) 'AQD' - Contract
Income also added to the Takaful Mutual Fund. Profits of ii) 'AMANAH' - Trust
the Fund are distributed among Shareholders as Dividend iii) 'BAY' - Sale
payouts and SHAREHOLDERS FUND is created. iv) GHARAR - Unknown or Uncertain Factors
v) IJARAH - Service, Employment
Profits are also distributed to Policyholders and a POLICY- vi) JUALAH - Reward for Service
HOLDERS SURPLUS FUND is created.

Thus,entire operation of Takaful is based on Co-operative vii) 'KAFALAH' OR AL.DAMAN - Guarantee, Surety
Principles, Brotherhood, and Interest free Loans to needy viii) MAISIR OR MYSIR - Gambling.
members of the Takaful Pool. ix) MUDARBAH - Sharing of Profit And Loss

The main Takaful operation model involves: x) MUSHARKAH - Partnership.
xi) RIBA - Interest.
The creation of a Shariah supervisory board that over- xii) SALAM - Sale by Deferred Delivery
sees insurance operations and compliance with the xiii) TABARRU - Donation- Charity
Shariah xiv) WADIAH - Deposit

The separation of shareholder funds from policyholder
funds

The Insurance Times, February 2016 19

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