Technical Aspect of Takaful

Business Operations –
Proposal for Enhancement
Azman Ismail
HIJRAH Strategic Advisory Group
Tel : 603-42601995
Fax : 603-42523114
Email : azman.hijrah@email.com
azmanwong@yahoo.com
Technical Areas of Concern …

Shariah
Surplus Legal Infra

Reserving Accounting

Pricing Shariah Audit

Retakaful
Is Shariah “Technical”

zTakaful Practitioners technically

“incompetent” when it comes to shariah
issues.
zReflect the state mentioned by Abdul
Qadir Audah
zThe need for practitioners to be
‘technically’ competent in both shariah and
insurance knowledge
“Shariah Technical” Aspects

zApplication/Proposal Forms
zPolicy/Certificate Wordings
zAccounting of Premiums/Contributions,
Claims & Retakaful (Additional
discussions on accounting and retakaful)
zSurplus distribution – shariah issues
Proposal

zEmploy more shariah graduates

zExpose practitioners to usul fiqh, qawaid
fiqhiyah & fiqh muamalah
zShariah scholars given allowance to ‘sit-in’
at least once a week
Legal Infra structure

zNot all countries have legal infrastructure

zThose countries that have legal
infrastructure – conflicts between
legislations
zGap between legislators, supervisors and
players
Proposal – Legal Infrastructure

zLegal infrastructure for Muslim countries –

acts of parliament, decrees, DG
guidelines,
zCommittee for legal reforms – to establish
and enhance takaful position
zCommon ombudsman – e.g. IFSB etc
Accounting

zContribution
zClaims/Reserves
zSurplus
Contribution

zCash/Accrual Issues
zLate payment issues
zAgency/collection issues
zContribution Warranty Issues
Claims/Reserves

zUnearned/Unexpired risks
zIBNR (including IBNYR, IBNER)
zValuation Reserves
Proposal - Accounting

zAccounting Standards – AAOIFI base

zStandard Contractual Model
zFinancial Models
Shariah Audit

zLacking In Takaful
zParallel To Conventional Audit
zAreas of Audit
Proposal - Audit

zCombine shariah & technical personnel to

conduct regular audit
zDevelop audit standards & instruments
zMake it compulsory on operators
zTraining for shariah auditors
Retakaful

zRetakaful Programming
{Shariah Considerations
zHolding company is conventional insurance
zCo-takaful – among operator & with conventional
{Retention
zBetween shariah & business considerations
{Structure
Proposal - Retakaful

zRetakaful Pool Beyond Geographical

Groupings
zStrong Technical Retakaful Operator
zStrategic Partnership With Reinsurers
zTransfer of Appropriate Technology
Pricing

z“Scientific” approach
zGeneral takaful – actuarial input
zPricing factors
z“Image”
zCompilation & coordination of data among
operators
Reserving

zConventional reserving methods for

general insurance
{May elect to choose most suitable based on
shariah considerations
zConventional reserving methods for life
insurance
{Most may be suitable from shariah angle
{Based on legal maxims
Surplus

zPure Mudharabah Model

zModified Mudharabah Model
zBasic Wakalah Model
zWakalah-Jualah Model
Wassalam