2. Takaful (Islamic Insurance )
An Ideal Alternative to Conventional Insurance.
11th Feb, 16- Intl Takaful & Conventional Mutual Insurance Consortium - Dubai
Muhammad Zubair Mughal
Chief Executive Officer
AlHuda : Centre of Islamic Banking & Economics

3. Outline of Presentation
Introduction to Takaful ( Islamic Insurance )
Difference b/w Conventional Insurance & Takaful
Takaful Through Time
General & Faimly Takaful Types
Takaful Models Worldwide.
Takaful - Target Market
Challenges to Takaful
Prospects of Takaful in Turkey.

4. Meaning of Takaful
“Takaful” is the Sharia Compliant brand name for the Islamic alternative to conventional insurance. Its based on the principle of Ta’awan or mutual assistance.
Takaful comes from the Arabic root-word ‘kafala’ — guarantee.
Operationally, takaful refers to participants mutually contributing to a common fund with the purpose of having mutual indemnity in the case of loss.

5. What wrong with Insurance practice ?
The contract between the insurer & insured is technically wrong from the sharia perspective because of
Interest (Riba)
Gharar (Uncertainty))
Gambling (Qamar & Maisir)
Risk Transfer Issue

6. Basic Elements of Takaful
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 “Participants’ Takaful Fund”.
Constitution of “Shariah Supervisory Board.”
Investments as per Shariah.

7. Comparing Takaful to Conventional Insurance
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 on pro rata basis.

8. Takaful through Time Origins in the First Constitution of Madina.
Serious efforts were made in modern times, in 1970s to come up with an Islamic alternative to the conventional insurance.
The first Takaful company was set up in Sudan in 1979, almost simultaneously followed by another one set up in Bahrain.

9. Takaful through Time… (Cont’d.)
Poor Insurance penetration in the Muslim countries (<1% of GDP).
Average growth rate higher than conventional insurance companies (around 25%).
Non–Muslims increasingly opting for Takaful products for commercial benefits.

11. Takaful Operators
The number of Takaful operators worldwide is now estimated at:
280+ Takaful companies
13 Re-takaful companies
In 56 Countries.

12. General Takaful Types
General Takaful – offers all kinds of non- life risk coverage. It is normally divided into following classes:
Property Takaful
Marine Takaful
Motor Takaful
Miscellaneous Takaful

13. Types of Family Takaful
Term Life Takaful
Whole Life Takaful
Endowment Takaful
Universal Takaful
Marriage Plan
Education Plan

14. TAKAFUL - TARGET MARKET
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.

15. Different Models of Takaful
Wakalah Based on Waqf Model : The participant's donate the fund and operator charge an agency fee.
Pure Mudarabah Model : The participants and operator enter into modarabah Contract.
Wakalah Model : An Agency Agreement is made between participants and Operators on the basis of Wakalah ( Agency agreements)

16. Takaful

17. Participants Contribution
Pool of Contributions

18. Participants Contribution
Investment in
Shariah Complaint Avenues
Participants
Pool of Contributions
Profit from Investment
(Part of the profit goes to the Company for acting as mudarib)

19. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala Fee
Claims
Re-Takaful Expense etc.

20. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala Fee
Claims
Re-Takaful Expense etc.

21. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala fee, Claims, Re-Takaful Expenses
SURPLUS

22. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala fee, Claims, Re-Takaful Expenses
SURPLUS

23. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala fee, Claims, Re-Takaful Expenses
SURPLUS
Contingency Reserve
Charity
Distribute Among Participants

24. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala fee, Claims, Re-Takaful Expenses
SURPLUS
Contingency Reserve
Charity
Distribute Among Participants

25. Participants Contribution
Investment in
Shariah Complaint Securities
Participants
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib)
Pool of Contributions
Wakala fee, Claims, Re-Takaful Expenses
SURPLUS
Contingency Reserve
Charity
Distribute Among Participants

26. - + + = Participants Contribution Participants Pool of Contributions
Investment in
Shariah Complaint Securities
Participants
Pool of Contributions
Profit from Investment
(Part of the profit goes to the
Company for acting as mudarib) - + +
Claims
Re-Takaful Expense etc.
Wakala Fee =
SURPLUS
Contingency Reserve
Charity
Distribute Among Participants

27. WAQF Wakala-Waqf Model S H A R E H O L D E R S’ F U N D (S.H.F.)
Wakalah Fee
Investment
Income
Admin Expenses, Employee’s etc.
Management Expense of
the Company
Profit/Loss
Takaful Operator
Investment by
the Company
WAQF
Operational Cost of Takaful / ReTakaful
Investment
Income
Claims &
Reserves
Surplus (Balance)
Participant
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.)

28. Challenges to Takaful Skepticism.
Lack of uniformity in Models & Shariah decisions.
Regulatory issues.
Capacity constraints.
Limited Investment avenues.
H.R. issues.

29. About AlHuda CIBE

32. Thank You for Listening with Patience
Muhammad Zubair Mughal
Chief Executive Officer
AlHuda Centre of Islamic Banking and Economics