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Pervaiz AHMEDCEO Pak-Qatar Family Takaful Limited16th January, 2012, Lahore
T A K A F U LShari’ah Compliant Alternative
to Conventional Insurance
Flow of Presentation
Risk Mitigation from Shari’ah Perspective
Global and National development of Takaful
How does Takaful Function?
Regulatory Framework in Pakistan
Risk Mitigation from Shari’ah Perspective
Risk Mitigation from Shari’ah Perspective
Is the concept of risk mitigation permissible in Islam?
• This very concept is not only lawful/permissible in Islam but is in fact encouraged
What are the available risk mitigation tools?
•A concept misunderstood as against Tawakul..
Avoid using Risk Mitigation Tools
•Funds may not be sufficient to compensate the loss
Self-Insurance or setting aside contingency money
for the rainy day
•A commercially viable system but contains the element of Riba, Gharar, and Qimar/Maysir
Conventional Insurance
•A commercially viable system which is also Shariah Compliant
Takaful
Risk Mitigation in Islam
Islamic history is replete with examples featuring risk mitigation activities:
Hadith:
“Tie the Camel and then Submit
to the Will of Allah”
Dhaman Khatr al-Tareeq:
A person would undertake another
person’s risks without any
consideration/fee in return
Dhaman Al-d’ark:
A person would influence a sale by
promising to compensate for the loss if the subject-
matter proved faulty
Aqila:
A risk sharing mechanism in
which community members pooled
their share of Diyat (blood money)
Shari’ah Ruling on Conventional Insurance
Concept of Insurance?
Content of Insurance??
Shari’ah has no objections as to the concept or objectives of insurance ; it only has reservations with the way it is
carried out i.e. the process of insurance
What is Allowed? Risk Transfer without Consideration (premium)
Risk Sharing between Participants Basis of Contract: Taburru i.e. unilateral non-commutative Takaful Operator has no ownership claim on the contributions
(premiums) paid by the participants The Participants lose ownerships rights once the contribution
is paid on the basis of Taburru The contribution becomes the property of the Waqf Waqf is owned by Allah Almighty
What is not Allowed? Risk Transfer Against Fixed Consideration (premiums)
Basis of Contract: Muawaza i.e. bi-lateral sales & purchase Reason: Such a contract involves Riba, Gharar, &
Qimar/Maysir
Global and National development
of Takaful
Origin of Modern Takaful Western socio-economic, political, and legal orders overshadowed Islamic and
traditional local norms Muslim Revival and Renaissance began around the 1920s on multiple
fronts
As a result, development of Islamic Banking started in 1970s
Dubai Islamic Bank, the first commercial Islamic bank, was established in 1975
There was a legal requirement that Islamic banks’ underlying assets be insured e.g. Car Ijarah
Islamic banks could not avail insurance from conventional companies as that would be antithetical to the cause
The need for a practical risk mitigation mechanism grew as the Islamic banking industry grew
First Takaful company was established in Sudan in 1979, four years after the establishment of the first Islamic bank
Need for Takaful was felt after the development of Islamic Banking
1975 First Islamic
Bank
1979 First Takaful Co.
Development of Takaful Industry
2004 2006 2007 2010 2012
1.4
2
3.4
4.3
8
(USD) BILLION
134
# of Takaful Operators in 2009
Approx.
36Window Operators
15IraniOperators
>18
Re-TakafulOperators Global Market Size (2009)
E&Y
Worldwide Takaful Developments & Growth
Re-Takaful Worldwide Islamic Takaful & Retakaful Co. (IRTCo.) (Bahamas) Hannover ReTakaful B.S.C. © (Bahrain) Solidarity Islamic Takaful & Retakaful Co. (Bahrain) PT Reassuransi Internasional Indonesia (Indonesia) Amin Reinsurance Company (Iran) Al Fejr Retakaful Insurance Co. (Kuwait) Asean Re-Takaful International (Malaysia) MNRB Retakaful Berhad (Malaysia) Islamic Takaful & Re-takaful Co. (Saudi Arabia) Islamic Takaful and Re-Takaful Co. (ITRCo.) (Saudi
Arabia) Tokio Marine Nichido Retakaful Pte Ltd (Singapore) National Re-insurance Co. (NRICo.) (Sudan) Sheikhan Insurance & Reinsurance (Sudan) Sudanese Insurance & Reinsurance Co (Sudan) BEIT Iaadat Ettamine Tounsi Saoudi Re-insurance
(B.E.S.T. Re) (Tunisia) ACR ReTakaful Holdings Limited (UAE) Dubai Islamic Insurance & reinsurance Co. (UAE) Takaful Re Limited (UAE)Source: ICMIF Takaful, www.takaful.coop
> 18 Re-Takaful Operators worldwide
•Insurance Ordinance is issued which includes provision for Takaful; the word “Takaful” is used
2002
•IJTIMA’ held in Darul Uloom, Karachi on permissibility of Takaful
2003
•A committee to frame Takaful rules was founded
2004
•SECP notifies Takaful Rules
2005
•First General Takaful Company established (Pak-Kuwait General Takaful)
2006
•First Family Takaful Company established (Pak-Qatar Family Takaful)
•First Takaful Group catering both Family (Life) and General Takaful needs established (Pak-Qatar Takaful Group)
2007
Total 5 Operators: 3 for General Takaful & 2 for Family Takaful, since the promulgation of Takaful Rules in 2005
History of Takaful in Pakistan
Takaful Operational Model
Takaful Arrangements can be broadlydivided into the following two categories:
Family Takaful covers
All risks associated with human life, like
- death,
- disability and illness
- short-term and long-term investment needs
General Takaful covers
All risks associated with Physical Assets and Property,
like
- house,
- marine,
- motor,
- engineering and misc.
Three Operational Models
Pure Mudarbah Practiced earlier, it is no longer in use.
Pure Wakalah This model in not widely practiced.
Hybrid – Wakalah + Mudarbah
This is the most prevalent model.
Hybrid- Wakalah+
Mudarbah+ Waqf
This model was suggested by Shari’ah Scholars in Pakistan.
How does it Function? Waqf Pool
Wakalah Wakala
h
WakalahWakalahTakaful Operator
Investment Participant
Participant
Participant
Participant
Waqf PoolRisk sharingBetween Participants
WakalahWakalah
Surplus Wakalah Fee, Claims, Re-Takaful
Participant’s Investment
Account (PIA)
Waqf FundOperator /
Wakeel
ParticipantContributions
Profits from Investment Wakalee Fee(s) for Investment Management
Contributions for Takaful Benefit
Payment of Claims
Surplus Distribution (if any)
Wakala Fee for Operating Waqf
Fund
1
23
4
5
6
7
How does it Function? Family Takaful
Takaful Funds
• Income and expenses of
Shareholder’s are managed
Shareholder’s Fund
• Income and expenses of Tabarru/Waqf pool are managed
Participant Takaful Fund
• Investments of Particpants are managed. This
fund is Only required in Family Takaful companies
Participant Investment
Fund
Surplus Distribution
After deducting the Wakalah Fees, Claims, Re-Takaful
Contributions, Contingency Reserves and Charities etc. the
remaining amount in the pool is to be distributed between the
participants; it does not go to the shareholders
Though Takaful companies are marketing surplus distribution
as USP of Takaful, very few have distributed surplus. This is
mainly due to high up front Wakalah fee and poor underwriting.
In some territories surplus is shared be y the operator as well
which makes Takaful similar to conventional insurance and is
damaging the overall industry image.
Pak-Qatar Takaful GroupFirst dedicated Takaful Group in Pakistan comprising of both Family (Life) Takaful and General Takaful operations
100 percent Foreign Owned
Paid up Capital:- Family Takaful : Rs. 708 million- General Takaful : Rs. 307 million- Total : Rs. 1015 million
Pioneers of Family Takaful: S.E.C.P. issued license to Pak-Qatar Family Takaful for operations on 16 August 2007
Pak-Qatar Family is the fastest growing Family Takaful company in the region
Our Sponsors• Sponsors include some of the most prominent
financial institutions from State of Qatar and Munich-based FWU AG
• Pak-Qatar Takaful Sponsors include:– Qatar Islamic Insurance Company (QIIC)– Qatar International Islamic Bank (QIIB)– Qatar Islamic Bank (QIB)– Qatar National Bank (QNB)– Masraf Al Rayan – The Amwal Group– FWU AG
• • Total assets under management of our top sponsors
are more than US$26.12bn
Financial Strength Rating In 2011, JCR-VIS Credit Rating Co. assigned Pak-Qatar Family Takaful a rating of
“A-” (Positive Outlook).
For Pak-Qatar General Takaful, it is “BBB+” (Stable Outlook).
Shari’ah Advisory Board
• Justice (R) Mufti Muhammad Taqi Usmani – Chairman
• Mufti Ismatullah – Member
• Mufti Hassaan Kaleem – Member
• Mufti Zubair Usmani – Member
Branch NetworkFamily BranchesHO KarachiLahoreIslamabadRawalpindiFaisalabadQuettaPeshawarMultanHyderabadKhairpurMoroRahim Yar KhanGujratGujranwalaSialkotJehlumJhangKotli
General BranchesHO KarachiLahoreRawalpindiFaisalabadPeshawarMultanRahim Yar KhanGujranwalaSialkot
Family Sub-branchesKhiproKhanpurSargodhaChishtianDera Ghazi KhanToba Tek SinghMardan
Alternative Distribution
Pak-Qatar is in partnership with top banks in Pakistan, and has established partnerships with many banks for distribution of Takaful products.
Standard Chartered Bank, Bank Al-Baraka, Burj Bank, Faysal Bank MCB Bank Emirates Global
Recent Performance
Gross Contribution 2011 Gross Contribution 2010 Percentage Increase
Pak-Qatar Family Takaful 1,866,211,783 1,044,475,621 79%
Pak-Qatar General Takaful 330,471,929 217,182,324 52.20%
Jazaakum Allahu Khairan
May Allah Reward you
Thank You
HALAL RESEARCH COUNCIL
Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan
Ph: +92 42 35913096-8 , Fax: +92 42 35913056E-mail : [email protected] Web: www.halalrc.org
