Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice

Takaful is a contract whereby the participants commit to contribute an amount on regular basis or in one lump sum in a specified fund to mutually guarantee each other and appoint a body to act as the fund manager. In this contract, Takaful participants have the opportunity to mitigate the possible f...

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Main Authors:	Ibrahim, Ahmad Basri, Mohd Ali, Ahmad Fadhil Hamdi, Elias, Mohd Hafizal, Wan Ahmad Lotfi, Wan Ahmad Najib
Format:	Article
Language:	English
Published:	Australasian Journal of Islamic Finance and Business (AJIFB) 2015
Subjects:	HG8011 Insurance
Online Access:	http://irep.iium.edu.my/45532/ http://irep.iium.edu.my/45532/ http://irep.iium.edu.my/45532/1/45532.pdf

id	iium-45532
recordtype	eprints
spelling	iium-455322018-03-07T09:05:06Z http://irep.iium.edu.my/45532/ Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice Ibrahim, Ahmad Basri Mohd Ali, Ahmad Fadhil Hamdi Elias, Mohd Hafizal Wan Ahmad Lotfi, Wan Ahmad Najib HG8011 Insurance Takaful is a contract whereby the participants commit to contribute an amount on regular basis or in one lump sum in a specified fund to mutually guarantee each other and appoint a body to act as the fund manager. In this contract, Takaful participants have the opportunity to mitigate the possible financial risk that their families might encounter in case of misfortune. The contribution then will be placed into respective participant’s account or also known as Participants’ Investment Fund (PIF). The fund manager, i.e. Takaful operator will drip from every PIF an amount on the basis of donation into a collective Participants’ Risk Fund (PRF) or known as Tabarru’ Fund. This fund does not belong to the Takaful operator; it’s rather owned by the participants. The Takaful operator only manages the fund on behalf of the participants. Being a fund, money in it is also invested and would possibly generate profit. At the same time, with proper management of the Tabarru’ fund, it might produce surplus after payment of claims at the end of financial year. There are several Shariah views and methods on the treatment of the investment profit and underwriting surplus generated from the fund. These views differ from one to another depending on the contracts adopted, which ultimately would define the permissibility of sharing the profit and the surplus between related parties. In Malaysia, the sharing of underwriting surplus is allowed according to the resolution passed by Central Bank of Malaysia (Bank Negara Malaysia) subject to the certain guidelines. All eleven (11) Takaful operators in Malaysia have different practices in distributing the surplus and profit with respect to Shariah contracts applied and operational treatments. This research will study these differences and provide recommendations on the issues identified. Australasian Journal of Islamic Finance and Business (AJIFB) 2015-10 Article PeerReviewed application/pdf en http://irep.iium.edu.my/45532/1/45532.pdf Ibrahim, Ahmad Basri and Mohd Ali, Ahmad Fadhil Hamdi and Elias, Mohd Hafizal and Wan Ahmad Lotfi, Wan Ahmad Najib (2015) Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice. Australasian Journal of Islamic Finance and Business, 1 (1). pp. 73-91. http://acrd.net.au/ajifb/files/Paper%205.pdf
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG8011 Insurance
spellingShingle	HG8011 Insurance Ibrahim, Ahmad Basri Mohd Ali, Ahmad Fadhil Hamdi Elias, Mohd Hafizal Wan Ahmad Lotfi, Wan Ahmad Najib Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
description	Takaful is a contract whereby the participants commit to contribute an amount on regular basis or in one lump sum in a specified fund to mutually guarantee each other and appoint a body to act as the fund manager. In this contract, Takaful participants have the opportunity to mitigate the possible financial risk that their families might encounter in case of misfortune. The contribution then will be placed into respective participant’s account or also known as Participants’ Investment Fund (PIF). The fund manager, i.e. Takaful operator will drip from every PIF an amount on the basis of donation into a collective Participants’ Risk Fund (PRF) or known as Tabarru’ Fund. This fund does not belong to the Takaful operator; it’s rather owned by the participants. The Takaful operator only manages the fund on behalf of the participants. Being a fund, money in it is also invested and would possibly generate profit. At the same time, with proper management of the Tabarru’ fund, it might produce surplus after payment of claims at the end of financial year. There are several Shariah views and methods on the treatment of the investment profit and underwriting surplus generated from the fund. These views differ from one to another depending on the contracts adopted, which ultimately would define the permissibility of sharing the profit and the surplus between related parties. In Malaysia, the sharing of underwriting surplus is allowed according to the resolution passed by Central Bank of Malaysia (Bank Negara Malaysia) subject to the certain guidelines. All eleven (11) Takaful operators in Malaysia have different practices in distributing the surplus and profit with respect to Shariah contracts applied and operational treatments. This research will study these differences and provide recommendations on the issues identified.
format	Article
author	Ibrahim, Ahmad Basri Mohd Ali, Ahmad Fadhil Hamdi Elias, Mohd Hafizal Wan Ahmad Lotfi, Wan Ahmad Najib
author_facet	Ibrahim, Ahmad Basri Mohd Ali, Ahmad Fadhil Hamdi Elias, Mohd Hafizal Wan Ahmad Lotfi, Wan Ahmad Najib
author_sort	Ibrahim, Ahmad Basri
title	Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
title_short	Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
title_full	Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
title_fullStr	Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
title_full_unstemmed	Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice
title_sort	distribution of underwriting surplus and investment profit from tabarru' fund: shariah contracts applied and current market practice
publisher	Australasian Journal of Islamic Finance and Business (AJIFB)
publishDate	2015
url	http://irep.iium.edu.my/45532/ http://irep.iium.edu.my/45532/ http://irep.iium.edu.my/45532/1/45532.pdf
first_indexed	2023-09-18T21:04:47Z
last_indexed	2023-09-18T21:04:47Z
_version_	1777410860635914240

Distribution of underwriting surplus and investment profit from tabarru' fund: Shariah contracts applied and current market practice

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