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:	Conference or Workshop Item
Language:	English
Published:	2015
Subjects:	HG8011 Insurance
Online Access:	http://irep.iium.edu.my/45618/ http://irep.iium.edu.my/45618/ http://irep.iium.edu.my/45618/1/45618.pdf

id	iium-45618
recordtype	eprints
spelling	iium-456182017-11-30T11:08:43Z http://irep.iium.edu.my/45618/ 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 a misfortune happens to them. 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 certain amount on the basis of donation into a collective Participants’ Risk Fund (PRF). Tabarru’ is Arabic word which means donation and due to the nature of PRF, it’s widely known in Islamic Finance as Tabarru’ Fund. Tabarru’ Fund is a separate entity from Takaful operator and participants, but t ownership remains with the participants. Being a fund, some money in it will be invested and would possibly realize investment profit. At the same time, with proper management of the Tabarru’ Fund, it might produce underwriting 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 another depending on the contract adopted, which ultimately would define the permissibility of sharing the surplus between related parties. In Malaysia, the sharing of underwriting surplus is allowed according to the Shariah resolution passed by Central Bank of Malaysia (Bank Negara Malaysia) subject to certain guidelines. All eleven 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 identified issues. 2015 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/45618/1/45618.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. In: Sydney International Business Research Conference 2015, 17th-19th April 2015, University of Western Sydney, Campbelltown Campus, Sydney, Australia. http://www.aabl.com.au/wp-content/uploads/proceedings/sydney/P194-R3.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 a misfortune happens to them. 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 certain amount on the basis of donation into a collective Participants’ Risk Fund (PRF). Tabarru’ is Arabic word which means donation and due to the nature of PRF, it’s widely known in Islamic Finance as Tabarru’ Fund. Tabarru’ Fund is a separate entity from Takaful operator and participants, but t ownership remains with the participants. Being a fund, some money in it will be invested and would possibly realize investment profit. At the same time, with proper management of the Tabarru’ Fund, it might produce underwriting 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 another depending on the contract adopted, which ultimately would define the permissibility of sharing the surplus between related parties. In Malaysia, the sharing of underwriting surplus is allowed according to the Shariah resolution passed by Central Bank of Malaysia (Bank Negara Malaysia) subject to certain guidelines. All eleven 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 identified issues.
format	Conference or Workshop Item
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
publishDate	2015
url	http://irep.iium.edu.my/45618/ http://irep.iium.edu.my/45618/ http://irep.iium.edu.my/45618/1/45618.pdf
first_indexed	2023-09-18T21:04:53Z
last_indexed	2023-09-18T21:04:53Z
_version_	1777410867345752064

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

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