Takaful 133
Main takaful models/structures
When the Grand Counsel of Islamic scholars in Saudi Arabia approved the
takafulsystem in 1985 as a Shari’a-compliant form of insurance, they did
not specify the exact structure that should beused. Consequently, several
models have been developed around the world to allow shareholders and
policyholders to set uptakaful businesses in an Islamically-compliant
manner.
All four models described below allow the shareholders to be paid explicit
fees by policyholders. Thesefees generally cover two areas:
- Fees paid to shareholders for setting up and running the company on
behalf of policyholders; and
- Fees paid to shareholders for investing policyholders’ funds on their
behalf.
Mudaraba model
This is known as the profit sharing model as the shareholders share in the
profit or loss with the policyholder. In this model, the shareholders are paid:
- A pre-agreed proportion of any surplus generated bythe policyholders’
funds in return for running the insurance operations of thetakaful
business. If the policyholders’ funds make a loss, the operator does not
share the losses, though it will provide theqard al-hasanto cover this
loss; and
- A pre-agreed proportion of any investment income from investing the
policyholders’ funds assets onbehalf of the policyholder.
The pre-agreed proportions are agreed at the beginning of each financial
year. Figure 1 gives an overview of this model.
