Al huda presentation on takful zubair mughal


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Al huda presentation on takful zubair mughal

  1. 1. Takaful ( Islamic Insurance ) Zubair Mughal Regional Head Takaful Pakistan Limited.
  2. 2. Introduction <ul><li>“ 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. </li></ul>
  3. 3. Origins of Takaful <ul><li>In the event of death caused by someone from another tribe, the member of the offender’s tribe would share the “ blood money” (Khoon Baha) to provide for the family of the victim. </li></ul>
  4. 4. Why Insurance ? <ul><li>Is Some thing wrong with Concept ? </li></ul><ul><li>Risk Aversion </li></ul><ul><li>Assuring others </li></ul><ul><li>Risk sharing </li></ul>
  5. 5. From the Holly Quran <ul><li>The need for insurance is shown in the following verse of The Quran. </li></ul><ul><li>“ Those of you who die and leave widows should bequeath for their widows a year’s maintenance and residence” (2.240) </li></ul>
  6. 6. From the Hadiths <ul><li>By Anas-bin-Malik, One day Prophet Muhammad(PBUH) notced a bedouin leaving his Camel without tying it. He asked the bedouin, “Why don’t you tie down your camel”? The Bedouin answered, “ I put my trust in Allah (SWT)”. The Prophet (PBUH) then said,” Tie your camel first, then put your trust in Allah(SWT)” <Tirmidhi> </li></ul>
  7. 7. What wrong with practice ? <ul><li>The contract between the insurer & the insured is technically wrong from the sharia perspective because of </li></ul><ul><li>Gharar (Uncertainty)) </li></ul><ul><li>Gambling (Qamar & Maisir) </li></ul><ul><li>Interest (Riba) </li></ul>
  8. 8. Riba in Insurance <ul><li>Direct Riba </li></ul><ul><ul><li>Excess on one side in case of exchange between the amount of premium. </li></ul></ul><ul><li>Indirect Riba </li></ul><ul><ul><li>The interest earned on interest based investments </li></ul></ul>
  9. 9. Gharar <ul><li>Lexically it means uncertainty and technically it means the uncertainty of the counteract or the subject matter. </li></ul>
  10. 10. Different Models of Takaful <ul><li>Pure Mudarabah Model : The participants and operator enter into modarabah Contract. </li></ul><ul><li>Wakalah Model : An Agency Agreement is made between participants and Operators on the basis of Wakalah ( Agency agreements) </li></ul><ul><li>Wakalah Based on Waqf Model : The participant's donate the fund and operator charge an agency fee. </li></ul>
  11. 11. Investment Income Operational Cost of Takaful / ReTakaful Claims & Reserves Surplus (Balance) 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.) Mudarib’s Share of PTF’s Investment Income Wakalah Fee Investment Income Management Expense of the Company Profit/Loss S H A R E H O L D E R S’ F U N D (S.H.F.) Participant WAQF Takaful Operator Share Holder Wakala-Waqf Model Investment by the Company
  12. 12. Shariah Compliance <ul><li>Shariah compliance is an essential element in Takaful . </li></ul><ul><li>It is ensured through a Shariah Supervisory/ Advisory Board at the level of each Takaful company. </li></ul><ul><li>The role of the Shariah Board is vital in meeting the specific demand of a public who would not insure otherwise. </li></ul>
  13. 13. General Takaful Types <ul><li>General Takaful – offers all kinds of non-life risk coverage. It is normally divided into following classes: </li></ul><ul><ul><ul><ul><li>Property Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Marine Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Motor Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Miscellaneous Takaful </li></ul></ul></ul></ul>
  14. 14. Types of Family Takaful <ul><li>Term Life Takaful </li></ul><ul><li>Whole Life Takaful </li></ul><ul><li>Endowment Takaful </li></ul><ul><li>Universal Takaful </li></ul><ul><li>Marriage Plan </li></ul><ul><li>Education Plan </li></ul>
  15. 15. BANCATAKAFUL <ul><li>Background </li></ul><ul><li>Range of Products </li></ul><ul><ul><ul><li>Savings -> Personal Accident, Homeowners’ Comprehensive, Credit Cards, etc. </li></ul></ul></ul><ul><ul><ul><li>Financing, Individuals -> Car Ijarah, Housing Musharika, Mortgage Takaful. </li></ul></ul></ul><ul><ul><ul><li>Financing, SMEs -> Trade Credit Takaful, Business, Office, Equipment, Assets. </li></ul></ul></ul><ul><ul><ul><li>E-Commerce </li></ul></ul></ul>
  16. 16. BANCATAKAFUL (…Cont’d.) <ul><li>Advantages of BancaTakaful: </li></ul><ul><ul><ul><li>Facilitation Desk / Equipment. </li></ul></ul></ul><ul><ul><ul><li>Fast Turnaround Time. </li></ul></ul></ul><ul><ul><ul><li>One-Stop shop for Clients. </li></ul></ul></ul><ul><ul><ul><li>Concept of Islamic Financial Supermarket. </li></ul></ul></ul><ul><ul><ul><li>Value Added Services. </li></ul></ul></ul><ul><ul><ul><li>Law of Large Numbers. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Lower Contribution Rates. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Attraction for Depositors. </li></ul></ul></ul></ul></ul>
  17. 17. ReTakaful <ul><li>Currently few ReTakaful companies worldwide offering a relatively small capacity: </li></ul><ul><ul><li>Sudan (1979) National Reinsurance. </li></ul></ul><ul><ul><li>Sudan (1983) Sheikhan Takaful Company. </li></ul></ul><ul><ul><li>Bahamas (1983) Saudi Islamic Takaful and ReTakaful Company. </li></ul></ul><ul><ul><li>Bahrain/Saudi Arabia (1985) Islamic Insurance and Reinsurance Company. </li></ul></ul><ul><ul><li>Tunisia (1985) B.E.S.T. Re </li></ul></ul><ul><ul><li>Malaysia (1997) ASEAN ReTakaful International. </li></ul></ul><ul><ul><li>Dubai (2005) TakafulRe by ARIG. </li></ul></ul><ul><ul><li>Lloyds of London to have a ReTakaful Syndicate in 2007. </li></ul></ul>
  18. 18. Takaful Pioneers <ul><li>Takaful started some 27 years ago in the Middle East with the launching of two companies: </li></ul><ul><ul><li>The Islamic Arab Insurance Co. (IAIC) in the UAE and </li></ul></ul><ul><ul><li>The Islamic Insurance Co. of Sudan </li></ul></ul><ul><li>But it took some time for the movement to take shape. </li></ul>
  19. 19. Takaful Pioneers <ul><li>Later in 1984, Malaysia played a pioneering role in setting the first Legal framework specific to Takaful (Takaful Act). </li></ul><ul><li>This was instrumental in the successful launching of the Takaful movement in Malaysia and in other countries of South East Asia. </li></ul>
  20. 20. Takaful Operators <ul><li>The number of Takaful operators worldwide is now estimated at: </li></ul><ul><li>179 Takaful companies </li></ul><ul><li>11 Retakaful companies </li></ul><ul><li>In 48 Countries. </li></ul><ul><li>Average growth rate higher than conventional insurance companies (around 25%). </li></ul><ul><li>Non–Muslims increasingly opting for Takaful products for commercial benefits. </li></ul>
  21. 21. Takaful Premium <ul><li>Takaful is one of the fastest growing segments in insurance (at around 20% pa. on average) </li></ul><ul><li>World Takaful contributions are conservatively estimated at around US$ 3billions, of which: </li></ul><ul><ul><li>60% General Takaful </li></ul></ul><ul><ul><li>40% Family Takaful </li></ul></ul>
  22. 22. <ul><li>People who do not insure due to religious reasons. </li></ul><ul><li>People who insure and are insensitive to religious reasons. </li></ul><ul><li>People who currently do not insure at all. </li></ul>TAKAFUL - TARGET MARKET
  23. 24. Main Markets <ul><li>Malaysia </li></ul><ul><li>Indonesia </li></ul><ul><li>Iran </li></ul><ul><li>GCC countries </li></ul><ul><li>Other Arab countries </li></ul><ul><li>Other Asia Pacific </li></ul><ul><li>Pakistan ( Emerging Market ) </li></ul>
  24. 25. Takaful Best Practices <ul><li>Regional Takaful institutions and organisations need to come together internationally in order to promote and standardise best practices within the industry: </li></ul><ul><ul><li>Islamic Financial Services Board (IFSB) </li></ul></ul><ul><ul><li>ASEAN Takaful Group (ATG) </li></ul></ul><ul><ul><li>International Takaful Association (ITA) </li></ul></ul><ul><ul><li>Accounting and Auditing Organization of Islamic Financial institutions (AAOIFI) </li></ul></ul>
  25. 26. Growth Outlook <ul><li>World Muslim population is estimated at 1.5 billions, </li></ul><ul><li>A two-digit growth in the range of 15% to 20% can be reasonably sustained for at least the next 10 years in the existing markets (Far and Middle East). </li></ul>
  26. 27. Takaful Prospects in Pakistan <ul><li>97% Muslim population. </li></ul><ul><li>Demand for insurance increasing with increase in per capita income. </li></ul><ul><li>Personal lines insurance business (leasing, health, Medicare) growing at a higher rate than other conventional classes. </li></ul><ul><li>Islamic banking on sound footing with support of the Govt. </li></ul>
  27. 28. Introduction to TAKAFUL PAKISTAN LIMITED
  28. 29. TAKAFUL PAKISTAN LIMITED <ul><li>Takaful Pakistan is a joint venture of prestigious local & foreign institutions, including: </li></ul><ul><ul><ul><li>House Building Finance Corporation. </li></ul></ul></ul><ul><ul><ul><li>Emirates Global Islamic Bank. </li></ul></ul></ul><ul><ul><ul><li>Arif Habib Securities. </li></ul></ul></ul><ul><ul><ul><li>Sitara Chemicals. </li></ul></ul></ul><ul><ul><ul><li>Emirates Investment Group (Sharjah). </li></ul></ul></ul><ul><ul><ul><li>Al-Buhaira National Insurance Co. (U.A.E.) </li></ul></ul></ul><ul><li>Large initial paid-up Capital. </li></ul>
  29. 30. TAKAFUL PAKISTAN LIMITED … (Cont’d.) <ul><li>Managed by dedicated professionals, committed to the cause. </li></ul><ul><li>ReTakaful arrangements with a consortium of internationally reputed ReTakaful operators. </li></ul><ul><li>Shariah Board comprises of eminent scholars. </li></ul><ul><li>BancaTakaful and MicroTakaful products. </li></ul><ul><li>We intend to be the trend-setter for excellent Clients’ Servicing, Operational bench marks and prudent Underwriting practices. </li></ul>
  30. 31. General Takaful Types <ul><li>General Takaful – offers all kinds of non-life risk coverage. It is normally divided into following classes: </li></ul><ul><ul><ul><ul><li>Property Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Marine Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Motor Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Miscellaneous Takaful </li></ul></ul></ul></ul>