The document discusses takaful (Islamic insurance) and compares it to conventional insurance. It provides definitions and principles of takaful, noting that it is based on mutual assistance and joint guarantee rather than interest. The key points covered are: - Conventional insurance contains elements prohibited in Sharia like interest (riba) and uncertainty (gharar) and is therefore haram. - Takaful operates based on Islamic principles of brotherhood and solidarity where participants help each other in case of loss. - Scholars have determined cooperative/mutual insurance models (takaful) to be permissible under Sharia where risk is shared among participants.

1.  The word takaful comes from the
Arabic root word Kafala, meaning
"guarantee".
 Takaful means mutual protection and
joint guarantee.
 Islamic Insurance System based on
the principles of solidarity and mutual
assistance

2. The Fiqh Council of Organization
of Islamic Conference in Jeddah
resolved:
 Conventional insurance as
presently practiced is Haraam,
 Cooperative insurance (Takaful)
is permissible and fully consistent
with Shariah principles.
Is All Risk Protection (Insurance) Haraam
(Prohibited)???
REASONS:
 Conventional insurance is
prohibited for Muslims (because it
contains the elements of Riba, Al
Maisir, and Al Gharar).
 Takaful provides risk protection
in accordance with Shariah based
on the principles of Ta’awun,
brotherhood, ethical operations.

4. The Holy Quran says: “Allah intends for you
ease, and He does not want to make things
difficult for you.” (2:185).
It further says:
“Muslims are brothers to one another”
(Surah Hujarat:10)

5.  The Prophet said, "Tie your camel first, then
put your trust in Allah”
(Reported by at-Tirmidhi and Ibn Majah).
 A believer is like a brick for another believer,
the one supporting the other.
(Sahih Muslim)

6. The Islamic scholar’s research establishes the fact that the insurance was
practiced in the period of the Prophet (‫.)ﷺ‬
Two Important Issues:
First:
A person was bound to pay the blood money (Diyat) if he had committed a
murder un-intentionally.
It was equal to one hundred camels.
It was so high that hardly anyone could afford to pay

7. Second:
 A person had to pay ransom money (Fidya), if he happened to be
captured by the enemy.
Practically he would become a slave
He had no chance to get free unless he paid the cost equal to one hundred
camels.
Again the cost was so high that hardly anyone could afford to pay.

8. The Prophet Mohammad (‫)ﷺ‬ established the units of “Mutual
Help” or today’s takaful in every tribe of Madinah
OPERATIONS:
Payment of blood money or Ransom
Help from other units.
Involvement of Central Government

9. 1979 – Islamic insurance company (Sudan)
1979 - Islamic Arab Insurance Company (UAE)
1984 – Takaful Act (Malaysia)
1985 –Takaful Malaysia Berhad (Malaysia)
1997 –Re-takaful company (Asean Retakaful
International, ARIL)

10. SOME SPECIFIC TERMINOLOGIES:
Takaful/Islamic Insurance Conventional Insurance
Contribution Premium
Participant Policyholder/Insured
Membership Policy
Benefits Claims
Re-takaful Re-insurance
Takaful Contribution Risk Charge
Surplus Underwriting Surplus

11. VISITED TAKAFUL COMPANIES:
PAK-KUWAIT TAKAFUL CO. LtdPAK-QATAR TAKAFUL CO. Ltd

12. PAK-KUWAIT TAKAFUL CO. LTD
The PKTCL is the first ever truly leading Islamic Shariah compliant takaful
company in Pakistan.
The PKTCL is a multinational joint venture partnership between Pakistan,
Kuwait, Malaysia, Saudi Arabia and Sri Lanka.
Re-Takaful company: Re Takaful of Qatar
Paid up Capital: 40 billion
Growth Rate: 8% in 2013
Earnings per share: Rs. 2.04 in 2013

13. PAK-QATAR TAKAFUL CO. LTD
In Pakistan the PQTCL Incorporated in 2006, and began operations in 2007.
 Company is registered and supervised by the SECP.
 An independent Shari’ah Supervisory Board chaired by Mufti Muhammad Taqi
Usmani, certifies all products and operations for Shari’ah compliance.
Re-Takaful Company:
1. Re-Takaful of Qatar
Paid up Capital:
Pak-Qatar Family Rs. 533 million
Pak-Qatar General Rs. 307 million

14.  Motor Takaful
 Fire Takaful
 Home Takaful
 Machinery breakdown Takaful
 Money Takaful
 Fidelity Takaful
 Travel Haj and Umrah Takaful
 Plate glass Takaful
 Marine Takaful
Endowment plane
 Life Takaful
 Retirement plan
 Childs education & marriage

15. Takaful endowment plan
This plan provides takaful coverage upon Death or
Total and Permanent Disability and additional coverage
for death. This plan is designed to help achieve medium
to long term financial goals such as child’s education ,
marriage as well as wealth accumulation for retirement
purposes.

16. Family Takaful
(Life Takaful)

17. Practical information:
 Required CNIC
 Monthly income must be at least Rs. 12000
 Age limit to get this policy is 18-65 years.
 Up to the age limit of 55 this policy is provided with out condition of
any decease.
 Death bed person can also get this policy.
 We can not surrender before 2 year.
 In case of suicide company also provide compensation but if suicide
attempt after 2 years of the policy.
 In case of death , death certificate is required.

18. Motor Takaful offers comprehensive coverage for private and commercial
vehicles. Motor Takaful offers protection from losses incurred due to traffic
accidents and legal liabilities that might arise due to accidents.
Comprehensive Motor Takaful provides maximum coverage against
 theft
 accidental damage
 third party liability
The cover includes losses due to external accidental means,
 Fire
 strikes
 natural calamities
Third Party liability includes
 Property Damage,
 Bodily Injury
 Death, are additional features of the policy.

19. Practical information:
 Provide car takaful policy for 1 year. At the rate of 4% p.a
 Only provide policy for those vehicles which are not old
more than 5 years from the year of launch.
 After 1 year we can renew the policy.
 In case of renewal depreciated value must be consider and
rate apply on this value. Depreciation rate is 10%

20. Vehicles which takaful is available can be
 Private car & Motorcycle
 Commercial car( trucks etc)
 Factory car
Documents required:
1. Copy of NIC/NTN
2. Copy of vehicle registration book.
3. Tracker installation certificate/invoice(if installed with
vehicle)

21. Health Takaful
Health Takaful brings peace of mind to you by providing
Islamic Health Takaful solutions which gives financial
protection in case of any unfortunate illness leading you to
hospital. It safeguards you by covering much of what you
would be expected to pay.
What does Health Takaful Policy offers?
Hospital care:
This benefit covers hospitalization due to illness, disease,
surgery or accident up to agreed available limits.
Critical illness care:
It covers expenses for all medically necessary treatments
specified in the policy.

22. Additional Benefits:
International cover :
The policy covers emergency hospitalization during (official)
overseas travel of covered participant. However, the
hospitalization expenses will be reimbursed in-line with the
treatment cost incurred in Pakistan (Subject to the availability of
the limit).

24. Takaful
Contribution
paid by
Participant
General
Takaful
Fund
General
Takaful
Fund
Operational
Cost of
Takaful
Surplus
(Profit)
Participant’s
Share
from Surplus
Company’s
Share from
Surplus
Investment
By
Company
Profit
From
Investments
Company
Participant

25. The surplus is shared between the participants with a
takaful operator. The sharing of such profit (surplus)
may be in a ratio 5:5 , 6:4 etc. as mutually agreed
between the contracting parties. Generally, these risk
sharing arrangements allow the takaful operator to
share in the underwriting results from operations as
well as the favorable performance returns on invested
contributions.

26. According to officer of pak qatar takaful mudarba
model is not practically use because in mudarba 5
to 6 or may be 10 members involve but we want
to cover whole community.
The Takaful operator gets the Surplus, but does
not bear the loss. Therefore, Shariah scholars
have raised serious objections to this model.
The requirement to provide Qard al Hasan (in
case of a deficit) in a Mudarabah contracts against
the concept of Mudarabah by definition, which is a
profit-sharing contract.
Further, a Mudarib cannot be a guarantor to the
financier.

28. It is a WAKALAH waqf model with a separate legal entity of WAQF in-between.
 The relationship of the participants and the operator is directly with the
WAQF fund. The operator is the ‘Wakeel’ of the fund and the participants pay
contribution to the WAQF fund by way of Tabarru.
 Losses to the participant are paid by the company from the same fund.
 Operational expenses that are incurred for providing Takaful services are also
met from the same fund.

29. Participants
Participants
Investment
fund(PIA)
Operator/WakeelWaqf fund
Contribution
Profit of
investment
Payment of claims and
surplus(if any)
Contribution for
takaful benefits
Fee for
operating
waqf fund
Fee for
investment
management

30. Case:
Mr. fahad is a salaried person 35 years old. His monthly income is 50,000. he
wants to purchase policy of family takaful from pak qatar family takaful for
10 years.
Solution:
According to the rules of company contributions in the form of tabaru charge
from him is also 50000 rupees on the basis of his monthky income. Coverage
provide to him according to policy wil be Rs.10,00,000. In case of death of
person face value of policy will provide to him that is 10,00,000. But in case
no loss occur then at the end of policy period face value or cash value which
ever is higher will be paid to the participant.
In case of surrender before 20 years no coverage will provide to the
participant but the portion of tabarru that is assigned to investment will be
returned to him. In case of surplus in waqf fund at end of year will also
refunded.

31. Case of Mr. Arshad:
In family takaful you become a member by paying only one
contribution. If after paying 1st contribution loss occur even then
whole coverage provide to the nominee of participant.
Mr. arshad was a customer of pak qatar takaful company. He was
resident of peoples colony. He was owner of burger shop. His
monthly income was 25000.
He purchases the takaful policy from company in Dec 2013 for 10
years. His age was 35 years.Yearly contribution by Mr. Arshad was
25000 according to his income.But after making only one
contribution he died. Company paid the face value of policy that
is 500000 according to contribution.

32. Family or life takaful
• Pak Qatar provides Endowment plan
to participants in which two
elements are covered.
1.protection element.
2.investment element.

34. Withdrawal
options
Top up
Free look
period
Maturity
Permanent partial
Benefits

35. Where Pak Qatar Takaful Co. invests
the funds of PIA
1. Investment in Shariah compliant Government
securities
2. Investments in immoveable property
3. Investments in Joint Stock Companies
investments in non-Shariah compliant
preferred stocks and debentures are not
allowed

36. 4. Mutual funds operating under
the Shariah principles and
approved by the Commission
5. Financing under Islamic modes
through the Islamic banks and
financial institutions.
6. Placement of excess funds with
banks and Islamic financial
institutions.

37. • Profit on investment will depend upon the strategy
chosen by the participant. And he also has option to
move or switch between these 3 types of strategies
at any time during the year
Fund (strategy) Potential
reward
Unit price
Conservative Low Risks and Steady
Growth 1024
Balanced Balanced Risks and
Balanced Growth 1049
Aggressive High Risks and High
Returns 1075

38. In general Takaful
pak Qatar company
provides term plan
to participants in
which there is only
protection element
A point to remember
is that there is no PIA
in general takaful.

40. Participant takaful
fund (PTF) ,waqf
PTF is a separate and independent legal entity capable
of having title of ownership and possession of assets
whether in the form of money, movable and
immovable properties
 it established by the shareholders of Takaful Company
through the contribution of “Ceding amount‟ (part of
the Capital) to compensate the beneficiaries.
Ceding amount of pak Qatar takaful is Rupees
Five Hundred thousand only(Rs.500,000)

42. The surplus for each period would be
calculated in the following manner:
Income of PTF
Balance in Fund brought forward
Add: Takaful Contributions received in the PTF
Add: Investment income earned by PTF
Add: last year’s Reserves to be brought forward
Add: Any donation made by the Takaful Operator
Total net income
less: Claims and expenditures Incurred
Less :Takaful Operator’s Fees
Less:Takaful Operator’s wakalatul istimar fee(40%)
Excess of income over expenditure
Less:Donation paid by the PTF on the advice of the
Shariah Board
Less: Reserves maintained for current year
Surplus for the year
(Rs)
200,000
800,000
400,000
100,000
50,000
500,000
240,000
160,000
200,000
150,000
(Rs)
--------------
1550,000
(900,000)
--------------
650,000
(350,000)
--------------
300,000

43. Technical Reserves
1. Unearned contribution reserves
2. Incurred but not reported claims’ reserves
3. Deficiency reserves
4. Reserve for Qard -e- Hasana to be returned
in the future.

45. Case Study
Mr. Ahmad bought Honda City Aspire 2015 with a
market value of almost Rs. 20,00,000. He wants to
get auto-takaful.

46. Pre-Inspection
The following things are inspected before takaful:-
o Car Company
o Model
o Year of Manufacturing
o Current Condition
o Tracker
o Damages

47. Documents
The copies of following documents are required:-
 CNIC
 Registration Documents
 Driving Lisence
 Tracker Certificate

48. Contribution
 Contribution (Premium):-
4 % 0f 20,00,000 80,000/-
 2nd Year:-
10% of 20,00,000 200,000/-
20,00,000
-2,00,000
Dep. Amount 18,00,000

49. Contribution
 2nd Year:-
4% of 18,00,000 72,000
 3rd Year:-
10% of 18,00,000 1,80,000
18,00,000
-1,80,000
Dep. Amount 16,20,000
Contribution will be:
4% of 16,20,000 64,800

50. Case Study
Mr. Ahmad bought Honda City Aspire 2013 with a
market value of almost Rs. 20,00,000. He wants
to get auto-takaful now in 2015.

51. Contribution
 Contribution (Premium):-
 1st Year:-
20% of 20,00,000 400,000/-
20,00,000
-4,00,000
Dep. Amount 16,00,000

52. Contribution
 1st Year:-
4% of 16,00,000 64,000
 2nd Year:-
10% of 16,00,000 1,60,000
16,00,000
-1,60,000
Dep. Amount 14,40,000
Contribution will be:
4% of 14,40,000 57,600

53. 3rd Party Liability
Third party liability provides coverage when a policyholder or
insured driver is responsible for an automobile accident

54. Refund
Refund will be provided before the end of policy period.
 Before 6 months 50%
 After 6 months 25%
Transferable
Yes, this is transferable if it is informed to the Takaful Co.

56. Point Of Differences Conventional Insurance Takaful
Risk mitigation Risk is transferred from insured
person to insurance company in
consideration of premium paid
by insured
It is based on mutuality
hence the risk is not
transferred but shared by the
participants who form a
common pool. The company
only acts as a manger of the
pool.
Key concept
It contains the element of riba
and gharrar
The element of gharrar is
brought down to acceptable
levels under shariah by
making contributions as
conditional donations for a
good cause.
Mode of contribution
It contains the element of maisir
in which the insured pays the
primium in the exception of
gain.
The participants pay the
contribution in the spirit of
purity and brotherhood
hence it negates the element
of maisir.

57. Point Of
Differences Conventional Insurance Takaful
Investment Preferred stocks and other
fixed interest bearing
instruments.
Shariah compliant
investment. For
example common
stock, islamic banks.
Surplus & profits All surplus & profits belong to
the company except in
permanent life insurance
Surplus and profits
belongs to waqf
fund.
Surrender
Term life insurance: nothing is
paid
Whole life insurance: cash
value is paid.
In general takaful:
surplus is paid
In family takaful
:cash value plus
surplus ( if any) is
paid.

58. Point Of
Differences Conventional Insurance Takaful
Investment
ownership
Investment is made by the
company on its own behalf.
Investment portion is
of the participant, he
can withdraw at any
time after 2 years.
Catastrophic
Losses
In case of more losses occur
company is in deficit then no
coverage provide to insured.
In case of deficit qard-
e-hasna allot to waqf
fund to provide
coverage to the
participant.