november 2008 examination - The Malaysian Institute Of Certified ...

FEATUREOverview of Takaful inMalaysiaThe concept of takaful (Islamic insurance) wasfirst introduced in Malaysia in 1985 when thefirst takaful operator was established to fulfilthe need of the general public to be protectedbased on the Islamic principles. The legal basis for theestablishment of takaful operators was the Takaful Actwhich came into effect in 1984.Insurance as a concept does not contradict thepractices and requirements of Shariah. In essence,insurance is synonymous to a system of mutual help.However, Muslim jurists are of the opinion that theoperation of conventional insurance does not conform tothe rules and requirements of Shariah as it involves theelements of uncertainty (Gharar) in the contract ofinsurance, gambling (Maisir) as the consequences of thepresence of uncertainty and interest (riba) in its investmentactivities.Takaful is an insurance concept in Shariah wherebya group of participants mutually agree among themselvesto guarantee each other against a defined loss or damagethat may inflict upon any of them by contributing astabarru’ or donation in the takaful funds. It emphasisesunity and co-operation among participants. Takaful is nota new concept as it had been practised by the Muhajirin ofMecca and the Ansar of Medina following the hijra of theProphet over 1400 years ago.Tabarru’ is the agreement by a participant torelinquish as donation, a certain proportion of the takafulcontribution that he agrees or undertakes to pay, thusenabling him to fulfil his obligation of mutual help andjoint guarantee should any of his fellow participants suffera defined loss. The concept of tabarru’ eliminates theelement of uncertainty in the takaful contract. The sharingof profit or surplus that may emerge from the operations oftakaful is made only after the obligation of assisting thefellow participants has been fulfilled. Thus, the operationof takaful may be envisaged as a profit sharing businessventure between the takaful operator and the individualmembers of a group of participants.Takaful operations are regulated and supervised byBNM since 1988 with the appointment of the BNMGovernor as the Director-General of Takaful. In October1995, the ASEAN Takaful Group (ATG), a grouping oftakaful operators in Brunei, Indonesia, Malaysia andSingapore was formed to enhance mutual co-operationand to facilitate the exchange of business among takafuloperators in ASEAN. In 1997, the Malaysian takafulindustry took a leap forward with the formation of ASEANRetakaful International (L) Ltd. (ARIL) as an offshoreretakaful company in Labuan. The establishment of ARILwas to create a vehicle for more dynamic retakafulexchanges among ATG members and provides additionalretakaful capacity to further reduce their dependence onconventional reinsurance.Types of businessThe takaful businesses carried on by the Malaysian takafuloperators are broadly divided into family takaful business(Islamic "life" insurance) and general takaful business(Islamic general insurance).10 | The Malaysian Accountant | August 2008 www.micpa.com.my