Insurance Journal (4th Quarter 2017)

Guest Contribution
Mufti Asad Mahmood
Shariah Compliance Officer
Adamjee Insurance Company Limited
(Window Takaful Operations)
Emerging Takaful
(Islamic Insurance)
& It's Challenges
Waqf Fund:
T h e b a c k b o n e o f a Ta k a f u l
Organization is Waqf Fund in which
members/participants regularly
contribute a small amount called
Contribution from savings as Taburru
or donation. This Waqf amount is for a
social welfare. Whenever a member
of Waqf Fund is in financial trouble,
the Waqf Takaful comes to the rescue
by compensating for their
loss.
Takaful Operator:
The Manager of WTO/
Takaful Operator is the
c u s t o d i a n o f P T F
( P articipant Takaful
Fund). So, it is a prime
responsibility of the
Operator that it should
take measures to safe
guard and strengthen PTF.
No any activity should be
under taken which is not
beneficial for PTF. As
Waqf Fund grows, it would be in the
benefit of the participants to whom
claims are paid.
Furthermore, it is a key responsibility
of the Operator to compensate the
members/Participants of Waqf Fund
as per policy issued. However, in
some instances accommodations are
required to be made keeping in view
market practices which are valuable
source to strengthen PTF.
Some most important challenges
which are being faced in emerging
Takaful industry are as under:
1. Why Ex-Gratia claim is to be
considered?
We realize that Takaful industry is
still at the earliest stage of its
evolution especially in Pakistan. As
per Sharia guidance, it is clear that
Ex-Gratia claim would not be
considered a right of participants to be
paid from PTF. However, emerging
Takaful industry is facing a challenge
of Ex-gratia claim as to the rejection
of such a claim may lead to significant
loss of business and instability of
Takaful industry.
Although it is not a right of
participants which can be paid from
PTF as mentioned above, but keeping
in view the market practices
regarding the way-out of subject
matter, it can be said clearly, that
WTO/ Takaful Operators, to the
extent of writing in documents and
speaking, cannot pay such a claim
from PTF, whereas, most/some of
WTO/Takaful operators practically
decide to provide EX-
Gratia payment from the
PTF when it is required to
safeguard / strengthen
PTF on case to case basis.
Because, rejection of Ex-
Gratia in Takaful is a main
element, through which,
most of the policy holders
in conventional side are
not moving to the Islamic
side of insurance.
It is understood very well
that common market
practice of a non-shariacompliant
activity will not
lead to the permissibility of the same
in Sharia. That is why; Ex-Gratia may
not be set based on market practice.
However, earlier stage of emerging
Takaful industry and common market
practice show a need of Ex-Gratia
payment.
Hence, Ex-gratia may be considered
and paid to safeguard/ strengthen the
PTF. Otherwise, rejection of such a
Insurance Journal October, November, December 2017
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