2. T A K A F U L Shari’ah Compliant Alternative to Conventional Insurance
Pervaiz AHMED
CEO Pak-Qatar Family Takaful Limited
16th January, 2012, Lahore

3. Flow of Presentation Risk Mitigation from Shari’ah Perspective
Global and National development of Takaful
How does Takaful Function?
Regulatory Framework in Pakistan

4. Risk Mitigation from Shari’ah Perspective

5. Risk Mitigation from Shari’ah Perspective
Is the concept of risk mitigation permissible in Islam?
This very concept is not only lawful/permissible in Islam but is in fact encouraged
What are the available risk mitigation tools?
Avoid using Risk Mitigation Tools
A concept misunderstood as against Tawakul..
Self-Insurance or setting aside contingency money for the rainy day
Funds may not be sufficient to compensate the loss
Conventional Insurance
A commercially viable system but contains the element of Riba, Gharar, and Qimar/Maysir
Takaful
A commercially viable system which is also Shariah Compliant

6. Risk Mitigation in Islam
Islamic history is replete with examples featuring risk mitigation activities:
Hadith:
“Tie the Camel and then Submit to the Will of Allah”
Dhaman Khatr al-Tareeq:
A person would undertake another person’s risks without any consideration/fee in return
Dhaman Al-d’ark:
A person would influence a sale by promising to compensate for the loss if the subject-matter proved faulty
Aqila:
A risk sharing mechanism in which community members pooled their share of Diyat (blood money)

7. Shari’ah Ruling on Conventional Insurance?
Concept of Insurance?
Content of Insurance?
Shari’ah has no objections as to the concept or objectives of insurance ; it only has reservations with the way it is carried out i.e. the process of insurance

8. What is Allowed? What is not Allowed?
Risk Transfer without Consideration (premium)
Risk Sharing between Participants
Basis of Contract: Taburru i.e. unilateral non-commutative
Takaful Operator has no ownership claim on the contributions (premiums) paid by the participants
The Participants lose ownerships rights once the contribution is paid on the basis of Taburru
The contribution becomes the property of the Waqf
Waqf is owned by Allah Almighty
What is not Allowed?
Risk Transfer Against Fixed Consideration (premiums)
Basis of Contract: Muawaza i.e. bi-lateral sales & purchase
Reason: Such a contract involves Riba, Gharar, & Qimar/Maysir

9. Global and National development of Takaful

10. Origin of Modern Takaful
Western socio-economic, political, and legal orders overshadowed Islamic and traditional local norms
Muslim Revival and Renaissance began around the 1920s on multiple fronts
As a result, development of Islamic Banking started in 1970s
Dubai Islamic Bank, the first commercial Islamic bank, was established in 1975
There was a legal requirement that Islamic banks’ underlying assets be insured e.g. Car Ijarah
Islamic banks could not avail insurance from conventional companies as that would be antithetical to the cause
The need for a practical risk mitigation mechanism grew as the Islamic banking industry grew
First Takaful company was established in Sudan in 1979, four years after the establishment of the first Islamic bank

11. Need for Takaful was felt after the development of Islamic Banking
1975
First Islamic Bank
1979
First Takaful Co.

12. Development of Takaful Industry

13. Worldwide Takaful Developments & Growth
134
# of Takaful Operators in 2009
Approx. 36
Window Operators 15
Irani
Operators
>18
Re-Takaful
(USD) BILLION
Global Market Size (2009) E&Y

14. Re-Takaful Operators worldwide
Re-Takaful Worldwide
> 18
Re-Takaful Operators worldwide
Islamic Takaful & Retakaful Co. (IRTCo.) (Bahamas)
Hannover ReTakaful B.S.C. © (Bahrain)
Solidarity Islamic Takaful & Retakaful Co. (Bahrain)
PT Reassuransi Internasional Indonesia (Indonesia)
Amin Reinsurance Company (Iran)
Al Fejr Retakaful Insurance Co. (Kuwait)
Asean Re-Takaful International (Malaysia)
MNRB Retakaful Berhad (Malaysia)
Islamic Takaful & Re-takaful Co. (Saudi Arabia)
Islamic Takaful and Re-Takaful Co. (ITRCo.) (Saudi Arabia)
Tokio Marine Nichido Retakaful Pte Ltd (Singapore)
National Re-insurance Co. (NRICo.) (Sudan)
Sheikhan Insurance & Reinsurance (Sudan)
Sudanese Insurance & Reinsurance Co (Sudan)
BEIT Iaadat Ettamine Tounsi Saoudi Re-insurance (B.E.S.T. Re) (Tunisia)
ACR ReTakaful Holdings Limited (UAE)
Dubai Islamic Insurance & reinsurance Co. (UAE)
Takaful Re Limited (UAE)
Source: ICMIF Takaful,

15. History of Takaful in Pakistan
2002
Insurance Ordinance is issued which includes provision for Takaful; the word “Takaful” is used
2003
IJTIMA’ held in Darul Uloom, Karachi on permissibility of Takaful
2004
A committee to frame Takaful rules was founded
2005
SECP notifies Takaful Rules
2006
First General Takaful Company established (Pak-Kuwait General Takaful)
2007
First Family Takaful Company established (Pak-Qatar Family Takaful)
First Takaful Group catering both Family (Life) and General Takaful needs established (Pak-Qatar Takaful Group)
Total 5 Operators: 3 for General Takaful & 2 for Family Takaful, since the promulgation of Takaful Rules in 2005

16. Takaful Operational Model

17. Takaful Arrangements can be broadly divided into the following two categories:
Family Takaful covers
All risks associated with human life, like
- death,
- disability and illness
short-term and long-term investment needs
General Takaful covers
All risks associated with Physical Assets and Property, like
- house,
- marine,
- motor,
- engineering and misc.

18. Three Operational Models
Pure Mudarbah
Practiced earlier, it is no longer in use.
Pure Wakalah
This model in not widely practiced.
Hybrid – Wakalah + Mudarbah
This is the most prevalent model.
Hybrid- Wakalah+ Mudarbah+ Waqf
This model was suggested by Shari’ah Scholars in Pakistan.

19. How does it Function? Waqf Pool
Participant
Surplus
Wakalah Fee, Claims, Re-Takaful
Participant
Takaful Operator
Waqf Pool
Wakalah
Wakalah
Wakalah
Risk sharing
Between Participants
Participant
Participant
Investment

20. How does it Function? Family Takaful
Participant’s Investment Account (PIA)
Waqf Fund
Operator / Wakeel
Participant
Contributions
Profits from Investment
Wakalee Fee(s) for Investment Management
Contributions for Takaful Benefit
Payment of Claims
Surplus Distribution (if any)
Wakala Fee for Operating Waqf Fund 1 2 3 4 5 6 7

21. Participant Takaful Fund Participant Investment Fund
Takaful Funds
Income and expenses of Shareholder’s are managed
Shareholder’s Fund
Income and expenses of Tabarru/Waqf pool are managed
Participant Takaful Fund
Investments of Particpants are managed. This fund is Only required in Family Takaful companies
Participant Investment Fund

22. Surplus Distribution
After deducting the Wakalah Fees, Claims, Re-Takaful Contributions, Contingency Reserves and Charities etc. the remaining amount in the pool is to be distributed between the participants; it does not go to the shareholders
Though Takaful companies are marketing surplus distribution as USP of Takaful, very few have distributed surplus. This is mainly due to high up front Wakalah fee and poor underwriting.
In some territories surplus is shared be y the operator as well which makes Takaful similar to conventional insurance and is damaging the overall industry image.

23. Pak-Qatar Takaful Group
First dedicated Takaful Group in Pakistan comprising of both
Family (Life) Takaful and General Takaful operations
100 percent Foreign Owned
Paid up Capital:
Family Takaful : Rs. 708 million
General Takaful : Rs. 307 million
Total : Rs million
Pioneers of Family Takaful: S.E.C.P. issued
license to Pak-Qatar Family Takaful for
operations on 16 August 2007
Pak-Qatar Family is the fastest growing Family Takaful company in
the region

24. Our Sponsors
Sponsors include some of the most prominent financial institutions from State of Qatar and Munich-based FWU AG
Pak-Qatar Takaful Sponsors include:
Qatar Islamic Insurance Company (QIIC)
Qatar International Islamic Bank (QIIB)
Qatar Islamic Bank (QIB)
Qatar National Bank (QNB)
Masraf Al Rayan
The Amwal Group
FWU AG
Total assets under management of our top sponsors are more than US$26.12bn

25. Financial Strength Rating
Shari’ah Advisory Board
Justice (R) Mufti Muhammad Taqi Usmani – Chairman
Mufti Ismatullah – Member
Mufti Hassaan Kaleem – Member
Mufti Zubair Usmani – Member
Financial Strength Rating
In 2011, JCR-VIS Credit Rating Co. assigned Pak-Qatar Family Takaful a rating of “A-” (Positive Outlook).
For Pak-Qatar General Takaful, it is “BBB+” (Stable Outlook).

26. Branch Network Family Branches General Branches Family Sub-branches
HO Karachi
Lahore
Islamabad
Rawalpindi
Faisalabad
Quetta
Peshawar
Multan
Hyderabad
Khairpur
Moro
Rahim Yar Khan
Gujrat
Gujranwala
Sialkot
Jehlum
Jhang
Kotli
General Branches
HO Karachi
Lahore
Rawalpindi
Faisalabad
Peshawar
Multan
Rahim Yar Khan
Gujranwala
Sialkot
Family Sub-branches
Khipro
Khanpur
Sargodha
Chishtian
Dera Ghazi Khan
Toba Tek Singh
Mardan

27. Alternative Distribution
Pak-Qatar is in partnership with top banks in Pakistan, and has established partnerships with many banks for distribution of Takaful products.
Standard Chartered Bank,
Bank Al-Baraka,
Burj Bank,
Faysal Bank
MCB Bank
Emirates Global

28. Recent Performance 79% 52.20% Pak-Qatar Family Takaful 1,866,211,783
Gross Contribution 2011
Gross Contribution 2010
Percentage Increase
Pak-Qatar Family Takaful
1,866,211,783
1,044,475,621
79%
Pak-Qatar General Takaful
330,471,929
217,182,324
52.20%

29. Jazaakum Allahu Khairan May Allah Reward you p. ahmed@pakqatar. com
Jazaakum Allahu Khairan May Allah Reward you

30. Thank You HALAL RESEARCH COUNCIL
Head Office:  192- Ahmad Block, New Garden Town , Lahore, Pakistan  Ph: , Fax: Web: