TAKAFUL INSURANCE Shariah compliant cover

AGENDA Introduction to Takaful How Takaful industry can facilitate Islamic financial industry in Africa Takaful product for both General and family Takaful Vastly growing trend of Takaful in Africa Takaful management system

ISLAM AQIDAH Faith & Belief SHARIAH Practices & Activities AKHLAQ Moralities & Ethics IBADAH Man-to-God Worship MUAMALAT Man-to-Man Activities Social Activities Economic Activities Political Activities Risk Management Takaful

Takaful comes from the Arabic root-word ‘kafala’ — guarantee. Takaful means mutual protection and joint guarantee. Operationally, takaful refers to participants mutually contributing to a common fund with the purpose of having mutual indemnity in the case of peril or loss. What is Takaful

Refference to Al-quran “Help (ta’awan) one another in furthering virtue (birr) and Allah consciousness (taqwa) and do not help one another in furthering evil and enmity”. Al Maidah: verse 2 (5:2). Takaful is a form of mutual help (ta’awun) in furthering good/virtue by helping others who are in need / in hardship.

Reference from Hadith Anas (R.A) reported that a person asked Rasul Allah (sal Allahu alaihi wa sallam), “Should I tie my camel and have Tawakkul (trust in Allah for her protection) or should I leave her untied and have Tawakkul.” Rasul Allah (sal Allahu alaihi wa sallam) replied, “Tie her and have Tawakkul.” [Jami At- Tirmidhi]. The hadith implied a strategy to mitigate/reduce risk. Takaful provides a strategy of risk mitigation/reduction by virtue of collective risk taking that distributes risks and losses to a large number of participants. This mitigates the otherwise very damaging losses, if borne individually.

Opinions and Fatwas against conventional insurance Fatwa issued by Higher Council of Saudi Arabia in 1397 A.H.(1997) Fatwa Issued by the Fiqh Council of Muslim World League in 1398 A.H. (1965 cairo) Fatwa issued by the Fiqh Council of the OIC in 1405 A.H. (1985).

How Takaful industry can facilitate Islamic financial industry in Africa The low penetration of Islamic insurance in key markets and a limited product portfolio post a hurdle in the growth of the Takaful industry in these markets. Innovative solutions to improve its distribution and service capabilities. To increase its customer base and products that could expand the existing product portfolio of takaful operators. include segments such as wealth management, educational, planning schemes and retirement plans would be the ideal way forward to overcome challenges

CONTD Takaful product innovation could result in the following benefits- Alternative to Life and General Insurance Useful for Islamic Banking Deposits, Financing, and Investments. Useful for the development of Islamic Microfinance Useful for Islamic Capital Market, especially for SUKUK Risk Mitigation Could be expanded to Pension Fund Schemes Micro-Takaful is effective to insurance to the poor Micro takaful contributes to Financial inclusion.

innovative products of general and family Takaful General Takaful is defined as, "schemes which are basically contracts of joint guarantee on a short-term basis (normally one year), and providing mutual compensation in the event of a specified type of loss". The schemes are designed to meet the needs for the protection of individuals and corporate bodies in relation to material loss or damage resulting from a catastrophe or disaster inflicted upon real estate, assets or belongings of participants. The Takaful contribution paid is pooled into the Participant Risk Fund under the principle of Tabarru to match the risk elements of the business that are inherent in its underwriting activities."

CONTD Accordingly the participants can engage with Takaful for the assets which are recognized as valuable items according to the Shari’ah. For instance, a factory producing alcohol is not allowed to apply for general Takaful. In addition, the potential loss incurred must be accidental and unintentional. This is seen in Surah al-Baqarah, 195: "And spend of your substance in the cause of Allah, and make not your own hands contribute to (your) destruction; but do good, for Allah love those who do good“

CONTD The main types of general Takaful products are motor vehicle Takaful; fire Takaful, marine Takaful and engineering Takaful. Takaful for motor vehicles, motorcycles and commercial vehicles are under motor vehicle Takaful. In the case of fire Takaful, it covers Takaful for standard fire, house owner or householder and home package. Marine cargo and marine hull or machinery are the sub products of marine Takaful and machinery break-down and construction risk are under engineering Takaful

Family Takaful Family Takaful provides protection and long-term saving and investment opportunities. By having family Takaful products, it will release the financial burden on the family in times of misfortune and return will be accumulated from the investment account managed by the Takaful operators. There are two main types of family Takaful products, namely individual family Takaful products and group family Takaful products.

CONTD Individual family products comprise of protection product, investment product, retirement product and medical product. Family Takaful protection aims to provide the financial help for the beneficiaries of participant when the participant dies or becomes permanent disabled. In addition, this product also tries to release the financial burden from the participant if he suffers critical illness or temporary (totally or partially) disability. In the case of family Takaful investment products or investment-linked family Takaful products, it provides investment opportunities in addition to the protection given to the participants. Retirement family Takaful products provide financial assistance to the participant when he retires from work. The Takaful benefit of this product is that the participant is entitled to get the adequate financial support after retirement and to cover the medical expenses in old age. Medical family Takaful products cover the cost of hospitalization and surgery

CONTD Group family Takaful is normally subscribed to by the employers for the benefit of employees and their family members. Similar to the individual family Takaful products, it provides financial assistance to the participants in order to cover hospitalization, surgery, and normal medical expenses. The coverage amount depends on the contribution given by the employer or employees.

Growing trend of takaful industry in Africa According to Deloitte and touché report, themed" The way forwad for Takaful”, it observed that, “the global Takaful insurance market exhibited double digit growth, representing 18% Compound Annual growth Rate (CAGR), during the period with worldwide gross Takaful contributions reaching US$18.3 billion in the first half of Nonetheless, the size of the industry still remained fragmented and significantly small compared to global Islamic financial assets with a market share of 1.1%. These figures should not discourage the reader, and our industry study and analysis suggest that there are enormous growth prospects in the Middle East, South Asia and Africa”. In 2012 there was $10.90 billion gross contribution worldwide with Africa contributing 5%. Mainly from Nigeria,Kenya and Tunisia

CONTD- In order for the takaful to realize stronger growth in Africa, the need for the following need to be strengthen- We have to have proper regulatory framework to guide takaful practices There is need to train takaful professionals. To develop comprehensive strategies in investment portfolio. Need to have good governance in ensuring smooth running of the takaful operators.

Takaful management system. For takaful to have smooth running it has to embrace a framework of policies, processes and procedures to ensure that an organization can fulfill all tasks required to achieve its objectives. There are several Takaful management system software that are shariah compliant which enables all the task of takaful operators to run smoothly – (1)It acts as strong basic operation control (2)It is a powerful analytical to benefit the business (3)It provides quality control of product and service delivery (4)It acts as a secure way of Data Management

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