By Sheila Nu Nu Htay
A entire consultant to present concerns and practices in governance for Takaful and re-Takaful operations
As the worldwide call for for Islamic coverage items raises, a radical knowing of Takaful ideas is essential for accountants, auditors, and leaders of businesses delivering those items. This e-book covers the elemental accounting ideas and practices of Takaful operations, together with the segregation of resources, liabilities, source of revenue, and charges among the Takaful operator and contributors; the environment apart of money reserves for assembly notable claims and destiny claims; and the administration of profit and expenditure. that includes wide case experiences from real-world events, this publication is the ideal primer for accounting scholars and practitioners unusual with Islamic finance and Takaful operations.
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Additional info for Accounting, Auditing and Governance for Takaful Operations
Gharar can be loosely translated as uncertainty, but the definition varies from one madhab to another. It may also mean deception, risk, hazard, ignorance, unjust enrichment, or even information asymmetry or “that whose consequences are hidden” (al-Dhareer, 1997). It is a universal principle that full consent and satisfaction of the parties to a contract can only be achieved through certainty, full knowledge, disclosure, and transparency. Takaful contracts have to observe specific rules in order to avoid gharar, such as making sure that the matter of insurance is a legitimate and essential need; that the insurer is able to safeguard the interests of the insured, and that the insurance is transacted on a cooperative basis under which ownership of the premium is with all contributors to the takaful fund; they collectively bear the risk and can share profits or losses from the pool.
The CBM is entrusted to administer and enforce the provisions of the Takaful Act, which was enacted to govern the conduct of takaful business and to ensure the orderly growth of the industry. The governor of Bank Negara is also the director general of takaful. Another relevant section is Section 68 of the Takaful Act 1984. This section provides that the minister of finance is authorised to make subsidiary legislation to prescribe detailed particulars in relation to the requirements under the act.
Under this model, profit belongs to the members as owners of the fund and is distributed to the members or retained within the fund. The concept of pure mudaraba is practised in their daily transaction. In the pure mudharabah concept, both the takaful operator and the participant will only share the direct investment income, in which the participant is entitled to 100 percent of the surplus with no deduction made prior to the distribution. This model is applicable to life family takaful as the fund is entirely distributed to the participants (Rabiah and Odierno, 2008).