TAKAFUL FUND
MANAGEMENT
Prof. Dr. Mohd. Ma’sum Billah
www.drmasumbillah.blogspot.com
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INTRODUCTION
AND
CENTRAL IDEA
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INTRODUCTION
“Some say prostitution is the oldest
profession; history actually
suggests that the oldest profession
may indeed be that of the
moneylender.”
Martin Armstrong,
Princeton Economic Institute
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CENTRAL IDEA
 Let’s
start with a Qur’anic evidence
which support the argument; yes
indeed riba is the oldest profession:
“O ye believe! Devour not usury,
doubled and multiplied; but fear God;
that ye may (really) prosper.”
Al-Imran:130
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SYARIKAT TAKAFUL
MALAYSIA BERHAD
(STMB)
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BACKGROUND OF THE
COMPANY



29th November1984
Authorized paid up capital of RM100
billion and a paid up capital of RM10
million.
Shareholders:
• BIMB
• Syarikat Takaful Malaysia Berhad
(STMB)
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
Governed by Section 8 article 3(a)
of Takaful Act 1984, in which the act
says that:
“A religious supervisory council
should be made up of Muslim
religious scholars in the country
and shall advise the company on
the operations of Takaful
business.”
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CORPORATE STRUCTURE
STMB
SUBSIDIARY COMPANIES ASSOCIATED COMPANIES
ARIL
(76%)
AMTC ATL
(49%) (20%)
STI
(56%)
ATK ATU
(99%) (99%)
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FAMILY
GENERAL
ROOTS=PRINCIPLES DEVELOPED
FRUITS=TAKAFUL PRODUCTS
FERTILIZER=MUSLIM SCHOLARS
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IDEA OF TAKAFUL FUND
MANAGEMENT
 To
have a good fruit, the fertilizer
must be from a very good quality.
Only then the root can be
developed to produce a branch of
good fruits.
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


Fertilizers = Muslim Scholars
Roots are principles developed by
knowledgeable Muslim Scholars
Fruits refers to the successful
insurance product
 The
very basic idea we are stressing
here is that in order to manage funds in
an Islamic way, the rules developed by
Muslim must be very clear and there
should be no room for doubt
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 If
the funds are managed very well
(according to Shari’ah principles), then
only people (especially the Muslims)
will come and buy the product.
 Getting
the trust from people is much is
much more important than promoting
the product for long term plan
(sustaining customers)
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FLOW FUND MANAGEMENT
TABARRU’
MUDHARABAH
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STMB FUND
MANAGEMENT
Practical Scenario
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
FUND MANAGEMENT

Sources of Income To The Company

Idea of Managing The Takaful Fund

STMB Fund Management
• Few Models of Takaful Fund Management
 Existing Phenomena
 Tauni Model
 Tijari Model
 Wakalah Model
 Proposed Model of Family and General
Takaful Fund Models II and I
 Model I
 Model II
 Shareholders’ Fund
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1. PSA-Retakaful, Claim Reserve, Unearned Takaful
contributions and General Reserve
2. PA-Investment and Profit
3. Surplus
4. PA-Investment and Profit
 Shareholder’s Fund
1. Shareholders’ Fund-Expenses
2. Net Profit for shareholder





Tabaru’
Hypothesis Analysis:Company’s Performance
Family Takaful Fund

Family Takaful Business
 Individual Sector
 Group Sector
General Takaful Fund

General Takaful Business
Staff Commission in Takaful Buying Policies By The Policy Buyer
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FUND MANAGEMENT
I) Sources of income to the company
• Profit from the investment of its
shareholders’ fund
• Its share of profits from the
management of both the family
takaful business and general takaful
business
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FUND MANAGEMENT
II) Idea of Managing the Takaful Fund
General Business
Current Profit
Sharing Ratio
Total Income will be
credited into the
shareholders’ fund
Profit/Loss will
be determined
Family Business
Profit From:
•General
•Family Business
•Funds and Investment
Income - Operating Expenditure
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FUND MANAGEMENT
III) Syarikat Takaful Malaysia Fund Management
• Few Models of Takaful Management
Existing Phenomena
1) Tauni Model
- Middle East, Bank Jazira in Arab
- Those did not face any risk will get nothing
- All the surplus will go straight away to the
company’s account and also the
shareholder's
fund
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2) Tijari Model
- adopted by Malaysia especially STMB
- underwriting surplus is done based on the
agreed ratio. Therefore, it depends on the
economic conditions
- Example :

recession - 60 : 40

booming - 80 : 20
- Those participant who did not claim will get
the mudharabah bonus
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3) Wakalah Model
- Also known as agent/broker model
- Adopted by May bank Takaful
- What differentiate this model with the other
two is the commission given to the agent
straight away from the premium given by the
participant. But with two condition; the
participants must:
 know and agree
 percentage of deduction must be known
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FUND MANAGEMENT
I
Proposed
Model of Family and General Takaful Fund
(Tabarru')
PSA
Family
General
8%
90%
(Mudharabah)
PA
90%
8%
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SSF
Total
2%
2%
100%
100%
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Ma nageme nt of Fa mily Takaful Fund
(Model 1)
Contract of Family Takaful Fund
between
‘P articipant’ by P ayment of
Contribution 100%
PSA 8% ( Tabarru’)
SSF 2%
Claim Reserve
PA 90% (Mudharabah)
Unearned Takaful
Contribution
Te chni cal
Retakaful
‘O pe rator by E nsuring Fina nc ial
Sec urity A gainst a Defined Risk
General
Reserve
IBNR
Profit
ET C
Surplus
40% to be added
back to PSA
Investment
60% for the company
60% for the company
40% + Paid Capital
from the PA for the
Participant
Shareholders’ Fund
Continue to the next page
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Ma nageme nt of General Takaful Fund
(Model 1)
Contract of General Takaful
Fund between
‘P articipant’ by P ayment of
Contribution 100%
PSA 8% ( Tabarru’)
SSF 2%
Claim Reserve
PA 90% (Mudharabah)
Unearned Takaful
Contribution
General
Reserve
Te chni cal
Retakaful
‘O pe rator by Ensuring Fina nc ial
Sec urity A gainst a Defined Risk
IBNR
Profit
ET C
Surplus
40% to be added
back to PSA
Investment
60% for the company
60% for the company
40% + Paid Capital
from the PA for the
Participant
Shareholders’ Fund
Continue to the next page
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Ma nageme nt of Fa mily Takaful Fund
(Model 2)
Contract of Family Takaful between
‘P articipant’ by P ayment of
Contribution 100%
‘O pe rator by Ensuring Fina nc ial
Sec urity A gainst a Defined Risk
Commission 15%
Takaful Fund 85%
Retakaful
Claim Reserve
PA 90% (Mudharabah)
Unearned Takaful
Contribution
General
Reserve
Te chni cal
IBNR
Surplus
40% to be added
back to PSA
Investment
Profit
ET C
Provided that:
•A written consent w ith fulles t understanding
has been obtained form the res pective
participant prior to the contract is signed
•Percentage of deduction etc. Shall be
regarded as among the material facts or matters
affecting the policy, which have to be duly
disclos ed by the agent (Wakil)
PSA 8% ( Tabarru’)
SF 2%
60% for the company
60% for the company
40% + Paid Capital
from the PA for the
Participant
Shareholders’ Fund
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Ma nageme nt of GeneralTakaful Fund
(Model 2)
Contract of General Takaful between
‘P articipant’ by P ayment of
Contribution 100%
‘O pe rator by E nsuring Fina nc ial
Sec urity A gainst a Defined Risk
Commission 15%
Takaful Fund 85%
Retakaful
PSA 90% (Tabarru’ )
Claim Reserve
PA 8% (Mudharabah)
Unearned Takaful
Contribution
General
Reserve
Te chni cal
IBNR
Surplus
40% to be added
back to PSA
Investment
Profit
ET C
Provided that:
•A written consent w ith fulles t understanding
has been obtained form the res pective
participant prior to the contract is signed
•Percentage of deduction etc. Shall be
regarded as among the material facts or matters
affecting the policy, which have to be duly
disclos ed by the agent (Wakil)
SF 2%
60% for the company
60% for the company
40% + Paid Capital
from the PA for the
Participant
Shareholders’ Fund
Continue to the next page
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Shareholders’ Fund
Deduction of
Expenses
SSF 2%
Staff Cost
•Salary & wages
•EPF
•Employer’s SOCSO
•Incentives
•EPF-Incentive scheme
•Employer’s SOCSOincentive scheme
•Training& Courses
•Overtime & Allowances
•Medical Expenses
•Staff Uniform
•Bonus
•Desk T akaful Allowances
Net Profit for the
Shareholders
Establishment
Expenses
•Office Rental
•Desk T akaful Rental
•Telephone & Cables
•Telephone Leased Lines
•Rates & Assessments
•Security Guard
Depreciation
•Land & Building
•Furniture & Equipment
•Fixtures & Fittings
•Computer Equipment
•Renovation
•Security Equipment
•Motor Vehicles
Lease Rental
•Motor Vehicle
•Computer Equipment
•Office Equipment
•Other Rental
•Electricity & Water
•Contn on Takaful Plans/
Schemes
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Administration &
General Expenses
•Printing & Stationery
•Office Supplies
•Bank Charges
•Stamp Duty
•Postage & Stamp
•Travel & Accommodation
•Entertainment & Refreshment
•Newspaper, Books & Promotion
•Repairs & Maintenance
•Licence Fees
•Professional Fees
•Actuarial Fees
•Audit Fees
•Legal Fees
•Directors’ other Emolument
•Directors’ Fees
•Directors’ Traveling
•RSC Fees
•RSC Other Emolument
•RSC Traveling
•Repay Profit Expenses
•Family Takaful Stamp Duty
•Motor Vehicle Expenses
•Annual Registration Fees
•Office Cleaning
•Miscellaneous Expenses
•Survey Expenses
•Transportation Charges
•Contingency
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What differentiate Model 1
from Model 2
Model 1
• Agent do not get his commission
• Do not need to get consent from participants
Model 2
• Agent get his commission
• In this case, the company must get a
written consent from participants
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What are the similarities between
Model 1 from Model 2
All of them have:
1. Takaful fund which is divided into four divisions:
• Retakaful
• Claim Reserve
• Unearned Takaful Contribution
• General Reserve (which is subject to
Technical, IBNR, etc
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What are the similarities between
Model 1 from Model 2
2. The investment is generated from
participants (Mudharabah) account. Example
of investment are:
• Income from investment account
• Income from Islamic Accepted Bill
• Malaysian Government - certificates
If we see the, the investment income (net
return) is RM 894,355 as compared to
RM 9,013,989 last year
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RECOMMENDATION

Say no to RIBA’. Even Julius Caesar
in Romania Empire mentioned that
riba’ can destroy the institution of a
society. What else being a Muslim,
we should be very bold in upholding
the Qur’anic teachings
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What we can do?
1. Train employees
•The employees must equip themselves
before promotion
• They also must be actively seek all the
available facts and base their decision
upon the research
2. General Takaful Insurance product should be
treated as one of the competitive advantage
over conventional insurance whereby the
money back guarantee is there
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What we can do?
3. Offer more insurance products that has to do
with umrah, hajj or educational package
4. In terms of investment, STMB should expand
its branch worldwide because:
• Malaysia has been a leading platform for
takaful insurance business in the world
• see total revenue page 31
5. Role of education
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CONCLUSION
1. DOUBT
• Once the room for doubt arises in the insurer and
also the assured, either one party will find some
difficulties in implementing the roles governance
the management of funds
2. COMMISSION
• Different models had been presented



Tauni
Tijarah
Wakalah - Only in wakalah the commission is given to
the agent
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THE FUTURE OF ISLAMIC
INSURANCE
For a body to be healthy, the organs
must work well first
So, for an organization to work
well, the mechanisms used in
the system should be checked
first whether it fulfills the shariah
requirements or not
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