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<p>Imported from text file</p> <p><b>New page</b></p><div> BEST REINSURANCE –<br /> <br /> FAR EAST REGIONAL OFFICE<br /> <br /> TAKAFUL :<br /> <br /> THE MALAYSIA CASE<br /> <br /> <br /> Development of Takaful<br /> <br /> – Worldwide Prospective<br /> <br /> Takaful or Islamic Insurance is a new<br /> <br /> industry.<br /> <br /> Takaful was initially undertaken in Sudan<br /> <br /> 1979 and Malaysia in 1984.<br /> <br /> Takaful operations open up in many<br /> <br /> countries in the past two decades especially<br /> <br /> in large Muslim community.<br /> <br /> Currently more than 50 takaful operators<br /> <br /> worldwide including some non-Islamic<br /> <br /> countries.<br /> <br /> 2<br /> <br /> <br /> Worldwide Muslim Population<br /> <br /> (Based on 1998 Islamic Web.Com)<br /> <br /> 3<br /> <br /> <br /> Potential of Takaful Business in Muslim Countries<br /> <br /> Worldwide Muslim Population (Based on 1998 ISLAMIC Web.Com)<br /> <br /> Area Population Muslim Population Percentage<br /> <br /> (Million) (Million)<br /> <br /> Worldwide 5,070 1,500 30%<br /> <br /> South East Asia 363 226 62%<br /> <br /> Malaysia 20 10.4 53%<br /> <br /> Total Insurance Premium (Based on 2003 Sigma Report)<br /> <br /> Area Total Premium Life Insurance Non-Life Insurance<br /> <br /> (USD ‘Billion) (USD ‘Billion) (USD ‘Billion)<br /> <br /> Worldwide 2,940 1,670 1,270<br /> <br /> South East Asia 194 137 57<br /> <br /> Malaysia 5.6 3.4 2.2<br /> <br /> Area Total Takaful Family Takaful General Takaful<br /> <br /> Contribution Contribution Contribution<br /> <br /> (USD ‘Million) (USD ‘Million) (USD ‘Million)<br /> <br /> Malaysia 267 201 66<br /> <br /> (Takaful)<br /> <br /> 4<br /> <br /> <br /> Potential of Takaful Business in Muslim Countries<br /> <br /> Insurance Premiums Per Capita (Based on 2003 Sigma Report)<br /> <br /> Area Insurance Life Insurance Non-Life<br /> <br /> Premiums Per Premium Per Premium Per<br /> <br /> Capita (USD) Capita (USD) Capita (USD)<br /> <br /> Worldwide 470 267 203<br /> <br /> South East Asia 58 41 17<br /> <br /> Malaysia 227 140 87<br /> <br /> Area Takaful Family Takaful General<br /> <br /> Contribution Per Contribution Per Contribution Per<br /> <br /> Capita (USD) Capita (USD) Capita (USD)<br /> <br /> Malaysia 11 8 3<br /> <br /> (Takaful)<br /> <br /> 5<br /> <br /> <br /> Development of Takaful – Malaysia Case Study<br /> <br /> Takaful industry is relatively new<br /> <br /> compared to conventional insurance<br /> <br /> companies in Malaysia.<br /> <br /> The National Fatwa Committee of the<br /> <br /> Malaysian Islamic Affairs Council declared<br /> <br /> the conventional life insurance business<br /> <br /> contradicted with Islamic principles in<br /> <br /> 1972.<br /> <br /> In 1985, the Fiqh Academy of the OIC<br /> <br /> made a declaration that all forms of<br /> <br /> conventional insurance do not conform<br /> <br /> with Islamic principles.<br /> <br /> 6<br /> <br /> <br /> Development of Takaful – Malaysia Case Study<br /> <br /> Takaful Act 1984 was introduced to<br /> <br /> supervise the takaful activities since<br /> <br /> Insurance Act could not be applied to the<br /> <br /> takaful business in Malaysia.<br /> <br /> Takaful Malaysia Sdn. Bhd. was established<br /> <br /> in 1984 with paid-up capital of RM10 Million<br /> <br /> and there are four takaful operators in<br /> <br /> Malaysia.<br /> <br /> 7<br /> <br /> <br /> Organisation Chart: Islamic Banking &amp; Takaful<br /> <br /> Department &amp; Insurance Supervision Department<br /> <br /> GOVERNOR<br /> <br /> DEPUTY<br /> <br /> GOVERNOR<br /> <br /> ASSISTANT ASSISTANT<br /> <br /> GOVERNOR GOVERNOR<br /> <br /> DIRECTOR ISLAMIC DIRECTOR<br /> <br /> BANKING &amp; CHIEF INSURANCE<br /> <br /> TAKAFUL ACTUARY SUPERVISION<br /> <br /> DEPARTMENT DEPARTMENT<br /> <br /> SENIOR SENIOR SENIOR MANAGER SENIOR SENIOR SENIOR SENIOR<br /> <br /> SHARIAH BANKING<br /> <br /> ISLAMIC MANAGER OPERATIONS,<br /> <br /> MANAGER MANAGER MANAGER MANAGER<br /> <br /> SPECIALIST SUPERVISION SUPERVISION ACTUARIAL<br /> <br /> BANKING TAKAFUL LEGAL &amp; SERVICES SUPERVISION<br /> <br /> 8<br /> <br /> <br /> Takaful Market Performance In Malaysia(2003)<br /> <br />  Four Takaful operators are :<br /> <br /> - Takaful Malaysia<br /> <br /> - Takaful Nasional Malaysia<br /> <br /> - Maybank Takaful<br /> <br /> - Takaful Ikhlas<br /> <br />  Number of Offices : 132<br /> <br />  Total Employment : 2,161<br /> <br /> No. of Total Net Total Takaful<br /> <br /> Agents Contribution Income Fund Assets<br /> <br /> (USD’ Million) (USD’ Million)<br /> <br /> Total 11,433 267 1,160<br /> <br /> Family Takaful 9,893 201 1,010<br /> <br /> General Takaful 1,540 66 150<br /> <br /> 9<br /> <br /> <br /> Performance of Takaful Business in Malaysia<br /> <br /> 300<br /> <br /> Net Contribution in USD Million<br /> <br /> 250<br /> <br /> 66<br /> <br /> 200 58<br /> <br /> 47<br /> <br /> 150<br /> <br /> 39<br /> <br /> 100 201<br /> <br /> 176<br /> <br /> 137<br /> <br /> 50 98<br /> <br /> 0<br /> <br /> 2000 2001 2002 2003<br /> <br /> Year<br /> <br /> Family General<br /> <br /> 10<br /> <br /> <br /> Overview of the Takaful Performance<br /> <br /> The favourite economic conditions in 2003<br /> <br /> was positive for takaful industry in<br /> <br /> Malaysia.<br /> <br /> The contributions of both family and<br /> <br /> general increased by 14% to USD267m and<br /> <br /> total assets fund increased by 22% to<br /> <br /> USD1.16 billion.<br /> <br /> These increased has expanded the market<br /> <br /> share for Takaful business to 5.40% in<br /> <br /> terms of total insurance industry premium<br /> <br /> production and to 5.60% for total insurance<br /> <br /> assets fund.<br /> <br /> 11<br /> <br /> <br /> Overview of the Takaful Performance<br /> <br /> In 2003, the market penetration of family<br /> <br /> takaful business has improved to 4.50%.<br /> <br /> The Takaful industry is in strong position to<br /> <br /> move forward to expand further in an<br /> <br /> environment of stronger economic growth<br /> <br /> projected in 2004 and more conducive<br /> <br /> business environment in Malaysia.<br /> <br /> 12<br /> <br /> <br /> Performance of Family Takaful in Malaysia<br /> <br /> 160<br /> <br /> Contribution in USD Million<br /> <br /> 140 134<br /> <br /> 119<br /> <br /> 120<br /> <br /> 97<br /> <br /> 100<br /> <br /> 78<br /> <br /> 80<br /> <br /> 60<br /> <br /> 40<br /> <br /> 20<br /> <br /> 0<br /> <br /> 2000 2001 2002 2003<br /> <br /> Year<br /> <br /> 13<br /> <br /> <br /> Performance of Family Takaful Business<br /> <br /> The new business contributions<br /> <br /> shown strong growth in all family<br /> <br /> takaful plans.<br /> <br /> The increase due to new plans<br /> <br /> such as mortgage reduce term<br /> <br /> and new education fund takaful<br /> <br /> plans.<br /> <br /> 14<br /> <br /> <br /> Performance of Family Takaful Business<br /> <br /> The performance of the annuity<br /> <br /> takaful plans also shown positive<br /> <br /> growth and it is expected to increase<br /> <br /> given the demographic transition<br /> <br /> towards an ageing society.<br /> <br /> The development of the first<br /> <br /> investment-linked takaful plan has<br /> <br /> opened a new window of growth for<br /> <br /> family takaful business in Malaysia.<br /> <br /> 15<br /> <br /> <br /> Distribution Channel for Family Takaful<br /> <br /> Business<br /> <br /> Direct Marketing and Agents: 86.3%<br /> <br /> Bancassurance: 13.0%<br /> <br /> Brokers: 0.7%<br /> <br /> Types of Family Takaful Business in Malaysia for Year 2003<br /> <br /> Annuity Investment-<br /> <br /> 1% Linked<br /> <br /> Ordinary 1%<br /> <br /> Family Group<br /> <br /> 10%<br /> <br /> Ordinary<br /> <br /> Family<br /> <br /> Individual<br /> <br /> 88% 16<br /> <br /> <br /> Assets of Family Takaful Fund in Malaysia<br /> <br /> (2003)<br /> <br /> Other Assets, Islamic Private<br /> <br /> 10.8% Debt Securities<br /> <br /> and Equities,<br /> <br /> 34.6%<br /> <br /> Investments,<br /> <br /> 45.3%<br /> <br /> Investment<br /> <br /> Accounts and<br /> <br /> Islamic Money<br /> <br /> Market, 35.6%<br /> <br /> Government<br /> <br /> Islamic Papers,<br /> <br /> 10.5%<br /> <br /> Other<br /> <br /> Financing, 2.4%<br /> <br /> Investment Investments, 0.2%<br /> <br /> Properties, 5.9%<br /> <br /> 17<br /> <br /> <br /> Performance of General Takaful in Malaysia<br /> <br /> for Year 2003<br /> <br /> 120<br /> <br /> 106.05<br /> <br /> Contribution in USD 'Million<br /> <br /> 100<br /> <br /> 87.55<br /> <br /> 80 70.21<br /> <br /> 60 53.34<br /> <br /> 40<br /> <br /> 20<br /> <br /> 0<br /> <br /> 2000 2001 2002 2003<br /> <br /> Year 18<br /> <br /> <br /> Distributions Channel for Family Takaful<br /> <br /> Business<br /> <br />  Direct Marketing And Agents: 70.1%<br /> <br />  Bancassurance: 10.0%<br /> <br />  Brokers: 19.6%<br /> <br /> Types of General Takaful Business in Malaysia (2003)<br /> <br /> Marine,<br /> <br /> Misc Aviation and<br /> <br /> 20.0% Transit<br /> <br /> 8.7%<br /> <br /> Fire<br /> <br /> Motor<br /> <br /> 41.5%<br /> <br /> 29.9%<br /> <br /> 19<br /> <br /> <br /> Assets of General Takaful Funds in Malaysia<br /> <br /> (2003)<br /> <br /> Islamic Private<br /> <br /> Other Assets, Debt Securities<br /> <br /> 10.8% and Equities,<br /> <br /> Investment<br /> <br /> 34.6%<br /> <br /> Accounts and<br /> <br /> Islamic Money<br /> <br /> Market, 35.6% Investments,<br /> <br /> 45.3%<br /> <br /> Government<br /> <br /> Islamic Papers,<br /> <br /> 10.5%<br /> <br /> Other<br /> <br /> Financing,<br /> <br /> Investments,<br /> <br /> 2.4% Investment<br /> <br /> Properties, 0.2%<br /> <br /> 5.9%<br /> <br /> 20<br /> <br /> <br /> Basic Concepts of Takaful<br /> <br /> 1. Al-Mudharabah – means ‘profit sharing’.<br /> <br /> 2. Al-Takaful – means ‘joint guarantee’.<br /> <br /> 3. Tabarru – refers to elements of ‘donation’.<br /> <br /> Why Conventional Insurance does not<br /> <br /> conform with the requirement of the<br /> <br /> Syairah?<br /> <br /> 1. Al-Gharar – refers to ‘unknown’ or ‘uncertain’ factors in<br /> <br /> a conventional insurance contract.<br /> <br /> 2. Al-Maisir – refers to ‘gambling’ element and is said to<br /> <br /> derive from the ‘gharar’ element.<br /> <br /> 3. Riba – refers to the ‘interest’ factor present in the<br /> <br /> investment activities of conventional insurance<br /> <br /> companies.<br /> <br /> 21<br /> <br /> <br /> Takaful Models<br /> <br /> 1. Non-Profit Model - Social governmental owned<br /> <br /> enterprises and programme operating on a non-<br /> <br /> profit basis. The contributions paid by the<br /> <br /> participants are wholly for tabarru (donation) to<br /> <br /> unfortunate members.<br /> <br /> 2. Al-Mudharabah Model - The co-operative risk<br /> <br /> sharing where participants and operators share<br /> <br /> in the distribution profit.<br /> <br /> 3. Al-Wakala Model - In this model, the co-<br /> <br /> operative risk sharing occur among the<br /> <br /> participants with a takaful operator whereby a<br /> <br /> fee is agreed to be paid to the operators for the<br /> <br /> services rendered. The operator shall not<br /> <br /> participant in the underwriting results.<br /> <br /> 22<br /> <br /> <br /> Types of Takaful Operation<br /> <br /> 1. Family Takaful (Chart 1) – The plans available<br /> <br /> is quite similar to the endowment policy in<br /> <br /> conventional life insurance practice where<br /> <br /> participants may choose a fixed period of<br /> <br /> coverage. Installment payment can be in<br /> <br /> Participants Account (PA) and Participant<br /> <br /> Special Account (PSA).<br /> <br /> 2. General Takaful Operation (Chart 2) – The<br /> <br /> protection on short term basis. The participants’<br /> <br /> contribution is wholly on tabarru (donation)<br /> <br /> basis and sharing of profits is on underwriting<br /> <br /> surplus and investment income. Surplus is<br /> <br /> derived after deducting company’s expenses<br /> <br /> from this fund.<br /> <br /> 23<br /> <br /> <br /> Chart 1: Operation Flowchart of the Family<br /> <br /> Takaful Plan.<br /> <br /> PROFITS<br /> <br /> ATTRUBUTED TO<br /> <br /> SHAREHOLDERS<br /> <br /> COMPANY'S<br /> <br /> COMPANY ADMINISTRATRTION<br /> <br /> &amp; MANAGEMENT<br /> <br /> EXPENSES<br /> <br /> TAKAFUL<br /> <br /> INVESTMENT PROFITS 30% (Example only)<br /> <br /> CONTRACT BASED<br /> <br /> BY FROM<br /> <br /> ON PRINCIPLE OF COMPANY INVESTMENT 70% (Example only)<br /> <br /> AL-MUDHARABAH<br /> <br /> PARTICIPANTS PARTICIPANT PARTICIPANT PAYMENT TO<br /> <br /> PARTICIPANT ACCOUNT ACCOUNT ACCOUNT PARTICIPANT<br /> <br /> TAKAFUL<br /> <br /> FAMILY<br /> <br /> INSTALLMENT<br /> <br /> TAKAFUL<br /> <br /> PAID BY<br /> <br /> FUND<br /> <br /> PARTICIPANT<br /> <br /> PARTICIPANTS PARTICIPANTS<br /> <br /> TAKAFUL PAYMENT TO<br /> <br /> SPECIAL SPECIAL<br /> <br /> BENEFITS PARTICIPANT<br /> <br /> ACCOUNT ACCOUNT<br /> <br /> Source: BIRT (1996) 24<br /> <br /> <br /> Chart 2: General Takaful Operation<br /> <br /> Flowchart PROFITS<br /> <br /> ATTRUBUTED TO<br /> <br /> SHAREHOLDERS<br /> <br /> COMPANY'S<br /> <br /> ADMINISTRATRTION<br /> <br /> COMPANY &amp; MANAGEMENT<br /> <br /> EXPENSES<br /> <br /> TAKAFUL<br /> <br /> INVESTMENT PROFITS<br /> <br /> CONTRACT BASED<br /> <br /> BY FROM<br /> <br /> ON PRINCIPLE OF COMPANY INVESTMENT<br /> <br /> AL-MUDHARABAH<br /> <br /> OPERATIONAL<br /> <br /> COST OF SHARE OF<br /> <br /> TAKAFUL SURPLUS FOR<br /> <br /> THE COMPANY<br /> <br /> PARTICIPANT TAKAFUL GENERAL GENERAL OPERATIONAL<br /> <br /> CONTRIBUTION FAMILY FAMILY COST OF SURPLUS 40% (Example only)<br /> <br /> PAID BY ACCOUNT ACCOUNT FAMILY (PROFIT)<br /> <br /> 60% (Example only)<br /> <br /> OPERATIONAL SHARE OF<br /> <br /> COST OF SURPLYS FOR<br /> <br /> THE PARTICIPANT<br /> <br /> TAKAFUL<br /> <br /> Source: BIRT (1996)<br /> <br /> 25<br /> <br /> <br /> Challenges and Opportunities in Malaysia<br /> <br /> The future prospects of the takaful business<br /> <br /> depend on our ability to convert challenges<br /> <br /> into opportunities.<br /> <br /> The challenges that takaful operator face are<br /> <br /> lack of uniform terminology, Sharifah<br /> <br /> interpretation, human resources development,<br /> <br /> product innovation, retakaful, promotional and<br /> <br /> marketing.<br /> <br /> A large market remains untapped and takaful<br /> <br /> operators need to keep pace with their<br /> <br /> conventional counter parts in developing<br /> <br /> comprehensive range of takaful products that<br /> <br /> are innovative and Shariah compliant.<br /> <br /> 26<br /> <br /> <br /> Challenges and Opportunities in Malaysia<br /> <br /> Takaful operators shall develop and<br /> <br /> explores new marketing tools and<br /> <br /> channels to promote their products and to<br /> <br /> reach the untapped market.<br /> <br /> The implementation of Takaful system<br /> <br /> should be accepted by other races as well<br /> <br /> since Malaysia is a multiracial country.<br /> <br /> 27</div>

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