Takaful in the light of Shariah Concept & Practical Aspects

2. Takaful in the light of ShariahConcept & Practical Aspects Shariah Compliance Department Pak -Qatar Family & General Takaful

3. Introduction Introduction of Participants • Name • Department • Designation • Qualification • Experience • Takaful Course (if attended before)

4. Some Misconceptions • Intellectual need of Wahi (revelation) • Meaning of Shariah Compliant/Jaiz/Islamic • Shari Hukum will not be based on the results but the process • Takaful Vs Tawakkul • Shari Hukum - based on Illat or Hikmat • Shariah principle of Conflict(Ta’aruz) in references

5. Definition of Takaful • The word “Takaful” originates from the Arabic language. • Its root word is “kafala” which means “to look after”. • Through inflection it changed to “takafala” which means “to help each other”.

6. The Concept of Takaful • It is based on the concept of brotherhood and mutual solidarity. • Takaful is a community-pooling system in which participants contribute their savings into the common fund to help those who need it most in times of financial difficulty. • Examples: The concept of Takaful is manifested in the system of Bait-ul-Maal, cooperative societies and joint family set-ups etc…

7. The Concept of Takaful تکافل ایک کمیونٹی پولنگ سسٹم ہے جو کہ بھائی چارہ اور تعاون کے اصول پر مبنی ہے اس میں ممبران اپنا پیسہ ایک فنڈ میں اکٹھا کرتے ہیں جس پیسہ سے ان ممبران کی مدد کی جاتی ہے جنھیں مالی مشکلات کا سامنا ہو عملاً تکافل رسک کو کم کرنے کا طریقہ کار اور روایتی انشورنس کا حلال متبادل ہے

8. Risk Mitigation in Islam Risk mitigation is not only permissible in Islam but is in fact encouraged • Islamic history is replete with examples featuring activities involving risk mitigation: • DhamanKhatr 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) • Aqd-e-Muwalat etc. A person accepts Islam at the hand of another and then pact an agreement with him that he will be the inheritor of his wealth after his death, an all liabilities for his wrongs will upon him • The theme in all these examples is the concept of brotherhood and mutual solidarity

9. Risk Management and its Process Generally, there are five ways of dealing with a risk: • Risk Avoidance • Risk Control • Risk Retention • Risk Transfer • Risk Sharing

10. Risk Management in Quran & Hadith • وَلَا تُلْقُوا بِأَيْدِيكُمْ إِلَى التَّهْلُكَةِ --- ]البقرۃ، ۱۹۵] • وَأَعِدُّوا لَهُمْ مَا اسْتَطَعْتُمْ مِنْ قُوَّةٍ ۔۔۔ [الانفال، ٦۰] • وَكَذَلِكَ أَوْحَيْنَا إِلَيْكَ قُرْآَنًا عَرَبِيًّا لِتُنْذِرَ أُمَّ الْقُرَى وَمَنْ حَوْلَهَا وَتُنْذِرَ يَوْمَ الْجَمْعِ لَا رَيْبَ فِيهِ فَرِيقٌ فِي الْجَنَّةِ وَفَرِيقٌ فِي السَّعِير...[شوری-۷] • عذاب قبر، قیامت کی ہولناکی کا بیان، جہنم کے عذابکی خبرسب ایک خطرہ کا اعلان ہے، جس سے تدارک کے لیے اسلام کی دعوت دی جارہی ہے۔

11. Risk Management in Quran & Hadith • عَنْ أُسَامَةَ بْنِ شَرِيكٍ قَالَ: قَالَتْ الْأَعْرَابُ: يَا رَسُولَ اللَّهِ! أَلَا نَتَدَاوَى؟ قَالَ: نَعَمْ، يَا عِبَادَ اللَّهِ! تَدَاوَوْا؛ فَإِنَّ اللَّهَ لَمْ يَضَعْ دَاءً إِلَّا وَضَعَ لَهُ شِفَاءً أَوْ قَالَ دَوَاءً إِلَّا دَاءً وَاحِدًا، قَالُوا: يَا رَسُولَ اللَّهِ! وَمَا هُوَ؟ قَالَ: الْهَرَمُ. [السسن للترمذی] • عَنْ سَعْدٍ رَضِيَ اللَّهُ عَنْهُ قَالَ: كَانَ النَّبِيُّ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ يَعُودُنِي وَأَنَا مَرِيضٌ بِمَكَّةَ، فَقُلْتُ: لِي مَالٌ أُوصِي بِمَالِي كُلِّهِ؟ قَالَ: لَا، قُلْتُ: فَالشَّطْر؟ قَالَ: لَا، قُلْتُ: فَالثُّلُثِ؟ قَالَ: الثُّلُثُ وَالثُّلُثُ كَثِيرٌ، أَنْ تَدَعَ وَرَثَتَكَ أَغْنِيَاءَ خَيْرٌ مِنْ أَنْ تَدَعَهُمْ عَالَةً يَتَكَفَّفُونَ النَّاسَ فِي أَيْدِيهِمْ... [الصحيح للبخاری] • قَالَ رَجُلٌ: يَا رَسُولَ اللَّهِ !أَعْقِلُهَا وَأَتَوَكَّلُ أَوْ أُطْلِقُهَا وَأَتَوَكَّلُ؟ قَالَ: اعْقِلْهَا وَتَوَكَّلْ.[السسنللترمذی]

12. TAKAFUL CONVENTIONAL INSURANCE Conventional Insurance vs. Takaful

13. History of Insurance • It is generally agreed that the history of insurance began with marine insurance in the fourteenth century. It was invented as a solution to the problem of sea piracy and from the possibility of ship sinking in high waters. Both carried immense financial risk. Insurance served to counter that financial risk. • Many believe that conventional insurance first got introduced in Islamic Fiqh in the twentieth century, but this is not so. Research tells us that the first fatwa issued on the subject was by a renowned Jurist from Syria by the name of AllamaIbnAbideenShami (may Allah be pleased with him) in his famous book titled “RadulMukhtar” (which is also known as FatawaShamia. This fatwa is regarded as an authentic fatwa). • In fact, we find that insurance was very much a norm in the days of AllamaShami (may Allah be pleased with him). Traders were accustomed to paying additional amount over routine costs for the transportation of their goods overseas. This additional amount was called “Sokara”. Sokara means insurance and security. The insurers promised to compensate for any loss to their cargo while at sea against these premiums. This was marine insurance in action. AllamaShami issued a fatwa against the practice of this form of insurance with the word of “Sokrah”.

14. What is Insurance ? • It is nothing but a promise of compensation for specific potential future losses. • In exchange of a consideration an insurer, or insurance carrier, is a company selling the insurance policy. • The insured, or policyholder, is the person or entity buying the insurance policy.

15. Shariah’s Stance on Conventional Insurance ? concept of Insurance? practice of Insurance? Shariah has no objections as to the concept or objectives of insurance ; it has reservations onlywith the way it is being practiced…

16. References regarding Concept of Insurance • {وَتَعَاوَنُوا عَلَى الْبِرِّ وَالتَّقْوَى وَلَا تَعَاوَنُوا عَلَى الْإِثْمِ وَالْعُدْوَانِ}[المائدة: 2] • {إِنَّمَا الْمُؤْمِنُونَ إِخْوَةٌ} [الحجرات: 10] • عن عامر، قال: سمعته يقول: سمعت النعمان بن بشير، يقول: قال رسول الله صلى الله عليه وسلم: «ترى المؤمنين في تراحمهم وتوادهم وتعاطفهم، كمثل الجسد، إذا اشتكى عضوا تداعى له سائر جسده بالسهر والحمى» • عن أبيه أبي موسى، عن النبي صلى الله عليه وسلم قال: «المؤمن للمؤمن كالبنيان، يشد بعضه بعضا» ثم شبك بين أصابعه... • عن ابن شهاب أن سالما، أخبره: أن عبد الله بن عمر رضي الله عنهما، أخبره: أن رسول الله صلى الله عليه وسلم قال: «المسلم أخو المسلم، لا يظلمه ولا يسلمه، ومن كان في حاجة أخيه كان الله في حاجته»(صحيح البخاري)

17. Insurer’s Business Model Premiums Claim Payment (upon Risk actualization) Policyholders --Insured-- Insurance Company --Insurer-- Premium (Consideration) Sum Insured (Subject-Matter)

18. Types of Contracts

19. Shariah’s perspective/stance on Insurers’ Business Model • Insurer: The insurance company is selling “Sum Insured” • Insured: The policyholder is buying Sum Insured by paying fixed “Premiums” • Nature of Contract: • It is a sales purchase contract, bi-lateral, commutative i.e. Aqd-e-Muawaza • Subject Matter: “Sum Insured” ; Consideration: “Premium” • It is a Risk-Transfer Mechanism • The insured (financially weaker party) is transferring its risk to the insurer (financially stronger party) • The insurer is charging a fee called “Premium” for accepting the risk and promising to pay “Sum Insured” if a covered event takes place • Shariah’s perspective/stance on Insurers’ Business Model

20. Riba, Qimar, Gharar • The sales - purchase contract is AqdMuawaza and due to this some ills involves: R I B A Qimar/Maysir Gharar Riba, Qimar and Gharar are prohibited in Shariah.

21. Definition of Riba • “Literal meaning of Riba is of “excess/markup” and in the verses of the Quran it is used for all such markup/gains which are without any service or effort.” (Abu-Bakar Al-Jassas (RA) • Riba-Al-Quran • "وهو القرض المشروط فيه الاجل وزيادة مال علي المستقرض” • A conditional or understood increase versus a loan is Riba • Riba-Al-Hadith • الربا هو الفضل المستحق لأحد المتعاقدين في المعاوضة الخالي عن عوض شرط فيه(الهداية) • A conditional increase in commutative contract without consideration. • Prohibition of Riba is similar to the prohibition of pork(خنزیر کا گوشت), liquor (شراب) , gambling (قمار ، جوا), adultery (زنا) etc., for which no specific definition was given. • Arabs and all the previous societies had no confusion about its exact sense.

22. Riba in Quran • {وَمَا آتَيْتُمْ مِنْ رِبًا لِيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِنْدَ اللَّهِ وَمَا آتَيْتُمْ مِنْ زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَئِكَ هُمُ الْمُضْعِفُونَ } [الروم: 39] • {فَبِظُلْمٍ مِنَ الَّذِينَ هَادُوا حَرَّمْنَا عَلَيْهِمْ طَيِّبَاتٍ أُحِلَّتْ لَهُمْ وَبِصَدِّهِمْ عَنْ سَبِيلِ اللَّهِ كَثِيرًا (160) وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا } [النساء: 160، 161] • {يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ} [آل عمران: 130] • {الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ (275) يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276) إِنَّ الَّذِينَ آمَنُوا وَعَمِلُوا الصَّالِحَاتِ وَأَقَامُوا الصَّلَاةَ وَآتَوُا الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ (277) يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279) وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَى مَيْسَرَةٍ وَأَنْ تَصَدَّقُوا خَيْرٌ لَكُمْ إِنْ كُنْتُمْ تَعْلَمُونَ} [البقرة: 275 - 280] • فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279)

23. Riba in Hadith • عَبْدِ اللَّهِ بْنِ مَسْعُودٍ، عَنْ أَبِيهِ، قَالَ: لَعَنَ رَسُولُ اللَّهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا، وَمُؤْكِلَهُ وَشَاهِدَهُ وَكَاتِبَه. • عَنْ أنس بن مَالِك قَالَ: خطبنا رسول الله صلى الله عليه وسلم فذكر الرّبَا وعظّم شأنه فَقَالَ:إنّ الرجُلَ يصيبُ مِنْ الرّبَا أعظمُ عَنْدَ الله في الخطيئةِ مِنْ ستٍ وَثلاثين زَنْية يزنيها الرجُل، وإنَّ أربى الرّبَا عرضُ الرجُلِ المسلم. • طلحة عن البراء بن عازب عن النبي صلى الله عليه وسلم قَالَ:الرّبَا اثنان وسبعون بابا، أدناها مثل إتيان الرجُل أمه وأربا الرّبَا استطالة الرجُل في عرض أخيه. • عَنْ عبدالله بن سَلاَم، عَنْ رسول الله صلى الله عليه وسلم قَالَ: الدّرهمُ يُصيبهُ الرجُل من الرّبَا أعظمُ عِنْدَ اللهِ من ثلاثة وثلاثين زَنْية يزنيها في الإسلام. وعن رسول الله صلى الله عليه وسلم قَالَ:إنّ أبوابَ الرّبَا اثنان وسبعون حوباً، أدناه كالذي يأتي أمه في الإسلام

24. Riba in Hadith • عَبْدِ اللَّهِ بْنِ مَسْعُودٍ، عَنْ أَبِيهِ، قَالَ: لَعَنَ رَسُولُ اللَّهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا، وَمُؤْكِلَهُ وَشَاهِدَهُ وَكَاتِبَه. • عَنْ أنس بن مَالِك قَالَ: خطبنا رسول الله صلى الله عليه وسلم فذكر الرّبَا وعظّم شأنه فَقَالَ:إنّ الرجُلَ يصيبُ مِنْ الرّبَا أعظمُ عَنْدَ الله في الخطيئةِ مِنْ ستٍ وَثلاثين زَنْية يزنيها الرجُل، وإنَّ أربى الرّبَا عرضُ الرجُلِ المسلم. • طلحة عن البراء بن عازب عن النبي صلى الله عليه وسلم قَالَ:الرّبَا اثنان وسبعون بابا، أدناها مثل إتيان الرجُل أمه وأربا الرّبَا استطالة الرجُل في عرض أخيه. • عَنْ عبدالله بن سَلاَم، عَنْ رسول الله صلى الله عليه وسلم قَالَ: الدّرهمُ يُصيبهُ الرجُل من الرّبَا أعظمُ عِنْدَ اللهِ من ثلاثة وثلاثين زَنْية يزنيها في الإسلام. وعن رسول الله صلى الله عليه وسلم قَالَ:إنّ أبوابَ الرّبَا اثنان وسبعون حوباً، أدناه كالذي يأتي أمه في الإسلام

25. Qimar/Maysir • The word ‘maisir’ literally means ‘getting something too easily’ or ‘getting a profit without working for it’ • It means that both parties stake their money in such a way that one party draws total profit and the other party incurs a total loss • Four elements in Qimar; • Commutative Contract between two. • Everyone puts his money at risk. • Uncertainty in conclusion of event. • One draws total profit and the other 100% total loss.

26. Qimar/Maysir in Quran يَا أَيُّهَا الَّذِينَ آمَنُوا إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالْأَنْصَابُ وَالْأَزْلَامُ رِجْسٌ مِنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ [المائدة: 90] اے ایمان والو! شراب ، جوا ،بتوں کے تھان اور جوے کے تیر ، یہ سب ناپاک شیطانی کام ہیں ، لہذا ان سے بچو، تا کہ تمہیں فلاح حاصل ہو۔

27. Qimar/Maysir in Conventional Insurance

28. Gharar (Uncertainty) • Literal meaning of Gharar is: To Cheat, Deceive, Lure, Entice, Risk, Danger, Hazard.دھوکہ دہی، غلط امید دلانا، اور خطرہ • In the Fiqh, Gharar is the element of uncertainty in the basic parts of commutative contract. I.e. Subject Metter, Price, period, Delivery etc. • Basic conditions of effectiveness of Gharar; • Should be found in Commutative contract. • Should be major. • Shouldn't found in contracts which are exempt. • Should be found as in the basic contract. (isalatan)

29. Prohibition of Gharar in Hadith • عَنْ أَبِي هُرَيْرَةَ، قَالَ: «نَهَى رَسُولُ اللهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ عَنْ بَيْعِ الْحَصَاةِ، وَعَنْ بَيْعِ الْغَرَرِ»(صحيح مسلم) • آنحضرت ﷺ نے کنکر کی بیع اور غرر کی بیع سے منع فرمایا ہے۔

30. Gharar in Conventional Insurance

31. Fatwas Against Conventional Insurance • The majority of scholars is of the opinion that the conventional insurance practiced today is not Shariah compliant • A fatwa issued by a committee comprising of leading scholars for the Saudi Arabia Government • “Our observation that the modern form of insurance companies and their current practices are objectionable Islamically does not mean that Islam is against the concept of Insurance itself ; not in the least – it only opposes the means and methods. If other insurance practices are employed which do not conflict with Islamic forms of business transaction ; Islam would welcome them” “The Lawful & the Prohibited in Islam” (pg. 276) • The National Fatwa Committee Malaysia deliberated on the question of life insurance (15th. June 1972) and below is a translation of an extract from the minutes recorded • “Life insurance as presently practiced by insurance companies is a fasid transaction as it is contrary to the Shariah principles of contract because it contains the following elements : Riba, Gharar, Maisir. As such from the Shariah point of view, insurance is haram”.

32. Definition of Takaful

33. Three Operational Models

34. Definition of Waqf • Transferring the corpus (Ain) of a physical thing to Allah. • That is for the usufruct (Manfa’at) of people. • Waqf item (asset) can’t be sold • Waqf item (asset) can’t be distributed in inheritance (meerath) • By using that thing, it should not be diminished/ consumed. (Like; well, water cooler, school, Masjid, hospital etc.) کسی چیز کا اپنی ملکیت سے نکال کر اللہ کی راہ میں دینا وقف کے منافع اللہ کے بندوں کے لئے ہوتے ہیں وقف کی خریدو فروخت اور ھبہ نہیں ہوسکتا موقوفہ شے میراث میں بھی تقسیم نہیں ہوسکتی وقف کا بقا ضروری ہے، لہٰذا پانی کا وقف جائز نہیں، کنواں کا وقف ہوسکتا ہے

35. Wakalah Participant Participant Participant Participant Wakalah • How does it Function? Waqf Pool Surplus Wakalah Fee, Claims, Re-Takaful Takaful Operator Waqf Pool Risk sharing Between Participants (MUDHARABAH) Investment

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

37. WAQF • Key Points on Takaful Process • Contributions are paid on the basis of Taburru. In Shariah such a contract is called AqdTaburru • Contributions are credited to the Waqf Fund; Operator acts as Wakeel • The Waqf Fund pays the claims • Contributions are invested only in Shari’ah Compliant investment avenues • An independent Shariah Board supervises business activities for Shariah compliance

38. Takaful from Customer’s Perspective • Takaful resonates with the beliefs and value system of people from different cultures: Shariahand Socially Responsible Investments Transparent and Full Disclosure Shariah Compliant Ethical Surplus Sharing

39. Participant Takaful Fund (PTF) - Income The income of PTF consists of the following: • Contributions received from participants (other than the portion transferred to PIA under Family Takaful Policies) • Claims, surplus and commissions from Re-Takaful operators • Investment profit attributable to participants in the PTF • Salvage/Recoveries • Qard-e-Hasana by the shareholder fund in case of a deficit • Any donation made by shareholders, etc.

40. Participant Takaful Fund (PTF) - Outgo The outgo of PTF consists of the following: • Settlement of losses and expenses occurred therein • Contribution of Re-Takaful • Takaful Operator’s fee – Wakala fee • Share of investment profits of PTF as Mudarib • Surplus distributed to participants • Return of Qard-e-Hasana to the shareholder’s fund

41. Differences between Conventional Insurance and Takaful • Point # 1:The fundamental difference between conventional insurance and Takaful is the “Change of nature of contract” from Aqd-e-Muawaza to Aqd-e-Taburru • This has eliminated Riba; and • Rendered Gharar and Qimar/Maysir Ineffective • Point # 2:Contributions go into the Waqf Fund & Waqf Fund belongs to Allah (SWT) • Point # 3:The Waqf Fund pays the claims • Point # 4:Contributions are invested only in Shari’ah Compliant business avenues • Point # 5: An independent Shariah Board supervises business activity for Shariah compliance

42. Shariah Guidelines

43. Names of Shariah Guidelines • Halal & Haram Business Venues • Screening Criteria for Investment • Co-Takaful Guidelines • Surplus Distribution Guidelines • Charity Guidelines • Re-Takaful Guidelines • Advertisement Guidelines

44. Shariah Guidelines Regarding Halal & Haram Business Venues • Section 1: Impermissible Businesses according Shariah • Conventional Banks • Conventional Insurance companies • Conventional Mutual Funds • Conventional Asset Management companies • Cinema Houses • Alcohol Manufacturers • Any other company whose main line of business is non-Shariah compliant, for example companies who deal in impermissible pictures and photographs, if this would be their only source of income.

45. Shariah Guidelines Regarding Halal & Haram Business Venues Section 2: Group Takaful Coverage for companies of impermissible business nature • The Shariah Board doesn’t allow providing any kind of group coverage to employees of companies mentioned in section one other than a simple death coverage for the employees as the real beneficiary is the family of the deceased. • Personal Accident Takaful Policy

46. Shariah Guidelines Regarding Halal & Haram Business Venues Section 3: Providing coverage to assets of companies of impermissible business nature • Assets that are owned by a company, as mentioned in section one, may they be fixed or not, cannot be covered by the Takaful Company under any circumstances. • The collateral of any conventional bank can be covered through Takaful as it is not the property of that bank. • Takaful coverage can be issued to assets which are mortgaged with conventional banks against its loan, if the borrower (mortgagor) considered as a participant of PTF in our policy, though the contribution paid by the bank.

47. Shariah Guidelines Regarding Halal & Haram Business Venues Section 3: • Assets of any Non-Shariah Compliant business such as cars etc. That is a part of any employee’s salary package can be covered under a Takaful plan as long as they are owned by the employee and not directly used for the company’s operation • Takaful coverage can be issued to the leased assets of any conventional bank or conventional leasing companies. • The assets financed be conventional banks or companies can be covered under a Takaful plan

48. Screening Criteria for Investment and Shares • This activity is supervised by the Shariah Advisory Board for Shariah compliance. • The nature of the investee company’s business and its existence • Debt to total Asset ratio should not exceed 33% • Illiquid assets should be at least 20% of the total assets • Investment in non-Shariah compliant activities and income from non Shariah- Compliant investments

49. Areas of Investment • Shari’ah compliant Government Securities • Immoveable property • Joint Stock Companies • Redeemable Capital • Mutual Funds • Musharika Certificates • Term Finance Certificates • Participation Term Certificates • Placement of excess funds with Islamic Banks and Islamic financial institutions

50. Shariah Guideline regarding Co-Takaful • It is permissible for the Takaful company to be a leader as well as follower in a Co-Takaful setup; • Allocation of the coverage share must be by the prospect, not from any Insurance company • Explicit wordings of ‘offer’ and ‘acceptance’ should be incorporated into the policy document • The contribution cheque received from the participant for the coverage share should be issued in the name of the Takaful company, whether the Takaful company is the leader or the follower • All minor claims of one third (1/3) of sum-covered amount may be recovered from follower co-insurance companies.