Family Takaful

Muslim jurists acknowledge that the basis of shared responsibility in the system of "aquila" as practised between Muslims of Mecca and Medina laid the foundation for mutual insurance. Islamic insurance was established in the early second century of the Islamic era when Muslim Arabs expanding trade into Asia mutually agreed to contribute to a fund to cover anyone in the group that incurred mishaps or robberies along the numerous sea voyages (marine insurance/ takaful).

“Commercial insurance is originally haram as agreed upon by most contemporary scholars. It is well known that in most non-Islamic countries there are cooperative and mutual insurance companies. There is no harm from the Shari`ah point of view to participate in these services. So, it is unlawful for a Muslim living in a country where there is such a cooperative insurance company to make an agreement with a commercial insurance company. But, if a cooperative insurance company is not found one may enter into a contract with a commercial insurance company only by way of necessity. If a person is forced by law to insurance or by way of need, it is obligatory for him to be content with the minimum proportion of insurance that covers his need or to the minimum of such transaction he’s being forced to carry out.” -European Council for Fatwa and Research

Takaful is an Arabic word meaning “guaranteeing each other” or "joint guarantee".

The Tabarru' system is the main core of the takaful system making it free from uncertainty and gambling. Tabarru' means "donation; gift; contribution."

Each participant that needs protection must be present with the sincere intention to donate to other participants faced with difficulties. Therefore, Islamic insurance exists where each participant contributes into a fund that is used to support one another with each participant contributing sufficient amounts to cover expected claims. The objective of takaful is to pay a defined loss from a defined fund.

Muslim jurists conclude that insurance in Islam should be based on the principles of mutuality and cooperation. Encompassing the elements of shared responsibility, joint indemnity, common interest and solidarity.

The principles of Takaful are as follows:

• Certificate holder cooperate among themselves for their common good.
• Every certificate holder pays his subscription to help those that need assistance.
• Losses are divided and liabilities spread according to the community pooling system.
• Uncertainty is eliminated in respect of subscription and compensation.
• It does not derive advantage at the cost of others.

Theoretically, Takaful is perceived as cooperative takaful, where members contribute a certain sum of money to a common pool.

The purpose of this system is not for profits but to uphold the principle of “bear ye one another’s burden.” It is a channel that can allow an individual to make an initiative to help one another and share risks together by providing benefits to ease financial burden between them.

Under Wakalah model, Archipelago act as an agent or ‘wakeel’ to represent their client known as participants. The ‘wakeel’ is the Takaful Operator in this concept.

Shareholders of the Takaful Operator provide the capital to establish the Wakalah Takaful as a donation under the basis of ‘Tabarru’.

The Takaful operator assumes the business risk in developing and operating Takaful business on behalf of the participants. For this, the Takaful Operator charges a Wakalah fees for managing the underwriting operations and investing activities, based on the level of contribution, investment returns and generated surplus. The contributions by the participants allocated to the Participants’ Fund based on tabarruʿ or voluntary donation.

Any liabilities for risks underwritten are borne by the fund and any surplus arising from there belongs exclusively to the participants.

Azman Ismail graduated from the University of London (BSc Hons) in the field of Mathematics and Operational Research in 1984 and has been in the Islamic finance and takaful industries for more than thirty years. He has provided training and consultancy services in Malaysia, Singapore, Indonesia, Saudi Arabia, Qatar, Brunei, Iran and the Philippines and presented papers in Kuala Lumpur, Manama, New York, Tokyo, Brunei, Singapore, Cairo, London, Milan, Taipei, Taroudant and Abu Dhabi. He is an external lecturer for the Master in Islamic Banking and Finance (MIBF) programme at the Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia (IIUM). He is also a Course Consultant and Member, Board of Studies at the Institute.

He has written and translated many books and has been commissioned by the Institute for Islamic Banking and Finance (IBFIM) and the International Centre for Education in Islamic Finance (INCEIF). He has also been consulted by the International Shari’ah Research Academy for Islamic Finance (ISRA) and ISRA Consultancy Sdn Bhd. He was a Director for Malaysia for the Life Underwriter Training Council (LUTC), Bethesda, Maryland, USA. He was also a Member of the Information Panel, AmanahRaya, the Public Trustee of Malaysia and a Shariah Adviser to ten financial institutions in Malaysia and Singapore.

He has also lectured at Bank Negara Malaysia (BNM), the Malaysian Insurance Institute (MII), Islamic Banking and Finance Institute of Malaysia (IBFIM), PNB Investment Institute, Institut Latihan Islam Malaysia (Malaysian Islamic Training Institute - ILIM), Akademi Percukaian Negara (National Tax Academy), Institut Latihan Kehakiman dan Perundangan Malaysia (Malaysian Judicial and Legal Training Institute - ILKAP), Association of Shariah Advisors (ASAS) and many other public and private institutions.