By Sheila Nu Nu Htay
A finished consultant to present matters and practices in governance for Takaful and re-Takaful operations
As the worldwide call for for Islamic coverage items raises, an intensive knowing of Takaful ideas is key for accountants, auditors, and leaders of businesses providing those items. This booklet covers the elemental accounting ideas and practices of Takaful operations, together with the segregation of resources, liabilities, source of revenue, and costs among the Takaful operator and contributors; the atmosphere apart of money reserves for assembly extraordinary claims and destiny claims; and the administration of profit and expenditure. that includes large case reports from real-world occasions, this booklet is the appropriate primer for accounting scholars and practitioners unusual with Islamic finance and Takaful operations.
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Extra resources for Accounting, Auditing and Governance for Takaful Operations
Under the same act, an operator is required to establish its own Shariah committee, which will make reference to the SAC for Shariah-related matters and decisions. The mandates of the SAC are: (1) to ascertain the relevant Islamic law on any financial matter and issue a ruling upon reference made to it; and (2) to advise the CBM and the relevant IFI on any Shariah issues relating to Islamic financial business operations, activities, or transactions. The role of the Shariah committee as collective in house religious advisers covers five main areas: (1) certifying permissible financial instruments through fatwas (ex-ante Shariah audit); (2) verifying that transactions comply with issued fatwas (ex-post Shariah audit); (3) calculating and paying zakat; (4) disposing of non-Shariah compliant earnings; and (5) advising on the distribution of income or expenses among shareholders and investment account holders.
In this case, the takaful operator is appointed to act as an investment manager to invest the fund for takaful participants. Both the takaful operator and participants will share the investment profits only (if any) and not the underwriting surplus. Generally, under mudarabah contracts, losses are borne by the participants as the capital providers. However, to protect the interest of the participants, the takaful operators are required to observe prudential rules, including provision of interest-free loans (qard hasan) by the operators in the event that there is deficiency in the takaful risk funds.
The development of takaful in modern times was initially undertaken in Sudan in 1979 followed by Malaysia in 1984. The Malaysian National Fatwa committee determined that conventional insurance is haram due to the presence of the elements of gharar (excessive uncertainty), riba (interest), and maisir (gambling). A special task force was formed by the government to look into the viability of setting up an Islamic insurance company. Following its recommendations, the first takaful operator (Syarikat Takaful Malaysia Sdn.