takaful hbl

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    ` Takaful is the Sharia Compliant brand name

    for the Islamic alternative to conventionalinsurance. Its based on the principle of Taawan or mutual assistance.

    ` Takaful comes from the Arabic root-word

    kafala guarantee.

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    ` Takaful means mutual protection and jointguarantee.

    ` Operationally, takaful refers to participantsmutually contributing to a common fund withthe purpose of having mutual indemnity in the

    case of loss.

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    Is Some thing wrong with Concept ?

    ` Risk Aversion` Assuring others

    ` Risk sharing

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    The need for insurance is shown in the

    following verse ofThe Quran.

    Those of you who die and leave widowsshould bequeath for their widows a years

    maintenance and residence (2.240)

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    By Anas-bin-Malik, One day ProphetMuhammad(PBUH) notced a bedouin leaving

    his Camel without tying it. He asked thebedouin, Why dont you tie down your

    camel? The Bedouin answered, I put mytrust in Allah (SWT). The Prophet (PBUH) thensaid, Tie your camel first, then put your trust

    in Allah(SWT)

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    The contract between the insurer & insured is

    technically wrong from the sharia perspective

    because of

    ` Interest (Riba)` Gharar (Uncertainty))

    ` Gambling (Qamar & Maisir)

    ` Risk Transfer Issue

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    ` Mutuality and cooperation.

    ` Takaful contract pertains to Tabarru as against Aqd e-

    muawadat in case of conventional insurance.

    ` Payments made with the intention ofTabarru (contribution)

    ` Eliminates the elements of Gharrar, Maisir and Riba.

    ` Wakalah/Modarabah basis of operations.

    ` Joint Guarantee / Indemnity amongst participants shared

    responsibility.

    ` Constitution of separate ParticipantsTakaful Fund.

    ` Constitution ofShariah Supervisory Board.

    ` Investments as per Shariah.

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    Issue Conventional Insurance Takaful

    Organization Principle Profit for shareholders Mutual Benefit for Participants

    Basis Risk Transfer Risk sharing

    Value Proposition Profits maximization Affordability and spiritual

    satisfaction

    Laws Regulations Sharia plus regulations

    Ownership Shareholders are Owners Participants

    Management status Managed by Company Management Operator

    Form of Contract Contract of Sale Islamic contracts of Wakala or

    Mudarbah with Tabarru

    (contributions)

    Investments Interest based Sharia compliant, Riba-free

    Surplus Profit of Insurance Company. Distribution to Participants on

    pro rata basis.

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    ` Origins in the First Constitution of Madina.

    ` Serious efforts were made in modern times, in 1970s to comeup with an Islamic alternative to the conventional insurance.

    ` The first Takaful company was set up in Sudan in 1979, almostsimultaneously followed by another one set up in Bahrain.

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    ` Poor Insurance penetration in the Muslim countries (

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    ` The number ofTakaful operators worldwide is now estimatedat:

    ` 180+ Takaful companies

    ` 11 Retakaful companies

    ` In 38 Countries.

    ` Offering all type of Insurance product with Shariah Mechanism

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    ` General Takaful offers all kinds of non-liferisk coverage. It is normally divided into

    following classes:

    x Property Takaful

    x Marine Takaful

    x MotorTakaful

    x Miscellaneous Takaful

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    ` Term Life Takaful

    ` Whole Life Takaful

    ` Endowment Takaful

    ` Universal Takaful

    ` Marriage Plan

    `

    ` Education Plan

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    Currently few ReTakaful companies worldwide offering a relativelysmall capacity:

    ` Sudan (1979) National Reinsurance.

    ` Sudan (1983) Sheikhan Takaful Company.

    ` Bahamas (1983) Saudi Islamic Takaful and ReTakaful Company.

    ` Bahrain/Saudi Arabia (1985) Islamic Insurance and ReinsuranceCompany.

    ` Tunisia (1985) B.E.S.T. Re

    ` Malaysia (1997) ASEAN ReTakaful International.

    ` Dubai (2005) TakafulRe by ARIG.

    ` Lloyds of London to have a ReTakaful Syndicate in 2007.

    ` SwissRe has formed a separate ReTakaful Pool

    ` MunichRe set up ReTakaful Co. in Malaysia 2008

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    ` People who do not insure due to religious reasons.

    ` People who insure and are insensitive to religious reasons.

    ` People who currently do not insure at all.

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    Participants

    Pool of Contributions

    Participants Contribution

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    Participants

    Participants Contribution

    Pool of Contributions

    Investment inShariah Complaint

    Avenues

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as

    mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Wakala Fee Claims Re-Takaful Expense etc.

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Wakala Fee Claims Re-Takaful Expense etc.

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Wakala fee, Claims, Re-Takaful Expenses

    SURPLUS

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Wakala fee, Claims, Re-Takaful Expenses

    SURPLUS

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    SURPLUS

    Contingency Reserve Charit Distribute Amon Partici ants

    Wakala fee, Claims, Re-Takaful Expenses

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Contingency Reserve Charity Distribute Among Participants

    SURPLUS

    Wakala fee, Claims, Re-Takaful Expenses

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    Contingency Reserve Charity Distribute Among Participants

    SURPLUS

    Wakala fee, Claims, Re-Takaful Expenses

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

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    Participants

    Participants Contribution

    Pool of Contributions

    SURPLUS

    Contingency Reserve Charity Distribute Among Participants

    Wakala Fee Claims Re-Takaful Expense etc.

    Investment in

    Shariah Complaint Securities

    Profit from Investment

    (Part of the profit goes to the

    Company for acting as mudarib)

    + +

    -

    =

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    InvestmentIncome

    OperationalCost of Takaful

    / ReTakaful

    Claims &Reserves Surplus

    (Balance)

    P A R T I C I P A N T S T A K A F U L F U N D(P.T.F.)

    MudaribsShare of PTFs

    InvestmentIncome

    WakalahFee

    Investment

    Income

    ManagementExpense of

    theCompany

    Profit/Loss

    S H A R E H O L D E R S F U N D (S.H.F.)

    Participant

    WAQF

    Takaful

    Operator

    Share

    Holder

    Wakala-Waqf Model

    Investment bythe Company

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    TakafulProducts

    Synergy

    withHBL - Islamic

    Banking

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    Motor Takaful provides comprehensiveprotection for your car:

    x Private Motor Coveragex Commercial Vehicle Coveragex Third Party Liability Coverage

    MotorTakaful Coverage

    Motor

    Takaful

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    Property Takaful providescomprehensive protection for your Property:

    x Commercial Buildingsx Hospitals/Public Utility Buildingsx Laboratories, Stores, Ware-

    housesx Factoriesx Private Dwellingsx Bridges & Infrastructure Projects

    Property Takaful Coverage

    Details

    Property

    Takaful

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    Marine Cargo Takaful providescomprehensive protection for:

    x Importsx Exportsx In-land Transportation

    Covering all modes of transport viz bysea, air, road, rail, etc.

    Marine Takaful Coverage

    Details

    Marine

    Takaful

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    Background Once the goods under the

    Murabaha contract have beenpurchased, there is a possibilitythat they might get damaged,destroyed or otherwise berendered defective prior to being

    sold

    Coverage Comprehensive Takaful coverage

    of the goods purchased for theentire Murabaha transaction period

    against the risks of loss, damage ordestruction due to fire & alliedperils, Theft, Burglary, pilferage,accidental damage, contamination,transit & transportation risks,storage risks, Acts of God, etc.

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    The structure of the productis simple. When clientsdeposits their money with theBank, their protection for such accidental happeningsshall be equivalent to the full

    amount of their deposit or twice the amount of deposit.Hence the more they depositwith the bank, the higher willbe their coverage, subject to

    a maximum of Rs. 5 million.

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    Background

    Health is an important part of life and one has tospend significant amount during thehospitalization, leaving him in financial distress.When the person is hospitalized and is notinsured, he takes out money from the bank topay the bills of the hospital. This affects both the

    bank and the person in need.

    Health Takaful can be offered to the savingsaccount holders as well as saving certificateholders of the bank as a value added service.This gives them incentive to keep their money

    with the bank. The same can also be extendedto the banks borrower, since if they arehospitalized, it would be hard to recover theloan amount from them as they would havealready paid exorbitant fees to hospitals.

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    BancaTakaful

    39

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    ` BancaTakaful is defined as the distribution ofTakafulproducts by Banks (Normally Islamic Banks)

    ` The Bank sees BancaTakaful as a way of creating a new revenue

    flow and its extensive branch network is efficiently used.

    ` Diversifies its business activities

    ` Covers all customers needs whether financial or protection

    related.

    ` The distribution costs are marginal since it is the Banks existingemployees who sell the products.

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    Extends its client base due to Banks extensive network.

    Provides access to clients who were otherwise difficult toreach

    Varies the distribution channels.

    The Takaful Company often benefits from the well-established brand image and service reliability that peopleattribute to Banks.

    Lower cost compared to the cost of the traditional salesrepresentatives.

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    The client enjoys greater access to all financial servicesfrom the Bank including protection One Stop Shop orIslamic Financial Supermarket

    The client benefits from cheaperTakaful products thanthrough traditional channels.

    Contribution payment methods are simplified since they

    are collected directly from Bank accounts.

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    ` Takaful Companies support to Islamic banks atdiscounted rates.

    ` The banks pay the contributions directly to TakafulCompanies

    ` The rates offered to the banks under this model will be

    net of commission.` The banks merge specific Takaful product into their own

    product to produce a BancaTakaful product.` The banks offer BancaTakaful products to their

    customers apparently free of cost.

    ` Simplified products such as Personal Accident, HomeShelterTakaful, etc may be included under this model.

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    ` Takaful Company enter into a cooperationagreement with our Islamic Banking partners

    ` While selling their banking products, the bank offersto arrange Takaful coverage to their customers fromus.

    ` The bank then refers the client to Takaful Companyor obtains and forwards their details.

    ` We offer our products to the Banks clients onspecially reduced rates.

    `

    Contribution is either paid directly to us or throughour partner bank.` We pay the bank a commission at a pre- agreed

    rate.

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    1. Home Musharakah:` Fire & Allied Perils Takaful: covers property against the risk of fire

    and other perils such as lightning, explosion, riot & strike, earthquake,atmospheric disturbances, burglary, etc.

    `

    Personal AccidentTakaful: covers risks of accidental death, totaldisablement, temporary total and temporary partial disablement; 24hrs,

    worldwide cover.

    2. Car Ijarah:` Private Car/Commercial Comprehensive Takaful:

    provides comprehensive coverage to the vehicle against risk such as fire,hail, theft, snatching, whilst in transit, 3rdparty death or bodily injury, 3rd

    party property damage, emergency medical expenses and any accidentaldamage to the vehicle.

    ` Personal Accident Takaful

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    3. Hajj & Umrah Financing Scheme

    ` Hajj & Umrah Travel Takaful: covers risks ofaccidental death, total disablement, temporary and total

    partial disablement, hospitalization expenses due to

    accident or illness, emergency medical evacuation

    expenses, expenses for repatriation of mortal remains,loss of baggage and loss of passport while travelling for

    the purpose of performing Hajj and Umrah.

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    1. Shop Owners Takaful: covers building,contents, stock and cash against the risks of fire,explosion, riot and strike, earthquake, rain water

    damage, flooding, vehicle impact damage, loss of rent,burglary and armed hold up, etc

    2. Personal Accident Takaful

    3. Home ShelterTakaful

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    1. Marine Cargo Takaful: covers machinery, equipment or materialagainst the risks during transit either at sea, in air or land.

    2. Marine Advance Consequential Loss Takaful: covers theconsequential loss resulting from loss or damage to the machinery,equipment or material during transit.

    3. Contractors All Risk Takaful: covers contract works against riskssuch as fire, earthquake, malicious damage, storm, flooding, lack of skill,3rdparty liability, etc.

    4. Erection All Risks Takaful: covers erection works against risks suchas fire, earthquake, malicious damage, storm, flooding, lack of skill, 3rd

    party liability.

    5. Principals Advance Consequential Loss Takaful: coversconsequential loss resulting from losses covered under CAR and EARpolicies.

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    1. Marine Cargo Takaful

    2. EAR

    3. Fire & Allied Perils Takaful

    4. Machinery Breakdown Takaful: covers

    machinery against the losses resulting from riskssuch as defects in casting and material, faultydesign, short circuit, lack of skill, etc.

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    ` Simple examples are: MotorTakaful policy with Car Ijarah of Islamic Bank Family Takaful cover with Housing or other financing

    facility. Depositors protection Credit card protection

    ` More complex products include: Savings products Education products Retirement products

    Protection products

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