A critical analysis on the practice of surplus sharing in takaful business

Abstract

This research generally discusses the current practice ofTakaful operators in Malaysia with regards to sharing of surplus from Risk Fund. It begins with the background of surplus sharing vis-a-vis Takaful models applied in Malaysia. It also describes applicable Shariah resolutions or fatwa related to surplus sharing as well as applicable regulatory guidance and standards pertaining to the matter. The writer analyses the resolutions and guidances and attempts to establish their basis. This research then describes applicable Shariah contracts in Takaful with focus towards surplus sharing as an outcome from the applied Shariah contracts. The writer analyses therefrom the connection between surplus sharing with the applicable Shariah contracts with emphasis on establishing justification towards the practice of surplus sharing. In this research, the writer highlights outcome from her industry survey regarding the practice of some Takaful operators in Malaysia with regards to surplus sharing and their basis of implementation. This research, at its end, proposes few recommendations for the betterment of the practice of surplus sharing by Takaful operators in Malaysia.