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6.1.5. The Most Preferred Takaful Structures
In Malaysia, a licensed TO is required to manage Takaful operations according to Islamic
Shari'ah. The TO must ensure a sound and prudent management of the Takaful operations. BNM
had issued some Guidelines on TOF on 26 June 2013 for the management of Takaful and
shareholders’ funds. The purpose of these Guidelines were to achieve operational efficiency of
Takaful business and the sustainability of Takaful funds.
Furthermore, BNM issued a Policy Document on Takaful Operational Framework (TOF) to be
enforced on 1st July 2020. This Document summarizes the rules for the management of Takaful
funds and shareholders fund. The Policy document aims at ensuring the operational efficiency
of the Takaful business and the sustainability of its funds to safeguard the best interests of the
Takaful participants. The policy document is developed based on the IFSA 2013, which requires
licensed TO to act as the manager and administrator of the Takaful funds on behalf of the Takaful
participants. The policy document summarizes the operational requirements for implementing
wakalah and mudarabah contracts that are currently being used by the industry.
Notwithstanding this, the licensed TO may explore new Shari'ah contracts for its Takaful
business model beyond wakalah and mudarabah. It is, however, subject to prior approval of the
Shari'ah Advisory Council and BNM.
Types of Operating Models
The most widely used models in the operation of Takaful are mudarabah, wakalah and a hybrid
model of mudarabah and wakalah.
In the mudarabah model the participants appoint TO as investment manager based on a pre-
determined profit-sharing ratio agreed upon by both contracting parties. The TO shares the
returns from the investment of Takaful fund (in a Family Takaful including the savings
components). Investment losses are borne by the participants assuming the losses did not arise
due to the negligence of the TO. Otherwise the latter becomes liable for losses in the case of its
negligence. On the other hand, the TO in the wakalah model provides service related to day-to-
day operation of Takaful. The TO receives management fee for the operation in addition to
getting a share of profit from the investment returns of the Takaful fund.
Products of Takaful Business
Section 5 of IFSA 2013 categorizes the products of the Takaful business in Malaysia into two:
Family Takaful and General Takaful. Section 2 of IFSA provides the definition of Family Takaful
business as “the business relating to the administration, management and operation of a Takaful
arrangement under a Family Takaful certificate.” Furthermore, the Section defines the Family
Takaful certificate as “a Takaful certificate by which Takaful benefits are payable on death or
survival, including those Takaful benefits payable in respect of personal accidents, disease or
sickness, and includes an annuity but excludes a personal accident Takaful certificate ”.