CIFE Takaful Insurance

Question 1

What is the fundamental principle underlying Takaful?

Accepted Answer

Mutual guarantee and shared responsibility: participants pool contributions to help each other in times of loss based on Tabarru' (donation)

Answer

Profit maximisation for the Takaful operator

Answer

Interest-based investment of premiums

Answer

Transfer of risk from all participants to a single insurer

Question 2

What is 'Tabarru'' and what role does it play in Takaful?

Accepted Answer

Tabarru' is a voluntary charitable donation each participant makes to the collective risk pool, which is used to pay claims and cannot be reclaimed as profit

Answer

Tabarru' is the Takaful operator's management fee

Answer

Tabarru' is the investment return paid to participants

Answer

Tabarru' is the regulatory deposit paid to the central bank

Question 3

What are the two most common Takaful operating models?

Accepted Answer

Wakala (agency) model and Mudarabah (profit-sharing) model

Answer

Murabaha and Ijara models

Answer

Riba and Gharar models

Answer

Conventional premium and reinsurance models

Question 4

In the Wakala Takaful model, how does the Takaful operator earn its remuneration?

Accepted Answer

By charging a fixed Wakala fee as a percentage of contributions for managing the Takaful fund on behalf of participants

Answer

By retaining all underwriting surplus as profit

Answer

By charging interest on participant loan balances

Answer

By investing participant funds in conventional bonds

Question 5

What happens to any underwriting surplus (excess of contributions over claims and expenses) in a Takaful fund?

Accepted Answer

The surplus belongs to participants and is distributed back to them or carried forward in the participants' fund, not retained as operator profit

Answer

It is kept entirely by the Takaful operator as profit

Answer

It is paid to the government as tax

Answer

It is used to pay operator salaries only

Question 6

What is 'Retakaful' and why is it needed?

Accepted Answer

Retakaful is the Shariah-compliant equivalent of conventional reinsurance, used by Takaful operators to share large risks with other funds and maintain solvency

Answer

Retakaful is a customer loyalty reward scheme

Answer

Retakaful is the fund for paying operator bonuses

Answer

Retakaful is the surplus distributed to participants