Fi Mmmmmmmmmmmm Mmmmm

8/3/2019 Fi Mmmmmmmmmmmm Mmmmm

1/20

1. Introduction

Insurance is a risk transfer mechanism whereby the individual and businesses can transfer

some of uncertainties of life on the shoulders of others. All the people desire to live clean,

healthier, easy and comfortable life. For this purpose many enterprises offer different

services. They make innovations which causes great risk. This kind of risk highlights the

importance of insurance. Insurance provide protection to industry, trade which in turn

contribute in human progress. The purpose of our project is to take into account the

importance if insurance and make comparison between conventional and Islamic

insurance. For this purpose we take united insurance (conventional) and Pak Qatar

Takaful (Islamic) insurance companies. Apparently there is no major difference between

the operations of these two, both offer almost same product and services but by

comparing their financial statements we come to know that there is a huge difference in

their mechanisms. As Takaful operate according to the ahkam (orders) of Quran and

Sunnah whereas Conventional insurance operate according to the manmade principles.

Besides this major difference there are many contradictory points among them. For

pointing out these differences we make comparison between United insurance and

Pakqatar Takaful company. After comparison it is proved that conventional insurance

promote only worldly benefit whereas Takaful along insurance promote the feelings of

brotherhood and mutual burden sharing.

1


2/20

2. IMPORTANCE OF INSURANCE

Insurance plays an important role in sharing the risks of people in an affordable form. It

helps the people to quickly recover from damages and losses. It is a legal contract that

protects a person from contingent risk of losses through financial means and provides a

means for individuals and societies to handle some of the risks faced in daily life.

3.TAKAFUL

Takaful comes from the Arabic rootword kafalaguarantee.

Takaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which

promotes

1.Solidarity and joint guarantee

2.Self reliance and self sustainability for community well being

3.Assistance to those that need it

4.Community pooling system

4. Principles of Islamic Insurance

1.Policyholders cooperate among themselves for their common good.

2. Every policyholder pays his subscription to help those who need assistance.

3. Losses are divided and liabilities spread according to the community pooling system.

4. Uncertainty is eliminated concerning subscription and compensation.

5. It does not derive advantage at the cost of others.

5. FIRST TAKAFUL COMPANY IN PAKISTAN

Pak Kuwait Takaful Company Limited is the first Islamic insurance company in Pakistan

making it the most experienced and financially strong Takaful operator. It was

established in 1979.

5.1.OBJECTIVE OF TAKAFUL COMPANY

The principle foundation of insurance as an economic institution in Islam is the equitable

distribution of the financial losses of a few over many. In insurance, each policyholder

contributes an amount commensurate with the risk he introduces to a fund; established

and administered by the insurer and out of the fund the losses are paid to the insured

members. The main function of an insurance organization then becomes the management

2


3/20

of the fund and the assessment of the equitable contributions to be made by the

policyholders. Technically speaking, insurance is a socio-economic device, which implies

sharing of losses sustained by some members of a group by all the members of that

group. It provides economic security against loss of life or property or pecuniary interest.

Insurance also provides insurance to the persons for legal liability. Therefore, insurance

as a system is acceptable to Islamic Society as it resembles the concept of Bait-ul-Maal.

5.2.OPERATIONS OF TAKAFUL COMPANY

An Islamic insurance company transacts business on a co-operative basis in accordance

with and subject to the principle of Islamic Shariah. All the functions of conventional

insurance companies, i.e. underwriting, claims, reinsurance, marketing, investment,

company management, etc. of Islamic Insurance Company should fully conform toIslamic Shariah Code. Islamic insurance companies have developed extensive facilities to

transact all classes of general insurance such as life, marine, fire, motor, accident,

aviation, engineering, etc.Takaful is based on some basic principles. A participant

(policyholder) of a general Takaful (insurance) scheme shall enter into contract with the

company on the basis of the principle of Mudaraba as per partnership clause of the

policy. This clause stipulates the rights and obligations of the participants as well as the

company. The Company, acting as an entrepreneur collects the Takaful contributions

(insurance premium) from the participants and manages the various classes of general

Takaful fund. The amount of the premium to be paid by the policyholder of an Islamic

insurance company depends upon the class of Takaful and the rate fixed on the basis of

sound principles of rate making. The participants shall pay the premium to an Islamic

insurance company as Tabarru. These Takaful contributions are credited into the

General Takaful Fund of the company. The company in accordance with the

requirements of the Shariah will invest the funds. All the profits from the investment

shall be pooled back to the fund. The company shall pay from the General Takaful Fund

compensation or indemnity to fellow participants, who have suffered a defined loss

caused by one or more than one of the insured perils during the policy period. From this

fund, operational costs of General Takaful Business, required reinsurance premiums are

to be borne. Further, a reserve for unusual losses is to be built up from this fund. The

3


4/20

surplus (profit) if any after meeting all these expenses and required reserve, will be

shared between the participants and the company. However, the participants who had

suffered losses should not have any share of profit as they have been already

compensated out of this fund. This sharing of the surplus will be in a ratio agreed to in

accordance with the principle of Mudaraba.

5.3.TYPES OF TAKAFUL BUSINESS

There are two types of takaful business that are mainly offered by takaful operators

worldwide, namely general takaful business (short-term maturity) and family takaful

business (long-term maturity). Takaful operators have the flexibility to operate both

takaful businesses with different models, but both classes of takaful business are required

to be kept segregated. There are two types of models that are commonly used by takaful

operators, namely the Almudarabah model (profit sharing) and Al-wakalah (agent) mode.

1.Al-Mudarabah Model.

A takaful operator that uses the al-mudarabah model in their business has a variation in

terms of management fees, product design, and distribution channels. In the al-

mudarabah contract, the takaful operator acts as the mudharib (manager) and participants

act as the rabbul mal (capital provider) The profit from this transaction will be shared

according to the agreed ratio between the takaful operator and participants. However,

losses will be borne by Participants as the capital provider. Nevertheless, to protect theparticipant, the takaful operator needs to follow strict requirements and not to invest in

risky investments.

2.Al-Wakalah Model.

The al-Wakalah model is different from the al-mudarabah model because in the wakalah

model, the relationship between the takaful operator and participant is basically as agent

and capital provider. The takaful operator acts as the participants agent and will be paid

fees for the services provided. The fees are charged as a fixed amount or percentage, or

based on the agreed ratio from the investment profits.

4


5/20

6. CONVENTIONAL INSURANCE

Conventional insurance can be defined as an agreement whereby an insurer undertakes

(in return for the agreed premium) to pay a policyholder an amount of money (or its

equivalent) on the occurrence of a specified event.

7. FIRST CONVENTIONAL INSURANCE COMPANY IN

PAKISTAN

The First Micro insurance Agency (FMIA) was inaugurated as Pakistans first dedicated

micro-insurance agency. FMIA provide innovative life and health micro insurance

products that are carefully tailored to the needs of poor families. FMIA is also the first

insurance agency in Pakistan to be established as a company rather than as an individual

enterprise.

7.1.Conventional Insurance Principles

Main principles of Insurance:

1.Utmost good faith

The insurance contract is founded on the basis of utmost good faith on the part of both

the parties. It is obligatory on the part of the proposer (one who wants to get an insurance

policy) to disclose all material facts about the subject to be insured. If some material facts

come to light later on then the contract can be avoided at the discretion of the insurer.

2. Indemnity

Indemnity means a promise to compensate in case of a loss. The insurer promise to help

the insured in restoring the position before loss. Whenever there is a loss of property, the

loss is compensated. The compensation payable and the loss suffered should be

measurable in term of money.The insured will be compensated only upto the amount of

loss suffered by him. He will not earn profit from the contractor. The maximum amount

of compensation will be upto the value of the policy.

3. Contribution

Sometimes a property is insured with more than one company. The insured cannot claim

more than total loss from all the companies put together. He cannot claim the same loss

from different companies. In this case he will be benefited by the insurance which runs

counter to the principle of indemnity. A person cannot be restored to a better position

than before the loss occurred. The total loss suffered by the insured will be contributed by

5


6/20

different companies in the ratio of the value of policies issued by them. So companies

make a contribution to restore the previous position of the insured.

7.2. OBJECTIVE OF CONVENTIONAL INSURANCE:-

The main objective of the commercial Insurance Company is that they provide liability of

difficulties that are faced in business as well as in life. It provides enough needs

according to the customers expectation. The policy varies depending upon the income of

the person and the business. Aim of Insurance companies is to help by spreading the risk

of loss among a large number of their clients.

7.3. OPERATIONS OF CONVENTIONAL INSURANCE:-

The Insurance companies charge a regular amount from the customers, which is paid

back, either in part, or entirety, to the customers in case of a definite loss. This regular

amount charged from customers is called Insurance Premium. Conventional insurance

operates as a commercial business with individuals purchasing policies to insure against

risk. Premiums paid will vary between individuals dependent on the companys

assessment of their risk.A large amount of interest is paid on the preium amount to the

customer on the occurance of an event.

8. WHY IS CONVENTIONAL INSURANCE NOT PERMISSIBLE IN

ISLAM?

Conventional insurance contains elements contradictory to Islamic Shariah.

1. Gharar: Uncertainty

The insurance contract contains uncertainty due to

1.Uncertainty whether the payment will be accepted as promised

2.The amount to be paid is not known

3. The time it will occur is not known

2. Maisir: Gambling

The participant contributes a small amount of premium in hope to gain a large sum .The

participant loses the money paid for the premium when the insured event does not occur

The company will be in deficit if claims are higher than contributions

3. Riba: Interests

An element of interest exists in conventional life insurance products - as the insured, is

6


7/20

entitled to get much more than he has paid .Insurance funds invested in financial

instruments such as bonds and stocks contain and element of Riba.

9.DIFFERENCE BETWEEN CONVENTIONAL INSURANCE ANDTAKAFUL1.Profit Maximization vs. Benefit Maximization

A conventional Company aims at making maximum profit for its shareholders. To attain

this objective, it often exposes its funds in risky investments to secure high returns. This

however, contains the elements of gambling (Masir) which is against the teaching of

Holy Quran..On the other hand, profit earning should not be the main goal of an Islamic

Insurance Company, rather, helping fellow participants through bad times, sharing the

misfortune while sharing the profits, if any, is the objective. The management of Takaful

funds, therefore, are to excise prudence when making investment decisions and must not

subject such funds to potentially high return / high risk situations.

2.In transparency vs. Transparency

In conventional Insurance Companies, the Policy holders have no legal rights to know

that how the insurance companies are making money or how they earn profit /

surplus.Whereas under the Islamic Insurance System, each and every policy holders

(participants) has the right to know how their money is utilized by the companys

management and how profits from various investments are earned and dividend.

3.Client Company Relationship vs Participatory Management

In conventional Insurance Companies, the relationship between the company and its

policy holders is nothing more than a client company relationship. Conventional

Insurance Policy holders have no legal right to be involved in the day to day activities

and investment policies of the company.On the other hand, Takaful Policyholders

(Participants) have the opportunity to participate in the management of the company and

thus help management the affairs of the company according to co-operative principles.4.Profit Sharing vs. No-Profit Sharing

In conventional Insurance, there is no provision to share the profit/ surplus with the

policy holders while in General Takaful company,if no claims are made and there is

surplus / profits after deducting all the operational cost of the fund, that surplus shall be

shared between the participants (insured) and the operator(insurer). The sharing of the

7


8/20

surplus is made in ratio agreed to, in accordance with the principles of Al-Mudarabah.

5.Shariah Council vs. No-Shariah Council

There is no binding to comply with the shariah principles in conventional insurance. On

the other hand, in Islamic Insurance Company, there is a Shariah Supervisory Council /

Committee with the rules of Shariah.

6.Zakat / Sadaqa Fund vs. No Charitable Fund

In Islamic Insurance, for the welfare of the people, a sadaqa or zakat fund is to be created.

But there is no such provision in Conventional Insurance Company.

7.Investment

All proceeds must be invested only in Sharia compliant businesses in Takaful,

purification is necessary for minority investment allowed in limited non-compliant

businesses whereas no such kind of restrictions exist in conventional system.

8. Functional technique used(Mudarbah vs Riba based Transactions)

Any means of earning money that is allowed by local regulations can be used in

conventional insurance. Interest (riba) based financing technique is not restricted.But in

TakafulAl-mudaraba (profits and loss sharing) is the most acceptable model used.

Wakala (agency) model and the non-profit model are the other available techniques used.

9.Initial capital (Shareholders vs Rabb ul Mal)

Initial capital is supplied by shareholders in conventional system whereas in Islamic

insurance initial capital supplied by Rabb ul Mal (Agent) or paid in via premiums from

participants.

10.Definite vs Indefinite time period

All Takafulpolicies have a fixed and definite term or period of maturity, e.g. 10, 15, 20

years etc. The reason is to avoid uncertainty (Garar) in the contract period.But in

conventional system It is different since the term of the policy can be various. Some may

have a definite time period such as temporary and endowment assurance policies, while

others may have an indefinite period.

8


9/20

10. ADVANTAGE OF TAKAFUL OVER CONVENTIONAL

INSURANCE

1. Full return if unwilling to continue premium

Islamic insurance contract binds the insurer to return the premium if the insured is notwilling or not in a position to continue paying the premium. The conventional insurance

contract binds the insured to pay certain number of premiums otherwise the paid

premiums are forfeited. The poor insured suffers double loss i.e. one due to the

circumstances, which make him unable to pay further, and secondly, the insurer takes

away his hard earned premiums which he has paid so far.

2.Investment without interest

Islamic insurance is free from interest. It is based on the profit sharing financing

technique called Al Mudarabah. The insurer invests the cumulated money on profit and

loss basis, and yields the profits whereas in the conventional insurance the insurer lends

money to the private sector as well as to the state in the form of security, loan, mortgage,

finance, etc. and collects a fixed interest. This interest added return is not legitimate to a

Muslim living in a Muslim state.

3.Insured gets profit not the bonus

Islamic insurance contract binds the insurer to share the profit. Since the insurer invests

the cumulated amount of premiums, so the yield deserves to be called profit whereas in

the conventional insurance contract, it is not called profit but bonus. This is very small

share of the actual profit (not more than 10% of the total profit).

4.Premium returned in General insurance

In general insurance of Takaful, in case nothing unexpected happens, the insured gets

back the premium in full or part of it with the addition of the profit. In the modern

insurance, once the policy matures, the insured gets nothing unless something unexpected

happens before the date of maturity.

5.Advertising costs

Due to the enormous competition, the insurers have to use every possible source of

advertisement through screen media and paper media. The cost of the advertisement,

which is in crores, is deducted from profits. Consequently, on one hand it increases the

premium rate and on the other hand the insured loses his margin of profit. In Takaful,

9


10/20

insurer is obliged to bear the cost of advertisement. Except the administrative costs,

insurer is not authorised to spend as the profit is treated as Amana. The advertisements

are for the purpose of introducing the policies, attracting new customers and generating

more business. These steps are purely for development and expansion. Therefore, the

investors should involve their money instead of involving depositors profit.

6. Zakat

In Islamic based insurance, the company pays the Zakat of the insureds paid premiums

as well as on the profit made by the company. The company too pays the Zakat on its

own liable income. The Zakat paid on behalf of the insured is deducted from his account.

In principle, the amount of Zakat of all the insured is accumulated and used in a more

collective and constructive way. This serves the purpose of Baitul Maal, which was the

first ever social security system.

In the conventional system the insured has to pay his Zakat by himself separately. Since

the exact amount of premiums and the bonus is not known to the policy holders, they are

not able to pay proper Zakat. Since most of the insured buy the insurance as a saving for

the future, they do not remember even to pay Zakat on this amount. As a result, the sum

of money he gets at the time of maturity of a policy is that amount on which the Zakat

has not been paid all along the years. Thus the insured is committing sin if a proper

account of the Zakat is not maintained all along the years of his insurance policy.

7.Distribution of Zakat

Takaful accumulates the Zakat into a large sum and uses collectively to help to a large

number of people. In conventional insurance each person pays individually. The amount

distributed in bits and pieces does not benefit as many as in the Takaful.

11.COMPARISON OF PAK QATAR TAKAFUL COMPANY AND

UNITED INSURANCE COMPANY

10


11/20

11.1.PAK QATAR GENERAL TAKAFUL LIMITED

History

Pak Qatar general takaful Ltd is one of the pioneer general takaful operators in

Pakistan.Pak Qatar general takaful limited, is regarded as a technology-driven shariah

complaint company providing need based and cost-effective takaful solution.

Incorporated in 2006,and began operation in 2007,the company is registered and

supervised by the securities exchange commission of Pakistan(SECP).An independent

shariah supervisory board chaired by Mufti Muhammad Taqi Usmani,certifies all

products and operations for shariah compliance.

Company's Offices:

Its head Office is in Karachi with branches all over Pakistan.

Rating of Company:

Pak Qatar general takaful has been registered as initial Insurer Financial Strength (IFS)

rating of BBB+ (triple b plus) by JCR-VIS Credit Rating Company Ltd with a positive

outlook. The rating report mentions that the management team of Pak Qatar general

takaful comprises of dedicated, experienced and qualified personnel with vast experience

in insurance sector with a mindsets aligned with the philosophy of takaful and the vision

of the company.

VISION AND MISSION OF COMPANY

Vision statement:

Pak Qatar general takaful company limited is committed to become a result oriented

Shariah complaint provider of risk mitigation through the principle of takaful based on

mutuality, team spirit and brotherhood.

Mission statement:

Participants

Committed to provide customized and innovative Shariah based takaful products and

services to the complete satisfaction of our customers.

Shareholders

Consistently delivering optimal return on capital.

Employees

11


12/20

To create dynamic, progressive, positive culture of innovation and skill development

within employees.

Community

Ensure our support to the community and the environment with excellence.

PRODUCTS AND SERVICES:-

The company offers fire and property takaful, marine takaful, motor takaful,haj and

umrah takaful, travel takaful coverage, engineering takaful, liability takaful,

miscellaneous takaful.

11.2. UNITED INSURANCE COMPANY PAKISTAN LIMITED

History

Mr. Fakhruddin Valika, one of the Leading Industrialists of Pakistan founded the United

Insurance Company of Pakistan limited in the year 1959 with 20% equity from Pakistan

Insurance Corporation (now Pakistan Reinsurance Company). United Insurance is the

only and First Insurance Company of Pakistan doing Crop Insurance and Livestock

Insurance. Originally, United Insurance was authorized to do Life Assurance as well as

General Insurance. In General Insurance Business the Company was doing special

insurance Business such as Engineering (EAR, CAR, Machine Break-down and Bonds)

Marine Hull, Aviation Hull, Hail Storm and loss of Profits. Being a Composite Company

and with the cooperation from Pakistan Insurance Corporation, the Company took

respectable start and continued its progress until nationalization of its Life Sector in 70s.

Type of Company:

It is a public limited company listed in Karachi Stock Exchange (Guarantee) Limited. Its

directors hail from various vocations & professions. Company registered as approved

Insurance Company with fifty Schedule Banks, DFI's Leasing Companies and Large

Institutions.

Company's Offices:

Its Registered Office is situated in Karachi and Head Office at Lahore with branches and

representatives all over Pakistan.

Rating of Company:

12


13/20

The Pakistan Credit Rating Agency (PACRA) has assigned an Insurer Financial Strength

rating ofA- (single A minus) to The United Insurance Company of Pakistan Limited

(UIC). The rating denotes strong capacity to meet policyholder and contract obligations.

At the same time, risk factors are moderate, and the impact of adverse and economic

factors is expected to be modest.

VISION AND MISSION OF COMPANY:-

Vision statement:

A first class Insurance Company to provide cost effective risk management solutions to

its policyholders through highest level of quality.

Mission statement:-

For Customers

To provide superior services through high quality business solutions and health

protection, based on expert advice and financial management and adding value to the all

corporate and non corporate customers.

For Members

To maximize the members' value by optimum utilization of resources.

For the Society

To ensure good governance by maintaining high ethical standards and risk coverage.

For the Government

Prompt and timely liquidation of liabilities and adherence to the policies established.

PRODUCTS AND SERVICES:-

Company offer fire,motor,mrine,engineering,crop insurance,live stock, travel guard,

health guard, education secure plan, home secure plan, shop secure plan, personal

accident, policy for students, miscellaneous.

12. COMPARISON OF FINANCIAL STATEMENTS OF PAK

QATAR TAKAFUL AND UNITED INSURANCE COMPANY

12.1. ANALYSIS OF BALANCE SHEET OF PAK QATAR TAKAFUL AND UNITED

INSURANCE COMPANY

13


14/20

Pak Qatar takaful has two parallel funds that are participant takaful fund (PTF) and

shareholder fund (SHF) whereas in united insurance company no such funds exist. There

is segregation of assets and liabilities of the SHF and PTF in Takaful, signifying the

completely separate status of the Participants Takaful Fund whereas no such segregation

exists in united insurance company Balance Sheet. These PTF (initial donation by

participant) invested in waqf funds from which 30-35% is deducted as wakala fee. This

Segregation is necessary because it helps determine surplus or deficit which would

impact the distribution to participants. The PTF is also represented in the equity portion

of the Takaful as opposed to a liability which also includes reserves through estimation

for IBNR, Unearned Contributions and other similar ones which are comparable with

equivalent provisions recognized in united insurance company Balance Sheet. A notable

change is recognition of a contribution deficiency reserve in Takaful balance sheet

which is drawn from surplus to mitigate risks from deficiencies in the fund .An

equivalent capital reserve exists in united insurance balance sheet disclosed in equity

portion. Another portion of the PTF is cede money (initial contribution by participant).

There is no such disclosure in conventional insurance as there is no need to start a fund

for participants and disclose it separately, thus not requiring such injections to be

recognized in financial statements. This is a requirement however in Takaful due to status

of Waqf as separate legal entity. Further differences in the balance sheet include

recognition of unearned Wakala fee as a liability. Its equivalent in conventional

insurance is the premiums received in advance liability. The former is a fee charged for

being in trust of the Waqf fund. Risk mitigating measures relate to re-insurance for united

and re-takaful for Pak Qatar which essentially serve the same purpose but differ in the

modes utilized for performing the tasks.

12.2. ANALYSIS IN INVESTMENTS PORTION OF PAK QATAR TAKAFUL AND


Investment component of Takaful consists of Shareholders Fund (SHF) in addition to PTF. It is

essential that investment components of PTF and SHF are not pooled together to form a common

pool of investment. Otherwise, the Rab ul Maal - Mudarib relationship between participants and

Takaful operator would no longer hold and the Takaful operator would be liable for sharing of

14


15/20

profits or losses arising out of investments rather than receiving proportion of profit only.

Investment strategies also differ between the two companies apart from segregation between the

funds. Takaful Rules in Pakistan require not more than 80% of the funds to be invested in

Shariah compliant Government securities. Hence, Pak Qatar Generals major investments from its

Share Holders Fund (SHF) are in Sukuks issued by WAPDA, Karachi Shipyard and Engineering

Works and Government of Pakistan Ijarah Sukuks. In addition, some investments in immovable

property, like sukuks of Century Papers and Boards Mills and Engro Chemicals Pakistan Limited

have also been made. Takaful Operators can also invest in joint stock companies excluding

companies that indulge in non-Shariah compliant activities.The Takaful operators can also invest

in redeemable capital e.g. mutual funds. However, investments in only those funds are allowed

that operate under Shariah principles and are approved by the Commission. Instruments available

in this category include Musharika Certificates, Term Finance Certificates (TFCs), Participation

Term Certificates (PTCs) and others. A Takaful operator can also strike arrangements with an

Islamic bank to provide it with capital to finance Musharika, Murabaha, Ijarah, Salam and Istisna.

Conventional Insurers have none of the above mentioned restrictions and invest in a wide range

of financial instruments. United insurance holds shares in sectors ranging from Investment Banks,

Investment Companies, Security Companies to Textile, Cement and Oil and Gas Exploration.

Other instruments include Term Finance Certificates, Mutual Fund Certificates and Fixed Income

Investments such as Defense Savings Certificates. All investments made by the Takaful fund are

subject to Shariah advisory board.

12.3.ANALYSIS IN INCOME STATEMENT OF PAK QATAR TAKAFUL AND


The difference between the statements of financial performance measuring profits and

losses of the two companies is that, a Takaful Company presents changes in the revenue

account of the Participants Takaful Fund (PTF) and the Shareholder Fund (SHF)

corresponding to the different pools in order to calculate the surplus/deficit accruing to

each. On the other hand, a conventional insurance company presents the entire amount of

premiums from underwriting and investment income as revenue and all the claims as

losses in a single Profit and Loss statement.

For Pak Qatar Takaful, inflows to the PTF include contributions by participants net of

Wakala fees, net commissions along with claims and rebates received from retakaful

15


16/20

operators, investment income from PTF Funds along with any proceeds from salvages

and recoveries. This revenue is setoff against any reported claims and incurred but not

reported (IBNR) claims, expenses directly related to settlement of claims such as

surveyors fees, etc and the Mudaribs share of the investment income from the PTF. All

other management expenses directly related to the Takaful operations, other General and

administrative expenses are deducted against this revenue giving Takaful Operators

profit before taxation.

12.4.Flow chart 1:-

12.5.Flow Chart 2:-

16


17/20

12.6.Flow chart 3:-

17


18/20

13.CONCLUSION

A good way to evaluate and analyze the differences between two business models is to

evaluate the differences in accounting and disclosure requirements between the two

companies. Hence, analyzing the financial statements and relevant disclosures of Pak-

Qatar General Takaful limited and united Insurance Company Limited provide us

valuable insights into their business models. Differing accounting treatments,

classifications of line items and purpose of reserves and provisions emphasize the

difference between the Takaful Waqf-Wakala model of risk sharing and the conventional

insurance model of a risk taker.As Takaful businee emphasizes on risk sharing where on

the other hand Conventional insurance highlight the importance of risk taking.Along with

providing the insurance against risk Takaful promotes the emotions of mutual help in a

society but Conventional insurance is only concerned about profit and loss sharing.

18


19/20

14.References

1.http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCa

MYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+isl

amic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd

658c98fd5&biw=837&bih=397

2. http://www.publishyourarticles.org/eng/articles/principles-of-insurance.html

3.http://www.takaful.coop/index.php?

option=com_content&view=article&id=7&Itemid=26

4.http://www.cheezypickle.com

19
http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.publishyourarticles.org/eng/articles/principles-of-insurance.htmlhttp://www.takaful.coop/index.php?option=com_content&view=article&id=7&Itemid=26http://www.takaful.coop/index.php?option=com_content&view=article&id=7&Itemid=26http://www.cheezypickle.com/http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCaMYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+islamic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd658c98fd5&biw=837&bih=397http://www.publishyourarticles.org/eng/articles/principles-of-insurance.htmlhttp://www.takaful.coop/index.php?option=com_content&view=article&id=7&Itemid=26http://www.takaful.coop/index.php?option=com_content&view=article&id=7&Itemid=26http://www.cheezypickle.com/


20/20

20

Fi Mmmmmmmmmmmm Mmmmm

Documents

Transcript of Fi Mmmmmmmmmmmm Mmmmm