Tariq Saeed ChaudhryGroup Manager – Corp SalesPak-Qatar Family Takaful Limited

02 November ,2010Lahore, Pakistan

Agenda• About Pak-Qatar Takaful Group

• Life is Full of Risks

• Conventional Insurance vs. Takaful

• The Practical Side of Takaful

Pak-Qatar Takaful Group

KEY FACTS: Pak-Qatar Takaful Group

• First Takaful Group in Pakistan, • The Group is sponsored by leading financial

institutions from the State of Qatar• Paid-up Capital:– Family Takaful : Rs. 533 million– General Takaful: Rs. 307 million– Total: Rs. 840 million

Major Achievements• Received an “A” minus (having Stable Outlook) rating

from JCR-VIS Credit Co. while still in second year of operations• Have Re-Takaful arrangements with some of the best Re-

Takaful global companies in the world• Are present in 14 cities having 25 branches • Have a trained sales force of 900+ strength in the market

in less than 3 years or operations• Have on board 300+ corporate clients in less than 3

years of operations• Have declared 15% Surplus for Individual customers for

the financial year ended 31 December 2009, in second year of operation

Awards & Recognition• WON: Declared as the “Best Family Takaful

Operator” in Pakistan by 1st National Achiever Award (2009)

• NOMINATED: for “Best Takaful Operator” in the world by CPI Financial, UAE (2009)

• WON for “Best Use of Technology” in Islamic Finance Industry by CPI Financial, UAE (2009)

• RANKED: Top 4 in “Best Marketing Strategy” by World Takaful Summit, London, UK (2009)

• WON: Brands of the Year Award – 2009

Life is full of Risks…

Motor Fire Marine

Travel

Machinery

Life

Health

Risk MitigationSince the beginning, people have tried to protect

themselves from risks and resulting losses

• What is Risk?– Risk is the potential danger that threatens to harm or

destroy an object, an event or a person

Risk Mitigation ToolsAvailable Risk Mitigation Tools?– Avoid Risk Mitigation:

• A concept generally misunderstood as Tawwakul. Tawakkaul by definition however is employment of all Halal available means/resources and entrusting Allah SWT with the outcome

– Self-Insurance or setting aside contingency money for the rainy day

– Conventional Insurance:• A commercially viable system but inherently flawed with

Shari’ah defined ills such as Riba, Gharar, and Qimar/Maysir– Takaful:

• A Halal and Ethical alternate to conventional insurance

Risk Mitigation in Islam• Is the concept of risk mitigation permissible in Islam?

– This very concept is not only lawful/permissible in Islam but is in fact encouraged• Islamic history is replete with examples featuring activities involving risk

mitigation:– Hadith:

• “Tie the Camel and then Submit to the Will of Allah”– Dhaman Khatr al-Tareeq:

• A person would undertake another person’s risks without any consideration/fee in return

– Dhaman Al-d’ark:• A person would influence a sale by promising to compensate for the loss if the

subject-matter proved faulty– Aqila:

• A risk sharing mechanism in which community members pooled their share of Diyat (blood money)

• The underlying theme in all these examples is the concept of brotherhood and mutual solidarity

TAKAFUL

CONVENTIONAL INSURANCE

Conventional Insurance vs Takaful

The Conventional Insurance Process

• The customer pays premiums in exchange for claim (at the time of risk actualization) from the Insurer

PREMIUMS (MONEY)

CLAIMS (Upon Risk Actualization)

Shariah’s Stance on Conventional Insurance

concept of Insurance?

practice of Insurance??

Shariah has no objections as to the concept or objectives of insurance ; it only has reservations with the way it is being practiced…

Shariah’s Stance on Conventional Insurance

Point # 1• It is a sales-purchase contract. In

Shari’ah terms it is called Aqd Muawaza

Point # 2• Premiums belong to the companyPoint # 3• Insurance company pays the claims

from its own pocketsPoint # 4• Premiums are invested in all kinds of

investment avenues, including Riba-based businesses

Riba, Gharar, Qimar/Maysir• Because this is sales-purchase contract i.e. Aqd Muawaza,

this kind of risk mitigation involves:

R I B A G H A R A R Q I M A R / M A Y S I R

DIRECT RIBA

IN-DIRECT RIBA

The difference between the premiums paid by the policyholder and the claims received

Premiums are invested in Riba-based investment avenues

Riba, Gharar, Qimar/Maysir• Because this is sales-purchase contract i.e. Aqd Muawaza,

this kind of risk mitigation involves:

R I B A G H A R A R Q I M A R / M A Y S I R

G H A R A R

Gharar is present because the Subject Matter of the contract does not exist, is not specifiable, and the time of delivery is uncertain

In Aqd Muawaza, Shariah does not allow Gharar & Qimar/Maysir.

Riba, Gharar, Qimar/Maysir• Because this is sales-purchase contract i.e. Aqd Muawaza,

this kind of risk mitigation involves:

R I B A G H A R A R Q I M A R / M A Y S I R

In Aqd Muawaza, Shariah does not allow Gharar & Qimar/Maysir.

Q I M A R /M A Y S I R

Total loss of premiums paid by the participant in case the risk doesn’t actualize

T A K A F U L

Definition of Takaful

• The word “Takaful” originates from Arabic language.

• Its root word is “kafala” which means “to guarantee”.

• Through inflection it changed to “takafala” which means “to help each other” or to “jointly guarantee each other.”

The Concept of Takaful

• Takaful is a community-pooling system in which participants contribute their savings into the common fund to help those who need it most in times of financial difficulty

• It is based on the concept of brotherhood and mutual solidarity.

• EXAMPLES: The concept of Takaful is manifested in the system of Baitul Maal, the cooperative societies and the joint-family set ups etc…

Takaful Process• Takaful Operator creates the Waqf Fund or the “Taburru Fund”• Participants contribute their premiums/contributions on the

basis of “Taburru” into this Waqf Fund• The Waqf Fund pays the claims

Takaful OperatorWAQF FUND

Contributions

Claims

Surplus

Key Points on Takaful ProcessPoint # 1• Contributions are paid on the basis of

Taburru. In Shariah such a contract is called Aqd Taburru

Point # 2• Contributions are credited to the Waqf

Fund; Operator acts as WakeelPoint # 3• The Waqf Fund pays the claimsPoint # 4• Contributions are invested only in Shari’ah

Compliant investment avenuesPoint # 5• An independent Shariah Board supervises

business activities for Shariah compliance

WAQF

Recap – Fundamental Differences between Conventional Insurance & Takaful

AQD MUAWAZA AQD TABURRU

PREMIUMS BELONGTO COMPANY

CONTRIBUTIONS CREDITED TOTABURRU FUND

RIBA-BASED PROFITS

COMPANY PAYSTHE CLAIM WAQF

TABURRU FUND PAYS THE CLAIM

HALAL INVESTMENTPROFITS

The Practical Side of Takaful

Gap!!!Present Financial Protections ToolsPublic

Beliefs

Public Awareness

Public Needs

Takaful Bridges the Vital Gap

Applied Takaful:from Investors’ Perspective

• Global Market Size : • “Current Global Trends suggest US$ 8.9 billion in gross contributions

by 2010” (E&Y, WTC 2010)

• Takaful is growing 35% faster than conventional insurance worldwide (Dr. Ahmed Al Janahi, Managing Director NOOR Takaful, WTC 2009)

134# Takaful Operators in 2009

+Approx.

36 15Window Operators Irani Operators

• KEY FACT: 60% of customers of Takaful in Malaysia are non-Muslims.

>18Re-Takaful Operators

Applied Takaful: from Customer’s Perspective

• Takaful resonates with the beliefs and values system of people from different cultures:

Shariah Compliant Ethical Transparent

& Full-Disclosure

Shariah & Socially

Responsible Investments

Surplus Sharing

Family Takaful Model

How can Takaful Help you?

- Corporate Takaful Products

- Individual Takaful Products

Family Takaful Products, Corporate

Group Healthcare

The Group Health Takaful Plan is designed to cater to your employees’ well-being.

It covers their hospitalization due to any reason, major medical expenses, maternity/childbirth as well as day-to-day medical expenses.

Family Takaful Products, Corporate

Group Family Takaful

The Group Family Takaful is a risk coverage Plan that provides protection to participant’s employees in the event of Death due to any cause (Natural, sickness, accident)

Family Takaful Products, Corporate

Retirement Income

This Plan enables the employer to provide its employees with retirement benefits, in either lump sum payment or as periodic income

Family Takaful Products, Individual

Savings & Protection

Why borrow loans and incur debts?

A more dignified way of fulfilling your needs is through savings.

Maximize your savings through Takaful

Family Takaful Products, Individual

Education Plan

A Takaful plan which ensures the continuity of your child’s education even when you are not around ORcannot afford the tuition fees

Family Takaful Products, Individual

Mortgage Takaful

In an event of the participant’s sudden death or disability, the Takaful Operator will settle the outstanding mortgage finances thus ensuring the security of home for loved ones

Family Takaful Products, Individual

Retirement Income

A Plan that provides regular income upon your retirement

Share ‘n Care Savings TakafulThe NEEDS

Share ‘n Care accumulates

small savings

amount and grows it into a large fund to fulfill all

your financial

needs

Salient Features of Share ‘n Care

Share ‘n Care Savings Takaful

ABC Education Takaful

ABC Takaful ensures the continuity

your child’s education even when you are not around or

cannot afford the

tuition fees

Difficulties in Ensuring Continuity of Children’s Education

Affordability of Higher

Education

1.TUITION FEES

2.FAMILY SIZE

Untimely Death of Income-Generator

Children become breadwinners of the family

Loans Are Short-term

solution

Loans incur debts and debts further create problems

Who should acquire education and to what

extent? Sons given more preference

The Escalating Cost of Education

• An average of 5 children / family in Pakistan– To afford quality education of every child is becoming increasing

difficult

• Cost of tuition fees and textbooks increasing exponentially– IBA BBA = Rs. 640,000/-– LUMS BBA = Rs. 960,000/-

MBA = Rs. 900,000/-– KU BBA = Rs. 158,000/-– SZABIST BBA = Rs. 502,720/-– CBM EMBA = Rs. 400,000/-

A Simple Illustration of ABC Education Takaful

Jazaak Allah Khairan for your patience

• For Feedback:– Email: tariq.chaudhry@pakqatar.com.pk

– familytakaful@pakqatar.com.pk– URL: www.pakqatar.com.pk