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TAKAFUL
ISLAMIC INSURANCE
(“…tie the camel first, then leave it to Allah (SWT).”)
Prof. Germán Rodriguez Moreno
ALTAMAYYUZ ENRICHMENT PROGRAM JANUARY 2024
TEST (1/3)
•
X, Y and Z each decide to take out a general Takaful policy with Halal Insurance (HI) to
provide protection for their families against them dying or suffering a short or long-term
disability which will result in expenses such as funeral costs and/or hospital bills.
•
X and Y pay each an annual contribution of €5,000; Z does not pay anything
•
This contribution is divided into three portions: (i) the underwriting (mortality and sickness
risk) fund; (ii) the Participants’ Risk Fund (PRF); and (iii) the Participants’ Investment Fund
(PIF)
•
The mortality and sickness benefit may be specified in the contract
•
The PFI is similar to an expenses plan with a maturity of 10 years
•
HI is an independent association
•
HI’s share capital and reserves (shareholders’ fund) are maintained together with the
participants’ funds = PIF and PRF
TEST (2/3)
•
HI manages the PRF on a Mudaraba basis and the PIF on a Wakala basis
•
In the PIF, the participants act as Mudarib and HI as Arbab al Mal
•
According to the Mudaraba agreement, the profit sharing ratio between HI
and the participants is respectively 80/20%
•
HI, as Wakil (agent) for the PIF, invests the fund’s money in Sharia’
compliant investments.
•
During a lunar year, the PRF generates €10million.
•
HI’s fees are calculated as 50% of the profit (€5,000,000).
•
The remaining surplus (€5m) belongs to the participants and is retained in
the Shareholders’ Fund to provide HI equity for solvency purposes
TEST (3/3)
•
In the PRF, HI as Wakil invests the fund’s money in Sharia’ compliant
investments
•
During a solar year the PRF generates €20m.
•
HI’s fees, as Wakil, are €16m (80% of the profit)
•
The remaining profit (€4m) belongs to the Shareholders and would
normally be partially shared with the PIF
•
In case of death of X after the maturity of the investment policy, HI as
Mudarib of the participants’ funds will pay Z’s heirs an unspecified death
benefit.
•
At the end of the Takaful agreement (i.e. 10 years), the PRF will pay back
the shareholders’ capital
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