Takaful Investment Considerations

A Takaful insurance operator is to strategically consider the maturity matching approach as an investment mechanism in dealing with liquidity issues of the business at hand. Moreover, the issue of distribution of surplus in Takaful comes only after fulfilling or meeting the Shariah obligation of helping participants who have become victims of various risk crystallization. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) brought out a valid suggestions on adopting the principle of Iltizam bil Tabarru (pledge or commitment to donate). This gives the participants the ownership rights over the scheme while still having the firm commitment of mutual assistance (Ta’awuni) on the premise that a balance, if any, will be returned by the fund manager for distribution between the donating participants or owners of the fund in proportion to their initial contribution.