Glossary

Unraveling Technical Terms of the Islamic Insurance Industry

A

Name

Definition

Amanah

Reliability, trustworthiness, loyalty honesty.
An important value of Islamic Society in Mutual Dealings. It also refers to deposits in trust, where a person may hold property in trust for another.

Average clause

Stipulates that a Takaful fund is only liable for such proportion of the loss as the sum covered bears to total value at risk.

B

Name

Definition

Bay Al Salam

Future delivery.
A contract whereby the payment is made in cash at the point of contract but the delivery of asset purchased will be deferred to a predetermined date.

Bay’ al ‘Inah

Sale and buyback.
The sales and buyback of an asset for a higher price than that for which the seller originally sold it.

A seller immediately buys back the asset he has sold on a deferred payment basis at a price that is higher than the original price. This can be seen as a loan in the form of a sale.

Bay’ al Arboon

Deposit-secured sales.
A sale agreement in which a security deposit is provided in advance as part payment towards the price of the commodity. The deposit is forfeited if the buyer does not meet his obligation

C

Name

Definition

Certificate document

An evidence of a contract between a participant and a Takaful operator which sets out the terms and conditions of the particular certificate.

Claims

Notification to a Takaful operator that payment of an amount is due under the terms of the certificate.

Claims ratio

The ratio of net claims incurred to earned contributions.

Contributions

Monetary contribution provided once or periodically by a participant to a Takaful operator for the purpose of investment and Tabarru’.

D

Name

Definition

Darurah

Necessity.
In an emergency, Muslims may disregard aspects of Shariah laws in order to save their lives or to preserve the Islamic community

E

Name

Definition

Earned contribution

Net contributions less provision for reserved for unearned contribution (RUC) at the year-end income plus the RUC at the beginning of the year.

Excess of loss treaty

A type of reTakaful treaty which provides that the reTakaful operator pays all or a specified percentage of a loss arising from a particular occurrence or event (frequently of a more or less catastrophic nature) in excess of a fixed amount and up to a stipulated limit.

Expense rate

The ratio of total expenses for the year (including commissions, salaries, etc) to the sum of total contribution income other than single contribution and consideration for annuities.

F

Name

Definition

Facultative treaty

A reTakaful contract under which a ceding Takaful operator has the option to cede and the reTakaful operator has the option to accept or decline individual risks.

Fard al Kifayah

Socially obligatory duties.
A collective duty of Muslims. The performance of these duties (for example, funeral prayers) by some Muslims absolves the rest from discharging them. This term covers functions which the community fails to or cannot perform and hence are taken over by the state, such as the provision of utilities, or the building of roads, bridges and canals.

Fasid

Unsound or unviable or vitiated.
A forbidden term in a contract, which consequently renders the contract invalid.

Fatwa

Religious decree or an authoritative legal opinion based on Islamic law (Shariah)

Fiqh

Islamic jurisprudence.
The science of the Shariah. An important source of Islamic economics.

G

Name

Definition

General Takaful

Protection to participant for losses arising from perils such as accident, fire, flood, liability and burglary.

Gharar

Uncertainty.
One of three fundamental prohibitions in Islamic finance (the other two being riba and maysir). Gharar is a sophisticated concept that covers certain types of haram uncertainty in a contract. It involves an exchange in which one or more parties stand to be deceived through ignorance of an essential element of the exchange. Gambling is a form of gharar because the gambler is ignorant of the result of the gamble.

Gross direct contributions

Contributions on original gross rate charged to clients in respect of direct Takaful business without any deduction for commission or brokerage.

Group family Takaful

Family Takaful (usually without medical examination) on a group of people under a master certificate. It is typically issued to an employer for the benefit of employees, or to members of an association.

H

Name

Definition

Halal

Lawful, permissible.
The concept of halal has spiritual overtones. In Islam, there are activities, professions, contracts and transactions that are explicitly prohibited (haram) by the Quran or the Sunnah. All other activities, professions, contracts and transactions are halal.

Haq Maliy

Rights on the financial assets.
Haq Maliy are rights on the finanacial assets. Examples of such rights are haq dayn (debt rights) and haq tamalluk (ownership rights).

Haram

Unlawful, forbidden.
Activities, professions, contracts and transactions that are explicitly prohibited by the Quran or the Sunnah. See Halal.

Hibah

Gift.
A gift voluntarily donated in return for a loan provided or a benefit obtained.

I

Name

Definition

Ibra’

Rebate/waving of debt.
When a person withdraws the right to collect payment form a borrower.

Ijtihad

Effort, exertion, industry.
A faqhi’s endeavor to formulate a rule on the bases of evidence found in the Islamic sources.

Incurred but not reported

Losses which have occurred during a stated period, usually a financial year, but have not yet (IBNR) been reported to the Takaful operator as of the date under consideration.

Indemnity

Restoration to the claimant of a loss by payment, repair or replacement.

Individual Family Takaful

A contract that provides Takaful benefits payable to an individual upon death/total permanent disability or periodic income to participant upon retirement.

Investment linked

A contract where the certificate benefits ant any time vary according to the value of the Takaful underlying assets at the time.

Istisna’

Advance purchase of goods or buildings.
A contract of acquisition of goods by specification or order, where the price is paid in advance, or progressively in accordance with the progress of a job. For example, to purchase a yet-to-be-constructed house, payments would be made to the builder according to the stage of work completed.

This type of financing, along with Salam, is used as a purchasing mechanism and Marabahah and Bai Bithaman Ajil are for financing sales.

J

Name

Definition

Ju’alah

Stipulated price for performing a service. Applied by some in Islamic banking. Bank charges and commission have been interpreted to be Ju’alah by the jurists and thus considered lawful.

K

 

Name

Definition

Kafalah

Guarantee
Shariah principle governing guarantees. If applies to a debt transaction in the event of a debtor’s failure to pay.

L

 

Name

Definition

Loan (with service charge)

Some islamic banks provide loans with service charges. The Council of the Islamic Fiqh Academy has resolved that it is permitted to charge a fee for loan-related services offered by an Islamic bank, provided that the fee relates to service expenses.

The service charge can only be calculated accurately after all administrative expenditure has been incurred (at the end of the year). However, it is permissible to levy an approximate charge on the client, and then reimburse/claim the difference when the actual expenses are known.

M

 

Name

Definition

Maysir

Gambling
One of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition on maysir is often used as grounds for criticism of conventional financial practices such as speculation, conventional insurance and derivatives.

Medical and Health

A contract that provides specified medical treatment benefits such as the cost of hospitalisation, Takaful surgical and physician consultation fees against risks of a person being diagnosed with certain illnesses or suffering injury as the result of an accident.

Mortality table

A statistical table showing the death rate at each age, usually expressed as the number of deaths per thousand.

Mu’amalat

Economic transaction
The lease of land or fruit trees for money, or for a share of the crop.

Mudarabah

Trust financing, profit sharing
An investment partnership, whereby theinvestor (the rab al maal) provides capital to the entrepreneur (the Mudarib) in order to undertake a business or investment activity. While profits are shared on a pre-agreed ratio, losses are born by the investor alone. The Mudarib loses only his share of the expected income.

The investor has no right to interface in the management of the business, but he can specify conditions that would ensure better management of his money. In this way, Mudarabah is sometimes referred to as a sleeping partnership.

A join Mudarabah can exist between investors and a bank on a continuing basis. The investors keep their funds in a special fund and share the profits before the statege of final settlement. Many Islamic investment funds operate on the basis of joint Mudarabah.

Mudarib

Entrepreneur in a Mudarabah contract
The entrepreneur or investment manager in a Mudarabah who puts the investor’s funds in a project or portfolio in exchange for a share of the profits. A Mudarabah is similar to a diversified pool of assets held in a discretionary asset management portfolio.

Muqasah

Debt settlement by a contra transaction.

Murabahah

Cost-plus financing
A form of credit that enables customers to make a purchase without having to take out an interest-bearing loan. The bank buys an item and sells it to the customer on a deferred basis.

The price includes a profit margin agreed by both parties. Repayment, usually in instalments, is specified in the contract. The legality of this financing technique has been questioned because of its similarity to riba. However, the modern Murabahah has become the most popular financing technique among islamic banks, used widely for consumer finance, real estate, the purchase of machinery and for financing short-term trade.

Musharakah

Joint venture, profit and loss sharing
An investment partnership in which all partners are entitled to a share in the profits of a project in a mutually agreed ratio. Losses are shared in proportion to the amount invested.

All partners to a Musharakah contribute funds and have the right to exercise executive powers in that project, similar to a conventional partnership structure and the holding of voting stock in a limited company. This equity financing arrangement is widely regarded as the purest form of Islamic financing.

The two main forms of Musharakah are: Permanent Musharakah and Diminishing Musharakah. Under the former, an Islamic bank participates in the equity of a project and receives a share of the profit on a prorated basis. The length of contract is unspecified, making it suitable for financing projects where funds are committed over a long period.

Diminishing Musharakah: This allows equity participation and sharing of profits on a pro-rated basis, and provides a method through which the bank can keep reducing its equity in the project, ultimately transferring ownership of the asset to the participants. The contract provides for payment over and above the bank’s share in the profit for the equity held by the bank.

Simultaneously the entrepreneur purchases some of the bank’s equity, progressively reducing it until the bank has no equity and thus ceases to be a partner.

N

 

Name

Definition

Net claims

Incurred net claims paid less provisions for outstanding claims beginning of the year plus provisions for outstanding claims at the end of the year.

Net contributions

Gross contributions less all reTakaful contributions payable

Net investment

Income returns on investments less rates and taxes.

Nisab

Exemption limit
Exemption limit for the payment of Zakat, which differs for different types of wealth.

P

Name

Definition

Participant’s account

An account to credit a portion of contributions from the participant for the purpose of investment/savings.

Participant’s special

An account to credit a portion of contributions from the participant for the purpose of Tabarru’.

Proportional treaty

A contract under which a Takaful operator and a reTakaful operator participate proportionately in the contributions and losses on every risk that comes within the scope of the contract.

Q

Qard

Loan

Qard Hasan

Benevolent loan
A loan contract between two parties for social welfare or for short-term bridging finance. Repayment is for the same amount as the amount borrowed. The borrower can pay more than the amount borrowed so long it is not stated by contract.

Most Islamic banks provide interest-free loans to customers who are in need. The Islamic view of loans (qard) is that there is a moral duty to give them to borrowers free of charge, as a person seeks a loan only if he is in need of it.

Some Islamic banks give interest-free loans only to the holders of investment accounts with them; some extend them to all bank clients; some restrict them to needy students and other economically weaker sections of society; and some provide interest-free loans to small producers, famers and entrepreneurs who cannot get finance from other sources.

Qimr

Gambling
An agreement in which possession of a property is dependent on the occurrence of an uncertain event. By implication, it applies to those agreements in which there is a definite loss for one party and a gain for the other, without specifying which party will gain and which party will lose.

R

Rab al maal

Investor in a Mudarabah contract.

Rahn

Collateral
An arrangement whereby a valuable asset is placed as collateral for a debt. The collateral may be disposed of in the event of a default.

ReTakaful operator’s

An amount deposited with or retained by a Takaful operator by way of security for performance Deposit by the reTakaful operator of its reTakaful contracts.

Retention ratio

The ratio of net contributions to gross direct and retakaful accepted contributions less retakaful within Malaysia.

Riba

Interest
An increase, addition, unjust return or advantage obtained by the lender as a condition of a loan. Any risk-free or “guaranteed” rate of return on a loan or investment is Riba. Riba is all its forms is prohibited in Islam.

In conventional terms, riba and “interest” are used interchangeably, although the legal notion extends beyond more interest.

Riba al Buyu’

Usury of trade
Also known as riba al fadl.

A sale transaction in which a commodity is exchanged for an unequal amount of the same commodity and delivery is delayed. To avoid riba al buyu, the exchange of commodities from both sides must be equal and instant. Riba al buyu was prohibited by Prophet Mohammad to forestall riba (interest) from creeping into the economy.

Riba al Duyun

Usury of debt
Also known as usury of delay (riba al nasia). The usury of debt was an established practise among Arabs during the pre-Islamic period. It can occur as an excess increment on top of the principal, which is incorporated as an obligatory condition of the giving off a loan.

Alternatively, an excess amount is imposed on top of the principal if the borrower fails to repay on the due date. More time is permitted for repayment in return for an additional amount. If the borrower fails to pay again, a further excess amount is imposed, etc.

Rider

An attachment to a certificate that modifies its conditions by expanding benefits.

S

Sadaqah

Voluntary charitable giving

Salam

Advance purchase
Advance payment for goods which are to be delivered at a specified future date.

Shariah

Islamic jurisprudence
Islamic common law derived from three sources: the Quran, the Hadith and the Sunnah A “Shariah compliant” product meets the requirements of Islamic law.

A “Shariah board” is the committee of Islamic scholars available to an Islamic financial institution for guidance and supervision in the development of Shariah compliant products.

A “Shariah adviser” is an independent Islamic trained scholar that advises Islamic institutions on the compliance of the products and services with Islamic law

Surplus at valuation date

Excess of the Takaful fund carried forward over the actuarial liabilities of a Takaful fund of family Takaful business.

T

Ta’widh

Deliberate delay in payment
Penalty agreed upon by the contracting parties as compensation that can rightfully be claimed by the creditor when the debtor fails or is late in meeting his obligation to pay back the debt.

Tabarru’

A portion of participant’s contribution for the purpose of mutual help and used to pay claims submitted by eligible claimants.

Takaful

Mutual guarantee provided by a group of people against a defined risk or catastrophe befalling one’s life, property or any form of valuable things.

Takaful annuity

A contract that provides a stream of periodic income upon retirement for a term dependent upon human life.

Tawarrug

Reverse Murabahah
In personal financing, a client with a genuine need buys an item on credit from the bank on a deferred payment basis and then immediately resells it for cash to a third party. In this way, the client can obtain cash without taking out an interest-based loan.

Tijari

Commercial business

Total loss

A loss of sufficient size so that it can be said there is nothing left of value.

U

Ujrah

Fee
The financial charge for using services, or manfaat (wages, allowance, commission, etc…)

Underwritting profit/loss

Earned contribution income less net claims incurred, commissions and management expenses.

Unearned contribution

Contributions already received in respect of risks which are still unexpired at the end of the reserves accounting period.

Uqud al-Mu’awadhat

contracts of exchange

Uqud al-Tabarruat

Charitable contracts

Urbun

Deposit
Earnest money which forms part payment of the price of goods or services paid in advance, but will be forfeited in the event the transaction is cancelled. The forfeited money is considered as hibah (gift)

W

Name

Definition

Wakalah

Agency
Absolute power of attorney: where a representative is appointed to undertake transactions on another person’s behalf.

In terms of Takaful operations, Wakalah refers to an agency contract, which may involve a fee for the agent.

Waqf

Charitable trust
Plural = Awkaf, Awqaf. An endowment or a charitable trust set up for Islamic purposes (usually for education, mosque or for the poor). It involves typing up a property in perpetuity so that it cannot be sold, inherited or donated.

Z

Name

Definition

Zakat

Religious tax
An obligatory contribution which every wealthy Muslim is required to pay to the Islamic state, or to distribute among the poor.

There are two types of Zakat: Zakat al Fitr, which is payable by every Muslim who is able to pay at the end of Ramadan. This is also called Zakat al Nafs (poll tax).

Zakat al Maal is an annual levy on the wealth of a Muslim above a certain level. The rate paid differs according to the type of property owned.

en_USEnglish
map-mlre
Malaysian Life Reinsurance Group

Unit 39-A-6, Level 39, Tower A, Menara UOA Bangsar, No. 5 Jalan Bangsar Utama 1, 59000 Kuala Lumpur
Malaysia

Hotline: –
Tel: 603 2780 6611
Fax: 603 2780 6622
Email: [email protected]
Web: Malaysian Life Reinsurance Group

Malaysian Life Reinsurance Group
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Zurich Takaful Malaysia Berhad

Level 23A, Mercu 3, No 3, Jalan Bangsar, KL Eco City, 59200, Kuala Lumpur

Hotline: 1 300 888 622
Tel: 603 2109 6000
Fax: 603 2109 6888
Emailc: [email protected]
Web: Zurich Takaful Malaysia Berhad

Zurich Takaful Malaysia Berhad
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Takaful Ikhlas General Berhad

IKHLAS Point, Menara 11A, Avenue 5, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur

Hotline: –
Tel: 603 2723 9696
Fax: 603 2723 9998
Email: [email protected]
Web: Takaful Ikhlas Family Berhad

Takaful Ikhlas General Berhad
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Syarikat Takaful Malaysia Am Berhad

Menara Takaful Malaysia, No.4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur.

Hotline: 1300 8 TAKAFUL(825 2385)
Tel: 603 2268 1984
Fax: 603 2274 0237
Email: [email protected]
Web: Syarikat Takaful Malaysia Keluarga Berhad

Syarikat Takaful Malaysia Am Berhad
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Munich Re Retakaful

Suite 13.1, Level 13, Menara IMC, 8 Jalan Sultan Ismail, 50250 Kuala Lumpur

Hotline: 1 300 888 622
Tel: 603 2380 8421
Fax: 603 2032 5955
Email: –
Web: https:Munich Re Retakaful

Munich Re Retakaful
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Malaysian Re

12th Floor, Bangunan Malaysian Re, No 17, Lorong Dungun, Damansara Heights, 50490 KUALA LUMPUR

Hotline: –
Tel: 603 2096 8000
Fax: 603 2096 7000
Email: [email protected]
Web: Malaysian Re

Malaysian Re
etiqa-general-map
Hong Leong MSIG Takaful Berhad

Level 5, Tower B, PJ City Development, No.15A, Jalan 219, Seksyen 51A, 46100 Petaling Jaya, Selangor

Hotline: –
Tel: 603 7650 1800
Fax: 603 7620 6730
Email: [email protected]
Web: Hong Leong MSIG Takaful Berhad

Hong Leong MSIG Takaful Berhad
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Great Eastern Takaful Berhad

Menara Great Eastern, 303 Jalan Ampang, 50450 Kuala Lumpur

Hotline: 1 300 13 8338
Tel: 603 4259 8338
Fax:603 4259 8808
Email: [email protected]
Web: Great Eastern Takaful Berhad

Etiqa General Takaful Berhad
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FWD Takaful Berhad

Level 29 Menara Shell, 211 Jalan Tun Sambanthan, Brickfields 50470 Kuala Lumpur

Hotline: –
Tel: 1300 13 7988
Fax: 603 2710 7800
Email: [email protected]
Web: FWD Takaful

FWD Takaful Berhad
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Zurich General Takaful Malaysia Berhad

Level 23A, Mercu 3, No 3, Jalan Bangsar, KL Eco City, 59200, Kuala Lumpur

Hotline: 1 300 888 622
Tel: 603 2109 6000
Fax: 603 2109 6888
Emailc: [email protected]
Web: Zurich Takaful Malaysia Berhad

Zurich General Takaful Malaysia Berhad
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Takaful Ikhlas Family Berhad

IKHLAS Point, Menara 11A, Avenue 5, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur

Hotline: –
Tel: 603 2723 9696
Fax: 603 2723 9998
Email: [email protected]
Web: Takaful Ikhlas Family Berhad

Takaful Ikhlas Family Berhad
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Syarikat Takaful Malaysia Keluarga Berhad

Menara Takaful Malaysia, No.4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur.

Hotline: 1300 8 TAKAFUL(825 2385)
Tel: 603 2268 1984
Fax: 603 2274 0237
Email: [email protected]
Web: Syarikat Takaful Malaysia Keluarga Berhad

Syarikat Takaful Malaysia Keluarga Berhad
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Swiss Re Retakaful

Swiss Re Retakaful, Swiss Reinsurance Company Ltd, Kuala Lumpur Branch, No.10 Persiaran KLCC Level 13A-2, Capital Tower @ Platinum Park

Hotline: –
Tel: 603 2118 3800
Fax: 603 2118 3811
Email: –
Web: Swiss Re Retakaful

Swiss Re Retakaful
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Sun Life Malaysia Takaful Berhad

Level 11, 338, Jalan Tuanku Abdul Rahman, 50100 Kuala Lumpur

Hotline1 300 88 5055
Tel603 2612 3600
Fax603 2614 3550
[email protected]
Web: Sun Life Malaysia Takaful Berhad

Sun Life Malaysia Takaful Berhad
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Prudential BSN Takaful Berhad

Tingkat 13, Menara Prudential, Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala Lumpur

Hotline: 1 300 888 622
Tel: 603 2053 7188
Fax: 603 2026 7688
Email: [email protected]
Web: Prudential BSN Takaful Berhad

Prudential BSN Takaful Berhad
etiqa-general-2-map
Etiqa General Takaful Berhad

Level 21, Tower C, Dataran Maybank, No. 1, Jalan Maarof, 59000 Kuala Lumpur

Hotline: 1 300 13 8888
Tel: 603 2297 1888
Fax: 603 2297 1800
Email: [email protected]

Etiqa General Takaful Berhad
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Etiqa Family Takaful Berhad

Level 20, Tower B, Dataran Maybank, No. 1, Jalan Maarof, 59000 Kuala Lumpur

Hotline: 1 300 13 8888
Tel: 603 2297 1888
Fax: 603 2297 1800
Email: [email protected]

Etiqa Family Takaful Berhad
AmMetLife Takaful Berhad

Level 23, Menara 1 Sentrum, No. 201,
Jalan Tun Sambanthan, 50470 Kuala Lumpur

Hotline: 1 300 88 8800
Tel: 603-2271 8000
Fax: 603-2171 3000
Email: [email protected]

AmMetLife Takaful Berhad
AIA PUBLIC Takaful Bhd.

Level 14, Menara AIA, 99, Jalan Ampang, 50450 Kuala Lumpur, Malaysia

Hotline: 1 300 88 8922
Tel: 603 2037 1333
Fax: 603 2056 3690
Email: [email protected]

AIA PUBLIC Takaful Bhd.