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Why Takaful | Watania Takaful Model Process - Watania

Why Takaful

Takaful Model

  • Premiums are voluntary contributions (Tabarru) to collectively insure the participants
  • Policyholders (Participants) collectively own the Takaful Fund/Risk pool (TF) to cover losses. The National Insurance Company (Watania) manages the pool according to Wakala model and receive fees
  • Payment of Premiums to Risk Pool are voluntary for mutual assistance without individual monetary gain
  • Investments are directed towards acceptable businesses/ industries and returns are Riba free
  • Policyholders are owners of the Risk Pool and entitled to its profits
  • Committed to channeling funds to industries, businesses and activities that are good for society and environment

  • The Participant pays contribution
  • An upfront fee is deducted from contribution and paid to the Shareholders Fund (SF) under the Wakala contract
  • The balance of the contribution is paid into the TF
  • TF pays for claims, retakaful, acquisition cost, change in reserves while it earns investment profit on the balance amount
  • SF is responsible for meeting operating expenses of TF
  • Some portion of the investment profits of TF goes to SF as fee under the Mudaraba contract
  • If there is a deficiency in the TF, the SF will give a Qard Al Hasan (interest free loan) to the TF to cover deficit
  • After setting aside reserve for stabilizing future surplus and paying for performance fee to SF, TF will pay surplus back to participants

  • A pool of money representing contributions donated by all participants out of which claims are paid.
  • It also accounts for investment gains and losses less any contributions paid for retakaful.
  • Watania reserves the right to reinsure the whole fund which case TF will be nil and all claims and benefits will be paid under our retakaful program.

  • Surplus or loss arises in TF depending on the number and amount of claims paid on collective basis and on investment performance of assets where in TF is invested.
  • Watania may put aside part of this surplus as reserve to strengthen the claim paying ability of TF.
  • Any surplus after company charges arising on pro rata basis related to contributions paid, accrues to the policy and payable at expiry of the term
  • Any claim paid under the policy is taken into account. The surplus may not be payable if the claim paid under that policy exceeds the Contribution made.
  • If there is overall loss in TF, Watania finances such loss on interest free basis until TF turns into surplus and its loan is paid back as top priority.

  • Watania is entitled to receive a share in underwriting surplus as performance fee provided some minimum level is earmarked for participants first.
  • As Watania is acting as Manager of TF it must receive a defined amount as its fee/charges. This is expressed as:
    a percentage of Gross Contribution as upfront Wakala Fee
    a percentage of policyholders investment income
    a percentage of underwriting surplus as performance fee after accruing minimum percentage of (1) as above
  • Watania Fee shall not exceed maximum limits as agreed with its Shariahh Committee beginning of every year.