SAC meeting discusses application of tabarru' contract in takaful

Kuala Lumpur: The Shariah Advisory Council (SAC) of Bank Negara Malaysia at its recent meeting, discussed several issues, including the application of the voluntary gift or tabarru' contract in takaful.The council said the underlying concept/principle for the takaful scheme is tabarru and ta'awun (mutual assistance) among the takaful participants.

"Tabarru' in takaful is applied through contributions from the participants to the tabarru' fund which is managed by (and entrusted to) a takaful operator in the interest of takaful participants based on the agreed terms and conditions.

"Financial obligation (zimmah maliyah) of the tabarru' fund is independent from the financial obligations of the takaful operator and individual takaful participant," the central bank said in a statement Wednesday.

The ruling also considered the underlying concept for takaful is tabarru' which is applied among the takaful participants based on the agreed terms and conditions in relation to the utilisation of the tabarru' fund.

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Contribution by the participants based on tabarru' transfers the ownership of the contribution to the tabarru' fund.

Financial obligation (zimmah maliyah) of the tabarru' fund is independent from the financial obligation of the individual takaful participant as he/she is no longer the owner of the takaful contribution and has no obligation in relation to it once the tabarru' is made to it.

In addition, in the context of takaful practice in Malaysia, an individual takaful participant is not responsible to fulfill any financial obligation of tabarru' fund if it is incapable of fulfilling its own financial obligation.

Meanwhile, the meeting also decided on the transfer of ownership of hibah asset and in the event of breach of condition by an agent under the wakalah bi al-istithmar contract.

"In addition to the above, the SAC has decided that the investor (muwakkil) is eligible to claim actual cost incurred due to the breach of condition by the agent.

"In the event of breach of condition that results in profit to be higher than the expected profit, the excess profit shall be treated based on the agreed terms and conditions in relation to performance fee.

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"If the terms and conditions are not stipulated or not agreed, the excess profit is subject to the discretion of the investor," it said.

This ruling is aimed at ensuring the interest of investors is protected and for the contracting parties to agree on all terms and conditions which are clearly outlined at the inception of the contract to avoid dispute. – Bernama

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