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Solvency of Takāful Fund: A Case of Subordinated Qard

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  • ONAGUN, ABDUSSALAM ISMAIL

    (Islamic Financial Services Board (IFSB))

Abstract

There are two elements important in formulating the solvency requirements of a tak ful undertaking namely the tak ful fund and qar facility. It has been seen in some regulatory frameworks that the regulator puts a requirement on the takāful operators to show that they are providing some financial support towards the solvency of the takāful funds. This paper attempts to explain the measures involved in the takāful operator using their shareholders’ funds to provide financial backing to support the solvency of tak ful funds through the practices of qar facility, injection of assets into the tak ful funds and assignment or allocation of assets in the shareholding to the takāful funds. The paper will focus on the nature of qar and its basis in the primary sources of Sharia’h. Is it acceptable legally to subordinate qar in the case of deficit, deficiency or drawn down of takāful fund? Finally, the paper will analyze the legal ruling related to qar and how it is different to conventional insurance practices.

Suggested Citation

  • Onagun, Abdussalam Ismail, 2011. "Solvency of Takāful Fund: A Case of Subordinated Qard," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 18, pages 1-16.
    • Handle: RePEc:ris:isecst:0041
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    Cited by:

    1. Falikhatun, 2016. "Performance Improvement for Micro, Small and Medium Enterprises (SMEs) with Social Financing Model," GATR Journals jfbr112, Global Academy of Training and Research (GATR) Enterprise.

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