Takaful or off-setting. b. Acceptable Participants need to accept

Takaful company surplus usually distribute one time
per annum at the end of the financial year. Referring to the ultimate sum of
surplus, the surplus to be distributed should refer to the guidelines given by
appointed actuary and endorse by the board of directors. The guideline prepared
by appointed actuary are based on several factors such as expectations of
takaful participants, regulations has been established by financial regulators,
internal policy of takaful institutions and contracts that have been agreed
with the takaful participants and takaful company as well.


The actuarial principles of the desired
characteristics of the takaful surplus distribution method are stated as follow
with assumption the surplus belongs exclusively to the participants:

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a.    Equitable

The element of equitable should be
applicable in surplus distribution which means only the participants who really
contribute to profit entitled to get the surplus distribution. For an equitable
surplus distribution, takaful operators may adopt one of the following three
modes which are pro-rata, selective or off-setting.


b.   Acceptable

      Participants need to accept the logic and
fairness of the surplus distribution method prepared by the actuary and adopted
by the takaful company.


c.   Simple

      The method of surplus distribution must
be simple and easy to govern by takaful company. At the same time, easy for
participants to understand and accept the logic. It is important to avoid
confusion that the participants may encounter if the method used is too comprehensive.


d.   Flexible

      Surplus distribution must be easy to
change or modify by takaful companies if circumstances cause changes in the
amount of surplus available.

e.    Consistent

Distribution of surplus must in line with
the actuarial basis for the provision of     contributions and liabilities.


The determination of surplus
is essentially an actuarial process because it relies strongly on and sensitive
to the actuarial estimation of liability provisions for the business.