Takaful element of equitable should be applicable

Takafulsurplus is usually distributed one time per annum at the end of the financialyear. Referring to the ultimate sum of surplus, the surplus to be distributedshould refer to the guidelines given by appointed actuary and endorse by amember of the board of directors. The guideline prepared by appointed actuaryare based on several factors such as expectations of takaful participants,regulations has been established by financial regulators, internal policy oftakaful institutions as well as contracts that have been agreed with thetakaful participants.  Theactuarial principles of the desired characteristics of the surplus distributionmethod for the takaful scheme stated as follow with assumption if surplusbelongs exclusively to the participants): a.

   EquitableTheelement of equitable should be applicable in surplus distribution which meansonly the participants who really contribute to profit entitled to get the surplusdistribution. The actuarial present value of the surplus generated by thepolicy should be same as the actuarial present value of bonus paid to the samepolicy. For an equitable surplus distribution, takaful operators may adopt oneof the following three modes which are pro-rata, selective or off-setting. b.   Acceptable     Participants need to accept the logic and fairness of the surplusdistribution method prepared by the actuary and adopted by the takaful company.

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 c.  Simple     The method of surplus distribution must be simple and easy to administer.Therefore, easy for participants to understand and accept the logic. d.  Flexible     Surplus distribution must easy to change or modify if circumstancescause changes in the amount of surplus available. e.

   ConsistentDistributionof surplus must in line with the actuarial basis for the provision of     contributions and liabilities. The determination of surplus is essentially anactuarial process because it relies strongly on and sensitive to the actuarialestimation of liability provisions for the business


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