surplus is usually distributed 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 a
member of 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 as well as contracts that have been agreed with the
actuarial principles of the desired characteristics of the surplus distribution
method for the takaful scheme stated as follow with assumption if surplus
belongs exclusively to the participants):
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. The actuarial present value of the surplus generated by the
policy should be same as the actuarial present value of bonus paid to the same
policy. For an equitable surplus distribution, takaful operators may adopt one
of the following three modes which are pro-rata, selective or off-setting.
Participants need to accept the logic and fairness of the surplus
distribution method prepared by the actuary and adopted by the takaful company.
The method of surplus distribution must be simple and easy to administer.
Therefore, easy for participants to understand and accept the logic.
Surplus distribution must easy to change or modify if circumstances
cause changes in the amount of surplus available.
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