Wakalah model (takaful)
The takaful model in which participants appoint the operator as agent to run underwriting and investment for a known fee.
In the wakalah model of takaful, participants appoint the takaful operator as their agent to carry out the underwriting and investment activities of the takaful funds in return for a known fee, which is how IFSB-29 defines wakalah in this context. The fee is set in advance, and the operator does not share in the underwriting surplus as of right. Many operators combine it with mudarabah for investment income, which is known as a hybrid model.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Takaful operatorThe entity that manages a takaful business on behalf of participants, usually for a fee, a profit share or both.WakalahAgency: one party appoints another to act on its behalf, with or without a fee.Underwriting surplusWhat remains in the participants' risk fund after claims, expenses and reserves, plus attributed investment returns.TakafulMutual cover: participants contribute to a common fund, as donations, to help one another against specified losses.