Actuarial Valuation (Pricing) of Takaful Products. A Malaysian Experience

Abstract

Takaful is Islamic insurance scheme and, is a policy based on the holistic approach of mutual cooperation, solidarity and brotherhood against unpredicted risk or catastrophes, in which the parties involved, are expected to contribute mutually within Maqasid al-Shari’ah. The nature of the principle of Takaful is fundamentally different from the principle of conventional insurance. Takaful provides insurance coverage to society, which practices based on the Shari’ah principles. In Malaysia, there are several companies, which offer Takaful operation and they are Takaful Malaysia Berhad, Takaful Etiqa Berhad, MNI Takaful Berhad and a few. In Takaful practices, rating or pricing Takaful products and services are determined based on the actuarial science. In this article however an attempt is made to analyse actuarial technique of valuation (pricing) of Takaful products.