Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI) is an well-known Islamic international autonomous non-for-profit
corporate body that prepare and provide standards for Islamic financial
institutions and the industry, including takaful. According to AAOIFI, there
are relevant standards allocating for the surplus, namely Financial Accounting
Standards (FAS) No. 13 (Disclosure of Bases for Determining and Allocating
Surplus or Deficit in Islamic Insurance Companies). FAS 13 is intentionally
incorporated to determine and allocate surplus or deficit in Islamic Insurance
Companies. It is required in the standards for Takaful operators to provide a
statement of surplus (or deficit) of the policyholder. The Takaful operators
themselves should disclose the method they use in allocating underwriting
surplus and the shari’ah basis applied in the notes.


general takaful funds, the underwriting surplus is determined for each takaful
business class after taking into account commissions, unearned contributions,
retakaful, claiming incurred and management expenses. Surplus can be distributed
according to the terms and conditions set by the company’s shari’ah committees
and all takaful operators have to disclose the amount of surplus in their
takaful fund.

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family takaful, the surplus is determined by the annual actuarial valuation of
the family takaful fund. The surplus that can be distributed to the
participants is determined after deducting the claims or benefits paid,
retakaful provisions, commissions, management expenses and reserves. It is
distributed according to the terms and conditions set by the company’s Shari’ah


company may invest the insurance surplus for the policyholder’s account, if
there is a real provision for this effect in the insurance policy. The
consideration to be paid to the party in such investment related with percentage
of investment profit in mudarabah or commission amount in the case of the
agency, shall be stated in the insurance policy.

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