Participation Insurance

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Participation Insurance

Tekâfül, which is known as Participation Insurance in our country, is a mutual insurance made by the method of cooperation.

The definition used as “participation” or “tekâfül” insurance is mostly used as participation insurance in Turkey. ‘ Tekâfül ‘, which comes from Arabic, means “to give mutual guarantees”, “to guarantee each other”. The main purpose of this insurance is to bring together the insured with the aim of mutual aid and solidarity and to use the collected contributions by the persons exposed to the risk. Participation insurance; It is a cooperation that different individuals do together to compensate the damages of the participants who have been harmed from among themselves. The money collected in this system is accumulated in the premium pool called the mutual fund and the losses of the members (policy holders) who are in a risky situation are compensated from this pool.

  • Finding the element/purpose of cooperation,
  • The pool where the premiums are collected belongs to the policy holders, there is no ownership of the company,
  • Evaluation of premiums collected from shareholders and policyholders in interest-free market instruments (participation accounts, Public and Private Sector, BIST Participation Index, precious metals, gold, foreign currency, etc.) approved by the Advisory Committee,
  • Acting selectively in the matters for which insurance coverage is given,
  • Receiving service from an advisory committee specialized in fiqh.

The most important principle of Katılım Emeklilik ve Hayat A.Ş. in all insurance branches in which it operates is the meticulousness it shows to the principle of participation in all its operations and agreements.

In this context,

  • Arranging participation insurance contracts for the purpose of organizing the assistance and guaranteeing (taavun and takaful) service between the participants,
  • Participation Pension and Life Inc. receives a certain share of the revenues generated in return for managing investment transactions of the contribution premiums collected with a certain attorney’s fee in return for the service rendered in relation to the participation insurance organization,
  • Being transparent, reliable and open to the participants in the contracts and notifications regarding the deductions taken from the contribution premiums and the participation insurance guarantees given in accordance with the Participation Insurance legislation and tariff approval,
  • Following up the company’s equity capital and risk premiums collected from the participants in separate accounts,
  • Evaluation of the company’s equity capital and contribution premiums collected from the participants with investment instruments approved by the company’s Advisory Committee and in accordance with Islamic finance principles,
  1. Participation accounts to be opened in participation banks,
    1. b. Stocks conforming to the participation index or the stocks or index approved by the Advisory Committee and updated with periodic reviews.
    2. c. Gold, silver and foreign exchange transactions to be carried out with interest-free methods,
    3. d. Gold, silver and other precious metals and capital market instruments based on them that can be invested with interest-free method,
    4. e. Public or Private Sector Sukuk, Lease Certificates and similar interest-free income or investment instruments issued in Turkey or abroad and approved by the Advisory Committee of the issuing institution,
    5. f. Interest-Free Mutual Funds and Interest-Free Exchange Traded Funds approved by the Founder’s Advisory Board,
    6. g. Other investment instruments approved by the Advisory Committee,
    7. h. Using the accumulation in the Participatory Risk Fund for the purpose of evaluation,
  • Benefiting from the protections and services of retakaful (participation reinsurance) companies operating in accordance with Islamic finance principles in the management of participation insurance risks, and in case of their insufficiency, service can be obtained from reinsurance companies,
  • In the event that there is a positive balance in the participant risk fund as a result of the calculations to be made in accordance with actuarial and participation finance principles as of the end of the period, the balance can be fully or partially returned, used in charitable projects or in accordance with Islamic finance principles, within the scope of the principles to be approved by the Advisory Committee in accordance with the principles of Participation/Takaful Insurance. evaluation by other non-contradictory methods,
  • In case of insufficient balance in the Risk Fund, lending by the company in favor of the Risk Fund,
  • In order for the risk fund to fulfill its obligations to the participants properly and to ensure the continuation of the risk fund, if the risk fund has a surplus, the Company’s reserve fund can be set aside for unforeseen risks and legal liabilities in the future.
Katılım Sigortacılığı (Participation Insurance) Geleneksel Sigortacılık (Traditional Insurance)
It is a donation/donation contract based on mutual assistance. It is a purchase contract in which the insured is the buyer of the policies.
It is based on risk sharing. It is based on risk transfer.
The insurance company carries out the insurance activities on behalf of the participants and is called the operator/operator instead of the insurer. There is a one-to-one relationship between the insured and the company. There is a one-to-one relationship between the insured and the company. There is a one-to-one relationship between the insured and the company.
Since the participants are also the owners of the risk fund, they undertake the insurance risk. The insurance company assumes the insurance risk.
The collected contributions are transferred to the risk fund jointly owned by the participants and managed by the operator. Ownership of paid premiums belongs to the insurance company.
Assets in the risk fund and the shareholders’ fund are directed to investment instruments that comply with the participation finance principles. There are no restrictions other than the rules set in the legal regulations.
In addition to the current insurance legislation, it is subject to the regulation on Participation Insurance Working Procedures and Principles. Subject to current insurance legislation.
The operating company receives service from the advisory committee, which consists of members who are experts in the field of fiqh.
The incomes of the company and the participants are followed in separate accounts. The company has a balance sheet and income statement.
Contributions must be transferred to the participation reinsurance company. However,  the absence of the participation reinsurance company, it is allowed to work with conventional reinsurance companies under certain conditions. Premiums (and risk) are not transferred to the reinsurance company

Mudaraba Model
This model is a model adopted especially in far eastern countries such as Malaysia and Indonesia. To put it simply, in this model, a Takaful company established by the shareholder begins to accumulate donations from the participants in the fund as the insurance policy begins. If there is any surplus value left in the fund at the end of the period, the ratio of this value to be shared must be determined by the contract at first. For example, a ratio notification is made to 30% takaful company to 70% policyholders or 50% takaful company to 50% policyholders. In the mudaraba model, the company is responsible for the collection of contributions, their operation and administration. The income obtained from the amount of these operated funds is also shared between the company and the fund within a predetermined ratio. Direct and indirect damage expenses and reinsurance/reinsurance expenses incurred during the period are covered by the participant funds, while other expenses are covered by the capital of the company.

Here, the company covers the operational costs of the company (personnel, IT expenses, advertising, marketing, administrative expenses, etc.) from the profit generated on its behalf, especially as a result of the profit or loss at the last stage.

Proxy Method
In this model, the takaful company acts as the agent of the policyholder. The role of the company is to fulfill all transactions of the pool for a predetermined fee. If the company does not take a share in these transactions, this system is called “Free Power of Attorney”. In this model, the fee to be received by the company is determined at the time of the contract. All expenses/expenses are covered by this fee, and in cases where this fee is not sufficient, the company’s shareholder pays for this deficiency himself. In the Pure Power of Attorney model, the company cannot receive any share from the investment income.

This amount, which is determined before the insurance contract, is accounted as company income. The commission fee paid to the distribution channel can also be included in this part. The remaining contribution amount from this part is put into the Takaful fund. Compensation, Retakaful, technical provisions etc. from this fund. technical costs are covered. If a balance remains after these expenditures, all of it is transferred to the policyholders. In some cases, distribution is made after the necessary provisions are set aside from this balance. This model is mostly applied in countries in the Middle East and Gulf Region.

Mixed Method
This model is similar to the pure proxy method, but on the management side of the fund, the takaful company receives a share from it as Mudarip. This model is named as Mixed or Hybrid (Mixture of Mudaraba and Wakala models). As in the proxy method, after the company receives a certain attorney’s fee, the remaining amount of contribution is directed to investment and the company gains by taking a share from the investment incomes realized through the Mudaraba method. Most of the Takaful companies established in recent years prefer this model, and it is stated by scholars that this model is more healthy in terms of religion. In addition, it is seen that some companies that have adopted the Mudaraba model for a long time are also switching to this model.