surplus usually distribute 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 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 and contracts
that have been agreed with the takaful participants.
actuarial principles of the desired characteristics of the takaful surplus
distribution method are stated as follow with assumption the 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. It is
important to avoid confusion that the participants may encounter if the method
used is too comprehensive.
Surplus distribution must be easy to change or modify by takaful
companies 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.