CTRL 9.4.4 Guidance
1 An important matter that an Islamic financial institution must disclose under AAOIFI FAS 13, as applied by rule 9.4.4 (b), is how the institution would treat an insurance deficit or surplus. Appendix B to AAOIFI FAS 13 provides some guidance as to how to treat a deficit or surplus.
2 That appendix states that there are a number of ways to treat a deficit, including:
(a) settling the deficit from the reserve of policyholders, if any;
(b) borrowing the amount of the deficit from the shareholders’ funds or from others (and paying it back from future surpluses);
(c) asking the policyholders to meet the deficit pro rata; and
(d) increasing the future premium contribution of policyholders on a pro-rata basis.
3 That appendix also states that there are a number of ways to allocate a surplus, including:
(a) allocating the surplus to all policyholders, regardless of whether or not they have made claims on the policy during the relevant financial period;
(b) allocating the surplus only among policyholders who have not made any claims during that financial period;
(c) allocating the surplus among policyholders who have not made any claims and those who have made claims of amounts less than their insurance contributions, provided that the latter category of policyholders should receive only the difference between their insurance contributions and their claims during the financial period;
(d) allocating the surplus between policyholders and shareholders; and
(e) allocating the surplus in other ways.
|Derived from QFCRA RM/2020-4 (as from 1st July 2021)|