Takaful company surplus usually distribute one timeper annum at the end of the financial year. Referring to the ultimate sum ofsurplus, the surplus to be distributed should refer to the guidelines given byappointed actuary and endorse by the board of directors.
The guideline preparedby appointed actuary are based on several factors such as expectations oftakaful participants, regulations has been established by financial regulators,internal policy of takaful institutions and contracts that have been agreedwith the takaful participants and takaful company as well. The actuarial principles of the desiredcharacteristics of the takaful surplus distribution method are stated as followwith assumption the surplus belongs exclusively to the participants: a. The element of equitable should be applicable in surplus distribution which meansonly the participants who really contribute to profit entitled to get the surplusdistribution. For an equitable surplus distribution, takaful operators mayadopt one of the following three modes which are pro-rata, selective oroff-setting. b.The surplus distribution method must be acceptableby participants.
Participants have no doubt towards the logic and fairness ofthe surplus distribution method prepared by the actuary and adopted by thetakaful company. c. The method of surplus distribution mustbe simple and easy to govern bytakaful company. At the same time, easy for participants to understand and acceptthe logic. It is important to avoid confusion that the participants mayencounter if the method used is too comprehensive. d. The method of surplus distribution mustbe flexible, easy to change ormodify by takaful companies if circumstances cause changes in the amount ofsurplus available.
e. Distribution of surplus must be consistent and in line with theactuarial basis for the provision of contributions and liabilities. The determination of surplus is essentially anactuarial process because it relies strongly on and sensitive to the actuarialestimation of liability provisions for the business