Islamic Reinsurance - Appendix C (Definitions)

Transcription

1. Shari ’ah Standard No. (41): Islamic Reinsurance Appendix (C) Definitions Reinsurance The reinsurance contract is a contract according to which the insurance company transfers part of the risks of its insurance commitments to the reinsurance company. The insurance company, therefore, undertakes to pay to the reinsurance company part of the insurance premium paid by the participants, against commitment of the reinsurance company to bear part of the claims as per an agreement between the two parties. Islamic reinsurance has the distinctive characteristic of being based on the same principles of solidarity insurance, as indicated in Shari’ah Standard No. (26) on Islamic Insurance. Special Need Something that concerns a certain group of people, or the employees of a certain profession, as for instance the need for insurance for the employees in trade and industry sectors. Public Need Something that does not concern a certain group of people, or a certain country. Public need is the need that concerns everybody such as the need for Istisna’a. Reinsurance Commission A percentage amount of the contributions payable to the reinsurance company, paid to the Islamic insurance company for the efforts it exerts in mobilizing the reinsured insurance contracts. Reinsurance Profit Commission A percentage amount of the realized increase of revenues over expenses in the reinsurance agreement, paid to the Islamic insurance company as 1034
2. Shari ’ah Standard No. (41): Islamic Reinsurance a bonus for its excellent performance in managing the insurance operations in general, and the reinsured risks in particular. Risk-Sharing Reinsurance The process of sharing the insured risk between the Islamic insurance company and other insurance companies, either due to lack of sufficient insurance capacity for such risk, or because of regulatory requirements of risk sharing with regard to the magnitude of the risk in question. Financial Gains of Islamic Insurance Companies from Traditional Reinsurance Companies Reinsurance agreements between traditional reinsurance companies and Islamic insurance companies lead to the following financial gains to Islamic insurance companies: ■ Compensations for harms harms;; the reinsurance company bears a percentage of the risk cover -when the harm materializes- commensurate to the percentage of its share from insurance contributions. ■ Reinsurance commission commission;; which is a percentage amount of the contributions payable to the reinsurance company, paid to the Islamic insurance company for the efforts it exerts in mobilizing the reinsured insurance contracts. ■ Reinsurance profit commission commission;; which refers to a percentage amount of the realized increase of revenues (reinsurance contributions) over expenses in the reinsurance agreement (coverage), paid to the Islamic insurance company as a bonus for its excellent performance in managing the insurance operations in general and the reinsured risks in particular, and providing the best services to its customers. Such amount is paid in the form of an agreed upon percentage of the profits of the reinsurance company, as per the reinsurance agreement signed between the two companies. When the reinsurance company earns profits from the reinsurance contracts signed between the two companies, the reinsurance company pays the part of the profits agreed upon to the insurance company. 1035