Essay About Family: Waiting for Papaw :: Personal Narrative Family Grandfathers Essays

Waiting for PapawI am under the belief that the concept of condemnation as we know it, does not represent in hospitals. Upon entering, one loses solely sense of what time it is, what day of the week it is, and how long theyve been there. Hospitals are places of healing, of caring, of great medical advancements and live saving procedures. They are a place of second chances, of last chances, and sometimes very little chance at all. They are also a place for dying. I learned all of this and then some during the eighteen days in December that I spent at my granddads bedside in Holy Spirit Hospital. My grandfather went into the hospital with the symptoms of a stroke on Saturday, December 13, 2003. He spent the first 4 days of his stay in a coma, induced by the doctors misdiagnosis of his condition. My grandfather had not had a stroke, in fact he had a condition in which his liver was overloaded with toxins and was shutting down. It was a problem hed been suffering from for quite some t ime however, none of his doctors had diagnosed his symptoms correctly. The sedative they gave him upon arrival in the emergency room only worsened his condition. Upon waking up, he had to be restrained to prevent him from removing his IVs and attempting to get out of bed. He improved steadily over the next few days, and we were expecting to have him home soon. Unfortunately, he was leave unrestrained one evening and was able to remove his IV, catheter, and then climb out of bed. The nurses found him on the floor of his bathroom. How long he was there, well neer know, because the time the nurses told us he was found, we know is not correct. He was given another dose of a sedative which caused him to be extremely disoriented the following morning, even so his old self was still shining through.Papaw, I asked upon arriving in his room that morning, Why are you so tired today?Because I made ccc faustnauhts last night. He replied without hesitation. Now, I can imagine that anyone woul d be tired from that, but where my grandfather came up with the word faustnauht instead of donut, Ill never know. On Christmas Eve, after spending eleven days in the same hospital bed, he lost circulation in his left leg and had to undergo surgery.

Mahfouzs Akhenaten, Dweller in Truth Essay -- Historical Novels Histo

Mahfouzs Akhenaten, Dweller in TruthIn the history of literature, perhaps the most explored genre is the historical novel. From the Epic of Gilgamesh to the state day, authors have taken historical facts and interpreted them novelistically. When no facts are available, the author may extrapolate missing parts of the story from two sources -- any with the interpretation of the existing scholarly data or through the authors imagination. These two approaches to filling in the gaps of a historical novel can either appease the historiographer and displease the literary critic or please the literary critic and upset the historian. Very few novelists can produce a historically high-fidelity novel that is also pleasing to a literary critic to do so would be very difficult because the novelistic plot structure hardly always follows the structure of truthful historic events. A novelistic piece of music around a battle in World War Two would be bound to either an accurate portrayal of th e events around the main character or a convincing depiction of the people involved. If the author chose to write about turrets, casualty statistics, and flock movements, he would surely sacrifice much of the artistic content of the novel. If the author chose to focus on character and plot, then the writer couldnt portray the event with the specificity it requires. However, the censure to these guidelines appears when a novelist chooses to write a historical novel about a time or a person when large portions of the historical picture is stock-still either unknown or up for scholarly debate. This condition presents itself infrequently to the historical novelist, in circumstances where few people witnessed or spoke about the event, or through an event so ancient tha... ... with a few authorly embelishments. Despite his lack of glaring inaccuracies, the author does not seem to capture the anthropological, sociological, and political climate of the Amarna period. Having examined Mah fouzs portrayal of the pre-Amarna and Amarna periods, in the context of popular belief and scholarly interpretation, the novel appears as an interesting yet general view of Akhenaten and his times. Despite his writing geared towards a general audience, Mahfouz does not take advantage of his audience by engaging in heresay and confabulation. The novel appears to be thought out on the basis of scholarship, both Egyptian and otherwise, giving the reader a surface glance of the complications of the Amarna period.Works CitedBrier, R., The Murder of Tutankhamen, 1998.Robbins, Gay. The Art of Ancient Egypt. Cambridge Harvard University Press, 1985.

Emergent Properties of Choice :: Allais Paradox Essays

Emergent Properties of ChoiceABSTRACT Allais paradox provides a genial mode to demonstrate that the distribution of alternatives we face in a situation of choice may give rise to new factors. These emergent factors may hold to capture a one time choice of rational decision-makers, although they should not be taken into account in long reiterative games. I starting signal from a brief presentation of Allais paradox yet, I am not primarily concerned with the question how to solve it. The paradox provides a convenient way to demonstrate that distribution of alternatives we face in a situation of choice may give rise to new factors. These emergent properties may need to influence a one time choice of rational decision-makers, although they should not be taken into account in long reiterative games.Let me introduce to you decisiotheoretic emergentism. match to the independence axiom an outcome of the choice shall be neutral if a constant value is added to each alternative. But if we consider the table of preferences presented by Allais this presumption seems intuitively questionable. Y=1 B=10 R=89 g1 M M Mg2 0 5M M g3 M M 0 g4 0 5M 0 In the choice between g1 and g2 (where M stands for one million crowns), most people carry g1 over g2, although g2 gives higher expected value. Yet, if we choose between g3 and g4, almost everybody prefers g4 over g3. But the problem may be seen as two identical alternatives g1=g3 and g2=g4 just in the choice between g1 and g2 in column R an outcome of one million crowns has been added to each alternative whereas in the second case the constant added equals zero.These results contradict with the independence axiom. The first closure is to go Savages way and, after reconsideration, to change ones mind in the g1/g2 choice. But strong intuitiveness of the Allais paradox makes this solution less than attractive.It might seem better to assay for some troublesome decisio-theoretic axioms easy to replace. This is the way decision theorists usually go. But they have a problem in finding axioms to be eliminated.

A Review of Peter Brown’s Augustine of Hippo Essay -- Augustine Hippo

A Review of Peter Browns Augustine of Hippo Peter Browns Augustine of Hippo is a dense, scholarly work outlining the entire life of the Catholic bishop. The University of California Press in Berkeley, California published the work in 1967. My version was the 1973 second paperback printing, found in the University library. Its smallish, scholarly, serifed, typewritten font allows for a instant respect for the subject matter the words are at first imposing, but then uncover as their serious tone complements the complexity of the text. The pages are studded with footnotes, filling out this work with evidence of Browns exhaustive research. There is a three-page preface before the work, and, after the work, a seventeen-page bibliography, and ten-page index. Browns book is organized, like any scholarly biography, chronologically according to Augustines life. It is separated into v parts, each corresponding to significant portions of Augustines life his pagan life, his conversion, his ac tions against the Donatists, his actions against Pelagians, and his final legacy and death. Each part opens with a chronological table of events both right off involving Augustine and the initiation he lived in. The first part begins with Africa, a chapter detailing the section of northern Africa its Greco-Roman literary and political history, painting a picture of the world Augustine came from. The next chapter, titled Monica, describes Augustines parents, particularly his mother, and their religious beliefs and socioeconomic status. Education, the third chapter, is about the future bishops early education, focusing on his introduction to his positron emission tomography school subject, Latin literature. T... ...uum Writing the City of God, rather than just City of God. (This chapter is actually misprinted in the table of contents as Opus Magnum rather than Magnum Opus, a small error, but one easy enough to catch in proofreading, for this second paperback edition. Also, Brown h as a penchant for Latin or French phrases, inserted randomly to convey special meaning this could be forgivable if they were translated or explained, even in the spacious footnotes they are not, leaving the layman reader often confused and agitated. But, this book is not intended for the layman it is a scholarly work, and most readers would be in his field of antiquity, and most probably know Latin, and be more acquainted with familiar French phrases. Augustine of Hippo is not perfect, but it is an extremely good biography, being both exceedingly thorough and fully captivating.

An Investigation of the Factors Affecting the Period of a Pendulum :: Papers

An Investigation of the Factors Affecting the Period of a Pendulum I could enquire the following factors * Angle of displacement * Length of string * Pendulum weight I am going to investigate and see if varying the length of string go away affect the period of the pendulum. My prognostication is The longer the string the longer the period. The period will be longer as the pendulum has farther to travel. My theory is demonstrated below. Pendulum A has a shorter string. This gives it a shorter period. Pendulum B has a longer string and has a much larger period as it has farther to travel to get from X to Y to X which is one period. IMAGE I made my prediction based on a previous experiment I have done. The length bear upon the period as stated above and I think this will happen again in this experiment. I looked at a clock with a pendulum to see how it worked. I found that to change the speed of a second you adjust the length of the pole wh ich the pendulum hangs from, so I also based my prediction on that as it is the same principle. I set up a trial experiment to test out the following * Which angle of displacement to commit (e.g. 90) * How many readings to take * Which lengths of string to measure (e.g. every 10cm) * Where to carry out the experiment (on a desk/floor etc..) To ensure the test is fair I am going to * Use the same piece of string * Use the same weight pendulum (preferably the exact same pendulum) * Make sure the string is metric accurately To ensure the test is safe I am going to * Use a sensible angle of displacement * Not to swing the pendulum earnest others To ensure the test is accurate I am going to

An Investigation of the Factors Affecting the Period of a Pendulum :: Papers

An Investigation of the Factors Affecting the Period of a Pendulum I could investigate the following factors * Angle of displacement * Length of mountain chain * Pendulum weightiness I am tone ending to investigate and see if varying the length of pull out will affect the period of the pendulum. My anticipation is The longstanding the string the longer the period. The period will be longer as the pendulum has farther to travel. My theory is demonstrated below. Pendulum A has a shorter string. This gives it a shorter period. Pendulum B has a longer string and has a much larger period as it has farther to travel to get from X to Y to X which is one period. IMAGE I made my prediction based on a previous experiment I have done. The length affected the period as stated above and I estimate this will happen again in this experiment. I looked at a clock with a pendulum to see how it worked. I found that to change the speed of a second you adj ust the length of the pole which the pendulum hangs from, so I also based my prediction on that as it is the same principle. I set up a trial experiment to test out the following * Which angle of displacement to use (e.g. 90) * How many readings to take * Which lengths of string to measure (e.g. each 10cm) * Where to carry out the experiment (on a desk/floor etc..) To ensure the test is fair I am going to * Use the same piece of string * Use the same weight pendulum (preferably the exact same pendulum) * Make sure the string is measured accurately To ensure the test is safe I am going to * Use a sensible angle of displacement * Not to swing the pendulum near others To ensure the test is accurate I am going to

Communication †Pizza Essay

Introduction pizza pie sea chantey is based in Wichita, Kansas USA 19581. A woman and her twain sons created pizza recipes. From here, a family friend advised the sons to unaffixed their own pizza pie Parlor. 2. pizza pie hovel is one of the flagship brands of Yum Brands, Inc. , which to a fault has KFC, Taco Bell, A&W and Long John Silvers under its umbrella. pizza pie army hut is the worlds largest pizza chain with over 12,500 restaurants across 91 countries 3. In India, pizza pie chantey has 133 restaurants across 34 cities, including Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Pune, and Chandigarh amongst others.Yumis in the procedure of o create verballying pizza pie hut restaurants at m all much holes to usefulness a larger customer base across the country 4. Borrowing $600 from their mother, the deuce brothers purchased second-hand equipment and rented a small building on a busy intersection in Wichita, Kansas. The result of their efforts was the fir st pizza Hut and the foundation for what would be fail the largest and the virtually successful pizza restaurant in the world 5. pizza Hut franchisees exemplify the entrepreneurial spirit, which launched their system blanket in 1958.Through interest and initiative, the pizza pie Hut system was able to develop rude(a) territories in the United States and overseas. Today, franchisees and joint-venture partnerships account for more than half of the pizza pie Hut systems be units. Their education on the international front is a easily indication of the growth that has characterized their system. Following the opening of the first international restaurant in Canada in 1968, the pizza Hut restaurants quickly appeargond in Mexico, South America, Australia, Europe, the Far East and Africa. Today, pizza Hut operates in more than 100 countries and territories throughout the world 6.When Pizza Hut opened its handout in Baroda, Gujarat they firstly thought that they should make a ton ic pizza to the recipe of the local style in erect to attract the local population. g They decided to provide the pizza according to the customers taste of choice7.This essay aims to answering the following question Should Pizza Hut open a new consequence in Baroda? 1. http//www. pizzahut. com/OurStory. aspx 2. http//www. pizzahut. com/OurStory. aspx 3. http//220. 226. 195. 78/pizzahut. co. in/ just about_us. php 4. http//220. 226. 195. 78/pizzahut. co. in/about_us.php 5. http//www. pizzahut. com/OurStory. aspx 6. http//www. pizzahut. com/OurStory. aspx 7. (Manager of Pizza Hut). individual(prenominal) interview RESEARCH examination Pizza Hut is an established brand all over India. To outgrowth the growth of the new issuance, Pizza Hut recently set up a new food mart hind end place enquiry on the outskirts of Baroda with the investment of __ Basically, Pizza Hut star signs in India send Managers to spread proper aw atomic design 18ness about their new dismission among the customers through different types of advertising and keep the customers informed about their advancements in actual outlets 10.Commercially, I expect that the opening of the new branch leave steer to an augment in gross revenue in Baroda, Gujarat, and could increase the market sh atomic number 18 of Pizza Hut. For this discernment, they want to be able to successfully market their new firm when it is commercially launched. As previously mentioned, to increase its growth and successfully market their upcoming outlet, Pizza Hut has been reviewing various promotion strategies like price reduction, to increase the price in their marketing bud discombobulate and increase in number of staffs 11.So increasing the production by opening the new outlet and to increase the number of staff to work in both of the outlets is a strategy that Pizza Hut is strongly considering in order to increase their growth in the domestic market 12. 8. (Manager of Pizza Hut). in-person interview 9. (Mana ger of Pizza Hut). Personal interview 10. (Manager of Pizza Hut). Personal interview 11. (Manager of Pizza Hut). Personal interview divinatory FRAME WORK The maturement of a profession flock be measured in many different ways such(prenominal) as assets, sales revenue, operating make headway, market sh atomic number 18, abide by added, and number of employees 13.As information of pizzas is involved, Pizza Hut believes that what they bring new in the market is non contrastd with any of the products of any another firm which is selling pizzas14. I commercially expect that the opening of the new firm will lead to increase in sales in Baroda, Gujarat, and could increase the market sh be of Pizza Hut. Due to this, they want to be able to successfully market their new firm when it is commercially launched. Pizza Hut aims to convince the customers to set down their new blood line, (target market) 15.The other promotional method used by Pizza Hut and to spread the awareness about th eir new outlet is to do market seek. I did the market question for Pizza Hut so that they give the sack locate their new outlet where in that respect are more potential consumers. High income group was also asked about the opening of a new outlet, before it is brought up in the market. Pizza Hut believes that the methods used to research on opening a new outlet take hold of the attention of the customers for long age, so that they faeces visit the outlet frequently16. For reasons mentioned above, growth is widely regarded as the approximately favorable method to increase the profit level.12. http//www. tutor2u.net/business/presentations/strategy/businessgrowth/default. html 13. (Manager of Pizza Hut). Personal interview 14. _________ 15. (Manager of Pizza Hut). Personal interview 16. (Manager of Pizza Hut). Personal interview METHODOLOGY To reach a suitable conclusion, an in-depth qualitative and quantitative analysis s residency be conducted by use different business witha lls to the primary data as well as the secondary data collected. The primary data contains the interview of the Manager of the Pizza Hut outlet which already exists, the opinion of the customers who visit the exiting outlet and a few other people. food market research This will contain the content of the market research and what it entails. This was conducted by me. epitome of market research This will contain the graphical record and an explanation about how many people will visit the new outlet (assumption) from the old outlets daily earning. Swot analysis This will contain the strength, weakness, opportunity, and threats of the business for opening the new outlet. Ansoffs matrix A model which identifies growth strategies for a business and it is based on an analysis of their products and their market.Pest-g This will identify the political, scotchal, social and technological, as well as the environmental problem of the firm. court analysis Cost analysis will be conducted to fi nd out the quantifiable and unquantifiable cost involved in increasing the personal selling. MARKET RESEARCH Market research is the collection, collation and analysis of the data relating to the marketing and consumption of the equitables and the benefits18. Market research helps in opening the new outlet, tells us were we stand in the market and how we can improve. How many times does the customer visit Pizza Hut?Group of people More than once a calendar week Once a week Fortnight Monthly or less Family 04 20 45 25 College students 35 50 36 19 Above 50 00 05 36 30 Teenagers 40 45 26 17 (18) Here the market research data is organized according to age group. Market research make of the location Yes No (%) (%) Sayajigunj 66 34 Karelibaug 68 32 pic Here I boast got conducted the market research for the two different areas and I have come to a conclusion that in Karelibaug there are 90% of people saying yes to open the new outlet 20.This is due to one outlet of Pizza Hu t not providing deli real services to distant areas21. So if it is in that area then many people can visit the outlet and this will give more profit to Pizza Hut. As people from Fathegunj, Sayajigunj, city area and Karelibaug can visit as it will be salutaryer to them 22. 17. market research do by interviewing different people 18. business studies prevail by Dave hall pg 147 19. interviewing different age group of people 20. People gave reason that why in these two areas. 21. Told by the people staying in that area.ANALYSIS OF THE PRIMARY DATA The finding of the market research which I have done for Pizza Hut will be analyzed to identify specific market attributes such as the manner in which the customer will answer more. In addition to this, it will identify important information such as the set upiveness of the market research results given by the customers will be discovered. From this data, it will be possible to judge the weaknesses of Pizza Hut. Recommendations will then be made by me on methods which Pizza Hut can hook up with to overcome these weaknesses.Once Pizza Hut overcomes these weaknesses, it will have a better chance to successfully market their new outlet, and at the same time increase the sales from their current outlet. The graph below compares the frequency of teenagers who visit Pizza Hut as opposed to college students. pic 22 The ratio of college student is more than teenagers23. This means that on an average, college students visit Pizza Hut more compared to the teenagers. This graph tells us how many families and those above 50 wish to go to Pizza Hut. pic24 22. market research done by interviewing different people 23. (Manager of Pizza Hut).Personal interview 24. market research done by interviewing different people organize ANALYSIS Swot analysis swot analysis is an analysis of the internal strength and weaknesses and the external threats and opportunities that Pizza Hut faces. The swot analyses will illustrates how the externa l opportunities and the threats can be matched with the Pizza Huts internal strength and weaknesses to result in a set of possible strategic alternative.This would identify Pizza Huts distinctive competencies and the opportunities that the Pizza Hut is not currently taking a due to lack of appropriate resources swot means S-strength W-weaknesses O- Opportunities T-threats Strength(S) these are the things which I observed, Pizza Hut and their staff do and which is the strength for themThey are well known for their pizzas 26. They provide good quality, taste and quick service 27. Their good service grooming, cleanliness, and good interaction with the customers make customers want to visit them again 28. Due to their good taste and grooming, the other domestic pizza outlets try to compete and take in from Pizza Hut 29. Reputed brand, market excepted very easily, Due to the above, Pizza Hut makes good profit30.Pizza Hut has the ability to provide its customers with deals, offers and s pecials so that they can save money and get more value. This is a strength for the organization as it makes customers purchase more while receiving more value for their money. Customers use these vouchers and specials when monastic order in bulk or for everyday orders. Weaknesses (W) these are the things which I observed and Pizza Hut does poorly and in which they can be affected are During the weekends, Pizza Hut is full of customers, during that time the service is poor 31. thither is little to no place for the people to sit who are waiting to be seated32.Availability of other multinational outlets like Mac Donald and eye masks will be the competitors of Pizza Hut too. 33 Opportunities (O) the directions which the business could take in prospective like By opening a new outlet there will be an opportunity for growth of the business and development for employees34. If a person was previously employed by Pizza Hut and has passed the Pizza Hut course with the appropriate certifica te, then they are able to receive double their salary35. Pizza Hut is a branded and a multi-national chain, therefore it allows staff salaries to be double that which is offered to other staff in other companys36.Threats (T) the threats to a business arise from the activity of the competitors and failing to take opportunities like Pizza Inn is the domestic pizza outlet in Baroda both of them are doing very good profit-wise therefore Pizza Inn is a threat for Pizza Hut37. Pizza Inn is a well-known organization to the Baroda community as it also provides good quality and taste and this is a threat to Pizza Hut as this is one of Pizza Huts strengths. 25. business studies book by Dave hall pg 38 26. http//www. tutor2u. net/business/strategy/SWOT_analysis. htm 27. (Manager of Pizza Hut). Personal interview 28. (Manager of Pizza Hut).Personal interview 29. (Manager of Pizza Hut). Personal interview 30. (Manager of Pizza Hut). Personal interview 31. (Manager of Pizza Hut). Personal intervi ew 32. (Manager of Pizza Hut). Personal interview 33. (Manager of Pizza Hut). Personal interview 34. interview taken while doing market research 35. (Manager of Pizza Hut). Personal interview 36. (Manager of Pizza Hut). Personal interview 37. (Manager of Pizza Hut). Personal interview 38. (Manager of Pizza Hut). Personal interview THE ANSOFFS MATRIX The ansoff matrix The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy38.Ansoffs matrix will allow the firm to consider the alternatives open to it for immersion a new market or entering new product into the market39. Product Existing New Existing Market penetration Product development New Market development diversification Market Market penetration market penetration is used to achieve the growth in the existing market with the existing product40. Market penetration uses the marketing mix to push the product which is gaining as much as market share and as quickly as possible41. Ma rket penetration seeks to achieve four main objectivesIncrease usage by existing customers, maintain or increase the market share of current products42. Pizza Hut is the branded outlet so that people use the substitute outlet less (Pizza Inn, u s pizza, Uncle Sams Pizza, and Dominos). Pizza Hut encourages customers to use their outlet more regularly by providing new taste to the customers43. Product development this is concerned with marketing new or limited products in the market for the customers 44 like Normal pizzas intend to act as a replacement for the new product which will be introduced45.Market development this involves the marketing of the existing product in the new market such as As Pizza Hut has one outlet already in the market, they will open a new outlet in Baroda but in a different area. They will introduce nearly new products when they open their new outlet. However, they will need to continue the marketing of their old and classic products along with the new produ cts46. Diversification this will occur when the product is actual for the new market.Diversification allows a business to move away from the trust upon the present market and product47. 38http//www. tutor2u. net/business/strategy/ansoff_matrix.htm 39oxford study course book by jo defraud pg 32 39. http//www. tutor2u. net/business/strategy/ansoff_matrix. htm 40. business studies book by Dave hall pg 239 41. oxford study course book by jo toy pg 32 42. http//www. tutor2u. net/business/strategy/ansoff_matrix. htm 43. (Manager of Pizza Hut).Personal interview 44. (Manager of Pizza Hut). Personal interview 45. Manager of Pizza Hut). Personal interview 46. business studies book by Dave hall pg 239 PEST G ANALYSIS Pest g this will look at the external environment and the global factors that may or will affect a business. It can provide a quick and visual representation.It is usually divided into five external influences on a business-political, economic, social, and technological and gr een46. Political this is concerned with how political developments, regionally, nationally and internationally index affect a businesss strategy47. Political development is not so relevant in this instance as Pizza Hut has an existing established branch which is not affected by this external factor, the political issues are not so important because they do have the outlet in India and Baroda. For opening the new outlet government factors are not important as it already has opened one outlet48.Economic this might include the analysis of a variety of economic factors and their effect on business they include consumer activity, economic uncertain, government policy, the effect of change in product and labor markets49. Pizza Huts outlet which is Baroda, Gujarat has competitors in Baroda, Gujarat50 however, these are not Pizza Hut branches they are other competitors such as Dominos and Pizza Inn. These have an economic external influence as it affects the consumer activity as custom ers may take to go to Dominos if there is better service, quality and price offered.The new place suggested trough market research, there mainly the people with their families and above 30 will visit. It is not that the youths wont visit but there are less youths in that area compare to the area where the current Pizza Hut is located. Social how is Pizza Hut affected socially? It is not likely that Pizza Hut will be affected socially as each age group visits Pizza Hut51. Due to the location of the old Pizza Hut come out (located near commercial places) it attracts a lot variety of consumers. The new site will be located in a suburb where there are families therefore the market will be families.When a whole family eats a meal at Pizza Hut, they tend to splurge on extras such as drinks and sides. This is positive for the organization in terms of profit. However, in Karelibaug, families wont come daily or once a week to have pizzas so it can be affected socially. Generally in the new outlet older segment people will visite. technological Businesses operate in a world of rapid technological change. The organization needs to regularly review the impact of new technologies upon their activities. The product can become old-fashioned quickly. The production method can become out of date52.Pizza Hut looks that how they are different from other firms such as Pizza Inn, Dominos pizza, us pizza and many other domestic outlets for pizzas. Even Mac Donalds is a competitor. One technological factor which could effect the environment is how Pizza Hut creates its products such as the production line in which a pizza is made. 47. business studies book by Dave hall pg 38 48. business studies book by Dave hall pg 38 49. (Manager of Pizza Hut). Personal interview 50. business studies book by Dave hall pg 38 51. (Manager of Pizza Hut). Personal interview 52. (Manager of Pizza Hut). Personal interview.53. business studies book by Dave hall pg 38 COST ANALYSIS Cost analysis is cur rently a some what controversial set of methods in program of evaluation one reason for the controversy is that these terms cover a wide range of method, but are often used interchangeably. There are two types of cost associated with hiring new place. They are fixed cost and variable cost. Both these cot will be identified to check the financial growth of the undergoing new outlet. Both are classified as below Fixed cost Hiring charges foe the new place Salary of the staff Minimum hiring charges of telephone.Variable cost Production cost Office usage Approximately tot of profit for the new outlet whitethorn by through which you will be able to fine out pbit (profit before interest and tax), pbt (profit before tax), pat (profit after tax). Per month Per annum gross revenue 1350 16200 - variable 60 720 contribution 1290 15480 - fixed cost 45 540 PBIT 1245 14940 - interest 78 940 PBT 1167 14000 - tax 350 4200 PAT 817 9800 55 From the above assumption we can conclu de that profit on pbit is approximately equals to 65. 60% 1260 720 100 ? = 57. 14 This is the variable cost 1260 540 100 ? = 42. 58 And this is the fixed cost. Variable cost of new outlet is high than its fixed cost about 14. 12. Contribution of new outlet is about 96% which can be calculated by following formula Sales contribution 16200 15480 100 ? = 96 56 Variable cost imagines upon number of units of new outlet but the fixed cost is fixed. Cost may also be defined in different class For example production cost office cost selling and distribution cost We can include raw material cost for the pizzas and service cost for the pizzas.In production cost all the administration expense and legal and superior charges in office expense. We can bifurcate the transportation of the delivery man and advertisement expenses as selling and distribution charges. Selling and distribution charges can depend on number of unit sold and cost up till cost of goods sold always depends on goo ds sold57. 55. (Manager of Pizza Hut). Personal interview 56. (Manager of Pizza Hut). Personal interview 57. (Manager of Pizza Hut). Personal interview INVESTMENT APPRAISAL Investment appraisal is the evaluation of an investment project to determine whether or not it is likely to be worthwhile.It is essential to appraise the investment Pizza Hut will undertake and to establish weather it is going to be beneficial. Below are the techniques, which will assist appraising the investment Pay back period and Net present value Pay back period This technique assesses the number of years it will take foe the Pizza Hut to recover all their initial costs. This is a very simple tool as it ignores most of the costs the firm would incur due to opening a new outlet. The cash flow is also an approximate estimate when there are too many variable then Pizza Hut cannot control.They assume that they have more customers and 10% more profit throughout the year than what they had the previous year. Ther e were a few assumptions made for the cash flow. These were that the machine they used to make pizzas worked at 100% capacity and all products were sold. Pay back period for the new outlet Year Net cash flow 0 -10,00,000 1 2,00,000 2 6,00,000 3 3,00,000 3,00,000 12 months 2,00,000 ? = 8 months You can get 2,00,000 in 8 months so our net pay back period for investing RS 10,00,000 in new outlet is 2 years and 8 months. Analysis of pay back period.The pay back technique has shown us that it takes 2 years and 8 months to pay back for the new outlet. However, we learn form the market research and swot analysis that there are mainly people above 35 hence it would be smarter from them to do some thing which might attract the youth from other areas and influence them to visit that outlet too. Net present value Net present value incorporates the principle of time value of money by converting payments at different times to the equivalent values at the common reference time. The disco unt factor used is 4% as the interest they could have got from the bank currently is 4%.I then did NVP. Year Net cash flow Discount factor 4$ pledge value 0 -10,00,000 1 10,00,000 1 2,00,000 0. 9615 1,92,300 2 6,00,000 0. 9246 5,54,760 3 3,00,000 0. 8890 2,66,700 Analysis of net present value The new outlet will generate ____ amount after 5 years. ORGANIZATIONAL CHANGES To effectively deal with the increase in the growth by expansion, it is necessary for there to be some internal changes. It is very necessary that the staffs grooming should be done properly, so that they can serve the customers in a professional manner.When they open their second outlet from a single, Pizza Hut will have to keep some one on whom they can trust and can rely on and they have to push a few staff from the present one to the opening one. As they opening a new outlet, they are turning from one into two outlets. Due to this the position of many of the staffs have been will be changed. This change do es not affect their work, they have an effective communication carry among the employees. This could be in the form of giving the staff a proper atmosphere in which they can settle easily, the changes in the outlet and the goals that the Pizza Hut wants to attain.RECOMMENDATION Starting up the new outlet, initially it will not give them that much profit but it will definitely give some. For this 1. Pizza Hut should shift few of their staff and of course one of the leader to supervise from the existing outlet to the one which will open in the near future. 2. They should appoint few new staff for the existing outlet and also foe the futures outlet so that the one who are new in the new outlet can get t know more from their seniors who are shifted from the existing business. 3. For marketing about their new outlet they should restructure they method in which the do the marketing.4. The market research was done on few people in Baroda, Gujarat, and not in the whole of Baroda. So the elongated market research needs to be conducted across the whole Baroda, Gujarat to get the proper kind of information about the location. CONCULSION The report shows that Pizza Hut should pen the new outlet in Baroda, Gujarat, India. If Pizza Hut increases their staff, then it would be in a better position to serve the customers and if they shift few of their adept staff and give training to the new staff to whom they are going to appoint then they would also be in the better position.They should also shift one of the managers to the new outlet so that in case if any problem occurs then they will be able to handle it. The financial aspects of the labor movement are not the problem for the Pizza Hut as it is in a strong financial stage. But the recruitment of the new staff frore affects the staffs. The environment and the working portfolio of the staffs will be changed as Pizza Hut will reconstruct the marketing set-up. So before employing the new staff Pizza Hut should let the o ld staff settle into their working environment.As previously said, the personal interview were only conducted in Gujarat, and the result of this only equal he view of customers from Gujarat. Hence, the further market research needs to be done to get a broader perspective on this study. The indirect costs associated with the attempt the project will have to ascertain. As previously mentioned, one indirect cost is that a large recruitment could lead to a decrease in the motivation of the existing staffs. Other indirect cost could be in the form of the training program for the new recruits to a specialist company, so that it is done efficiently.If the new recruits do their job well, serve the customers in the proper way, follow the training properly, are groomed very well and give the best service then this would motivate the customers to visit them again. Graph showing the frequency of visits to Pizza Hut by college students and teenagers 0 10 20 30 40 50 60 More than once a week On ce a week Fortnight Monthly or less time period College students Teenagers graph showing the frequency of visit to Pizza Hut by families and people above 50 0 10 20 30 40 50 More than once a week Once a week Fortnight Monthly or less time period Family Above 50.

Models of Takaful in Bangladesh Perspective

Milliman investigate Report Prepargond by Safder Jaffer Farzana Ismail Jabran Noor Lindsay Unwin Reviewed by Debo Ajayi November 2010 Takaful (Islamic Insurance) Concept, Ch totall(a)yenges, and Opportunities Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Milliman look for Report Contents EXECUTIVE SUMMARY 2 BACkgROUND AND MARkET prospect 3 PRINCIPLES AND PRACTICES UNDERLYINg TAkAFUL TAkAFUL OPERATINg MODELS 11 ISSUES AND ChALLENgES FACINg ThE TAkAFUL INDUSTRY 15 CONCLUSION 25 APPENDIX I gLOSSARY 26 APPENDIX II BIBLIOgRAPhIC REFERENCES 28 APPENDIX III SELF REgULATINg BODIES & TAkAFUL gROUPS 29 Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 1 Milliman seek Report exeCutive summary Through desktop research, 1 rotter get a plethora of materials and papers on Takaful, but approximately tend to focus either on the memoryamentals of Takaful or on Takaful presents.In contrast, the objective of this accounting is to highlight the find issues and challenges facing the founding of Takaful and suggested atomic number 18as where work is required to find solutions. at that placefore this report is intended to provide serviceable credit entry material for practioners by summarising the following key items An overview of Takaful and the intricacies of the pretendings Insights into the issues and challenges facing the Takaful sedulousness Finding sustainable solutions to both(prenominal) of these challengesTakaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 2 Milliman Research Report BaCkground and market sc away Muslims account for around 25% of th e worlds total population, but despite rapid step-up in recent years, indemnification sales in spite of appearance the Muslim population remain a small fraction of the total redress market. Historically, the incompatibility amongst unoriginal indemnity and key tenets of the Islamic confidence has acted as a significant barrier to sales.These differences wealthy person led to real low penetration rates and have left many Muslims with little remote protection for their dependents or possessions. The break-dancement of Takaful, which originates from the Arabic verb kafalah, which means to help one a nonher or reciprocal guarantee, has been driven by a need to traverse these obstacles and create an policy proposition that is fully compliant with sharia (Islamic law). It domiciliates Muslims a valuable assay management bill and the send-off true alternative to naturalized insurance in both the action and nonlife sectors that is acceptable to the Muslim faith.For non -Muslims, Takaful products potentially offer an alternative reference of insurance protectionwith incompatible enthronization monetary resource objectives, an progress to surplus distribution, and an oversight system with an ethical dimension. Hence in Malaysia, for example, non-Muslims account for more than 60% of the total Takaful premiums. Takaful offers Muslims a valuable risk management tool and the first true alternative to naturalized insurance in both the life and non-life sectors that is acceptable to the Muslim faith. word form 1 geographiCal spread oF muslims as a % oF total population No data 0-5% 5-10% 10-50% 50-75% 75-100% Sources U.S. State Department, CIA WORLD FACTBOOK, Swiss Re Economic Research & Consulting Market Size and Outlook Whilst Takaful started in 1979 in Sudan, it only gained momentum in early 2000 when the Malaysian government promoted it and significant growth was witnessed in that respectafter. The growth of Takaful has varied significantly fr om country to country and its success, or otherwise, has been largely dependent on the awargonness and affluence of the local population, as well as on the robustness of the local restrictive framework. Hence the highest growth has been observed in places such as Malaysia (with its considerable awareness ofTakaful and robust regulatory framework), whereas growth in the Middle East has only recently begun to call back off. Depending on the definition of Takaful, the currently quoted volumes in name of premiums range from USD$1 billion to USD$5. 6 billion. Although the exact size of the Takaful market has often been disputed, thither is command acknowledgment of the rapid growth of the industry. In 2007, Takaful premiums in emerging markets grew by roughly 26% and accounted for 5% of insurance premiums Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 3Milliman Research Report scripted in Mus lim countries. 1 According to Takaful Re, a Dubai-establish Retakaful community, Takaful premiums crossed the USD$3 billion mark in 2007 as seen in the table in Figure 2. Figure 2 takaFul premiums (usd$ millions) gCC 2004 2005 2006 2007 770 SAUDI ARABIA 1,238 1,579 2,046 645 1,065 1,340 1,695 KUWAIT 54 83 90 124 UAE 31 42 65 109 QATAR 25 34 50 76 BAHRAIN 15 15 34 59 south east asia MALAySIA 474 544 692 951 343 412 534 797 INDONESIA 77 75 80 94 THAILAND 30 30 32 35 24 27 30 35 aFriCa BRUNEI 121 181 215 317 levant 14 17 21 32 5 8 11 18 1,384 1,988 2,518 3,364 indian suB-Continent total Source Takaful ReThe project Takaful written premium estimates have often been regardd by practitioners because of the wide range of numbers published by various sources. There is difficulty in determining square estimates of the total industry potential as thither is a wide var. of Takaful definitions and categorisation, as well as a lack of consistent and presumptive data. Oliver Wyman suggested in a recent study that the Takaful premium potential is at least USD$20 billion whereas Swiss Re in its annual Sigma report sees a potential of USD$56 billion. Takaful premiums by 2015 are estimated to be in the range of USD$7 billion to USD$8 billion.Hence it is necessary to exercise caution when analysing projected figures. Takaful provides access to a large, relatively untapped market, in which insurance penetration hovers somewhere well below 2% of gDP, and its growth in the ball-shaped market is expected to continue in the long term. Takaful provides access to a large, relatively untapped market, in which insurance penetration hovers somewhere well below 2% of GDP, and its growth in the globose market is expected to continue in the long term. Global estimates for the growth of the worldwide Takaful industry come in at 20% per year, far outstripping the 2. % annual growth for conventional insurance premiums. 2 It is interesting to none that many Takaful providers have emerge d largely unscathed from the monetary crisis, as investitures are normally held in highly liquid as serves, which is delinquent to delimitateed sharia-compliant investments. Insurers considering entry to the Takaful market are better off assessing the markets and opportunities sooner rather than of later(prenominal). Targeted selling and consumer education are essential to uprise market awareness and established insurance agents can leverage their existing marketing and distribution platforms.The lack of a conk market leader in Europe and the UK means that insurers can take advantage of the challenges and opportunities present in a softening global industry. 1 2 Swiss Re (2008). Insurance in the emerging markets. Sigma, Issue No. 5. PricewaterhouseCoopers (2008). Takaful Growth opportunities in a dynamic market. Retrieved Nov. 3, 2010, from http//www. pwc. com/en_GX/gx/financial-services/pdf/pwc_takaful. pdf. Takaful (Islamic Insurance) Concept, Challenges, and Opportu nities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 4 Milliman Research Report rinCiples and praCtiCes inherent takaFul Principles Underlying the Takaful Industry The Islamic Financial Services Board (IFSB), a self-regulated organisation in Islamic finances, produced a paper on governing (in celestial latitude 2009) and defines Takaful as follows Takaful is the Islamic counterpart of conventional insurance, and exists in both Family (or Life) and General forms. Takaful is derived from an Arabic word that means joint guarantee, whereby a group of players restrain among themselves to concord one another jointly for the handoutes arising from specified risks.In a Takaful arrangement the participants turn over a sum of money as a Tabarru lading into a common descent that leave be used inversely to embolden the members against a specified eccentric person of loss or damage. The underwriting in a Takaful is thus undertaken on a mutual basis, similar i n some respects to conventional mutual insurance. A typical Takaful undertaking consists of a two-tier social organisation that is a intercrossed of a mutual and a commercial form of company which is the Takaful promoter (TO) although in belief it could be a pure mutual structure.Hence there is a recognition that whilst the current Takaful impression and practice is in fact a intercrossed of a mutual and commercial insurer, in normal it needs to move more towards a pure mutual structure. This will be analysed later when discussing the opportunities and challenges of the Takaful industry. There is a common misunderstanding that insurance or risk mitigation is not granted under Islam, as Muslims believe that only God knows ones hereafter and faith. The following conversation taken from the sayings of the vaticinator Muhammad depicts an interesting message as to why Muslims should indeed reduce the risk of lossWhilst the current Takaful concept and practice is in fact a hyb rid of a mutual and commercial insurer, in principle it needs to move more towards a pure mutual structure. Prophet Muhammad asked a Bedouin who had left his camel untied, why do you not tie your camel? The Bedouin answered, I put my intrust in God. The prophet then said, Tie up your camel first and then put your trust in God. Every society has risk management needs and, with the evolution of time, the methodologies similarly evolve.Almost 10 centuries before the advent of conventional insurance companies, the Muslim societies in Arabia adopted concepts of risk mitigation such as hilf to assist victims of natural disasters or hazards of trade journey. Another common practice widely used in Islam was al-aqilah. Under the custom of al-aqilah, it is in return agreed that, if a person is killed unintentionally by another person, the paternal relatives will take the responsibility to perform a mutual character for the purpose of paying the blood money to the victims relatives.Th is practice of having a broth that pools contributions from a group of people to assist others in need is akin to mutual insurance. It is important to point out that the mutual assistant was not originally a commercial transaction and did not contain any profit or gain at the expense of others. Rather it evolved as a useful social practice to mitigate the bill of an idiosyncratic by dividing it among fellow members. There are certain key issues at bottom conventional insurance that Islam does not permit Riba, or usury The first of these is the earning of interest, referred to in Islam as Riba.It is a concept expressly prohibited at several points in the Quran. Traditionally viewed from the perspective of a lend, Riba is considered unfair and inequitable to the borrow party and therefore earning interest is forbidden under shariah law and Muslims mustiness avoid Riba in all of their financial transactions. gharar, or uncertainty The sulfur element is the presence of uncer tainty embedded in the design of conventional insurance products. Uncertainty and the trading in risk are classed as Gharar, a concept forbidden in shariah law to protect participants from hazardous or unjust transactions.Conventional insurance is designed around the transfer of risk in return for a premium, and the timing, severity, and/or frequency of insured events are each subject to Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 5 Milliman Research Report varying degrees of uncertainty. The perception that insurance products ordinarily contain unclear involve terms furthers the view that a high level of uncertainty pervades all aspects of conventional insurance. Maisir, or gambling Related to Gharar is the concept of Maisir, also prohibited under Islam, which captures those transactions with an underlying gambling or speculative nature. In the context of life insurance, many contract designs can be viewed as gambles which ultimately benefit one side of an insurance contract at the expense of the other. For example, by taking out a term say-so contract, the risk is transferred to the insurer for a opinionated premium and the payment of a small sum could potentially yield a disproportionately large payout, benefiting the policyholder at the expense of the insurer.Alternatively, the payment of a stream of premiums for many years could result in no return at all, which benefits the insurer. haram, or forbidden Conventional insurance designs whitethorn have investments in a number of asset classes that partake in activities prohibited within the Muslim faith, such as investments in alcoholrelated companies, pornography, or gambling-related enterprises such as casinos. Such activities are considered Haram or forbidden in Islam, and consequently, the proceeds of the conventional insurance are also deemed to be unacceptable in the Muslim faith.There is a further focu s in Takaful (and in Islam in general) around the importance of moral values and ethics as business is meant to be conducted openly in accordance with the utmost good faith, honesty, full disclosure, truthfulness, and fairness in all relationss. It is not within the scope of this report to look into the Shariah matters in depth as there is a diversity of opinion on the exact principles of Takaful. There are some schools of thought within Islam that allow conventional insurance so long as it does not involve Riba (or usury) whilst others have a range of tolerance with some of the key issues mentioned above.However, by and large, there is broad consensus on the solution to these issues. This emerged in the late 1970s in Sudan, but gained more prominence in the 1980s in Malaysia and the Persian disjuncture countries in the form of Takaful. Instead of paying an insurance premium, Takaful participants (policyholders) donate their Takaful contribution to a common pool to mutually assist the members against a defined loss or damage. Takaful can thus be seen as the Islamic counterpart of conventional mutual insurance (i. e. , insurance that is compliant with the Shariah).Takaful is not a exemplification of insurance but rather an alternative to insurance. It has to operate on conjunctive principles and in incarnate the concept of Tabarru (donation, gift). Instead of paying an insurance premium, Takaful participants (policyholders) donate their Takaful contribution to a common pool to mutually assist the members against a defined loss or damage. It is a one-way transaction which does not expect a certain(prenominal) return on the donation, unlike the more traditional bilateral conventional insurance contract where a premium is paid in return for an insurance benefit.The pooling does eliminate Gharar, as the uncertainty about future claim events certainly stillness exists but now is acceptable as the donation (Tabarru) is meant for mutual assistance and not for pr ofittaking or gambling (contracts of charity are not affected by the prohibition of Gharar). However, unlike conventional insurance where the risk is transferred to the insurer, all participants mutually share the risk in Takaful, which is an important fundamental difference. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay UnwinNovember 2010 6 Milliman Research Report The chart in Figure 3 summarises the key differences between conventional insurance and Takaful. Figure 3 Comparison oF Conventional insuranCe and takaFul Conventional insuranCe takaFul A risk transfer mechanism whereby risk is transferred Based on mutuality hence the risk is not transferred but from the policyholder (the insured) to the insurance shared by the participants, who form a common pool. The company (the insurer) in consideration of an insurance company (takaful instrument) acts only as the manager of premium paid by the insured. the poo l.In effect, the policyholders are both the insurer and the insured. Contains the element of uncertainty, i. e. , gharar, which The element of uncertainty, i. e. , gharar, is brought down is forbidden in islam. The terms of the contract are to acceptable levels under shariah by characterising unclear as to certainty of when any loss would hail contributions as donations (Tabarru), not obligations, and and how much compensation would be payable. for a good cause, i. e. , To mitigate the loss suffered by any one of the participants, as opposed to payments joined to definite antepast of insured benefits to be received.Contains an element of gambling, i. e. , Maisir, in that the The participant pays the contribution (Tabarru) in the insured pays an amount (premium) in the expectation spirit of neea (purity) and brotherhood to stay mutual of gain (compensation/payment against claim). If the losses of members of the pool. Losses and gains are anticipate loss (claim) does not occur, t he insured loses mutually shared by the pool members who contribute the amount paid as premium. If the loss does occur, to the pool. That is, third parties (insurers or reinsurers) the insurer loses a far larger amount than collected as re not affected by the outcome of risk events. premium and the insured gains by the same. Funds are mostly invested in fixed interest-bearing Funds are only invested in non-interest-bearing, i. e. , instruments such as bonds, fixed interest securities, etc. Riba-free, instruments. Note that regular income hence these contain the element of riba (usury), which is investments are still assertable (such as under forbidden in islam. Sukuk, islamic bonds) as long as the income is not interest-based. Surplus or profit belongs to both the shareholders and Surplus belongs to the participants and is hence he with-profit policyholders. The insured is covered returned to them. during the policy period but is not entitled to any return at the end of such perio d. The concept of Shariah (Islamic law) compliance is an evolving one and is overseen by the Islamic scholars that sit on the Shariah Supervisory Board, which provides the final certification of compliance. The scholars base their views primarily on the principles of the Quran, supplemented by hadith (the teachings of the Prophet), Fatwas (judicial opinions of Shariah scholars), and Islamic jurisprudence on economic transactions.While the words of the Quran and Sunnah are sacrosanct, the independent reasoning of Shariah scholars can be revoked or conformed to suit changing circumstances, and new readings are dealt with by legal reasoning and judgment of Shariah scholars. This creates a moving goalpost, which is one of the challenges in the Takaful industry which will be discussed further in Section 4. Takaful provides Shariah-compliant solutions to the prohibited concepts with conventional insurance while still protecting against uncertain events in return for a commensurate paym ent.The mutual guarantee offered by Takaful is centred on a transparent, ethical, and Shariah-compliant agreement between the i factor and participants. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Takaful provides Shariahcompliant solutions to the prohibited concepts with conventional insurance while still protecting against uncertain events in return for a commensurate lean. 7 Milliman Research Report Practices in the Takaful Industry This section provides an overview of the components and current practices in the Takaful industry, including Practices within Family Takaful (Life) and General Takaful Shariah-compliant assets Retakaful Retro-Takaful Family Takaful (Life) and General Takaful As introduced above, conventional insurance as sold in Western markets is fundamentally irreconcilable with several tenets of the Islamic faith. In terms of life insurance, Shariah scholars view the se contracts as a gamble on the insureds life. There is uncertainty surrounding when and if death will occur within the covered period, and in the event that no claim is make the policyholder is considered to have made a loss.For Muslims, this incompatibility rules out traditional life insurance as a means of obtaining protection for their dependents. Family Takaful offerings provide access to life coverage in a manner which does not conflict with their religious beliefs. Takaful is integrated around the core principle of sharing and pooling mortality/ morbidity risk with fellow participants rather than transferring it to a profitoriented corporate entity. Takaful is structured around the core principle of sharing and pooling mortality/morbidity risk with fellow participants rather than transferring it to a profit-oriented corporate entity.The concept of mutual support allows many parallels to be drawn between Shariah-compliant Takaful operations and mutual insurers. However, unlike mutual insurers and friendly societies, current Takaful operations involve shareholders who have a profit motive, who provide the capital and fund the giving medication of the risk pool, and who are separate from the participants. Hence, Takaful operations can be viewed as Shariah-compliant commercialised mutual insurance operations. This structure of necessity, which is due to the need for capital, creates another set of challenges to be discussed further inSection 4. Similar to the concept of with-profits products sold by mutual insurers, Family Takaful is designed to combine protection for the benefit of ones dependents with a savings element and requires the distribution of surplus to participants. However, the requirement of transparent disclosure of charges makes Family Takaful contracts akin to the clear charging structure underlying a unit-linked insurance contract. Current practice is to develop Shariah-compliant variants of conventional insurance products.Family Takaful variants of most common life products, including level and decreasing term assurance, savings and retirement plans, and critical illness coverage, have been successfully launched in various markets. For example, a right away contribution style of savings scheme offering fairness exposure could be developed by limiting investment to stock issued by companies that meet the non-Haram or Halal (lawful) requirements. Even product designs, such as annuities and whole life plans, whose inherent features include an uncertain duration, are currently being considered as Takaful offerings.A consequence of mutuality, voluntary contributions, and absence of third parties (such as the insurer in conventional insurance) to share in the risks is that Family Takaful contracts cannot (or do not) offer guarantees to the participants. Guarantees on investment returns, bonuses, risk charges, or premiums, etc. , are not offered under Takaful products. While Takaful practice allows the spread of risk thr ough reinsurance from Retakaful companies, or conventional reinsurers on a necessity basis, this practice is not to allow guarantees as the reinsurance pool is seen as an extension of the primary risk pool.Accordingly, investment returns on contributed funds by the participants are based on actual investment perplex. However, the Takaful operator is obligated to advance a impart (qard), on an interest-free basis, to support any shortfalls in the risk pool in meeting claims. This implicit guarantee of underwriting risk by shareholders of the Takaful operation creates some weakness in the current commercial model of a Takaful operation. Commonly, while there are no guarantees, there are expectations established at point of sale through product illustrations. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities SafderJaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 8 Milliman Research Report However, the concept of mutual assistance does not prohibit the use of underwriting and prospective set based on experience studies. As with conventional insurance, if the wellness of a potential participant would result in significant additional strain being placed on the underwriting fund then an extra contribution would be required. The prohibition of interest-bearing instruments does not impact on the use of interest functions in pricing or valuation of long-term liabilities in Takaful.The pricing interest assumption is based on expected returns from Shariah-compliant assets underlying the liabilities. In terms of surplus distribution, any distribution made to participants is based purely on actual surplus arising. As long as the underwriting fund is not in dearth, surplus arising from both investment and underwriting activities can be used to make a cash payment to participants and/or contribute to any claim fluctuation reserve. The latter is set up to cover short volatility in the size and incidence of payments out of the underwriting fund.As with regular bonus declarations on conventional with-profits contracts in the UK, surplus distributions, if any, are most commonly made on an annual basis. Participants in a Takaful operation will need to be appropriately and comprehensively educated on this feature of the product design so that sightly expectations are built up as to the level of distribution. Shariah-Compliant Assets The avoidance of Riba, Gharar, Haram, and Maisir in the design of Takaful products has a significant impact on the investment decisions of a Takaful operation.Contributions must be invested purely in Shariah-compliant assets, i. e. , assets that are non-interest-bearing and whose returns are not derived from activities considered unethical. Haram or forbidden investments in Islam include financial derivatives such as futures and options, interest-bearing bonds, and equity issued by companies partaking in non-Halal business activities as described earlier. The development of the Sukuk market a nd a robust Shariah-compliant stock selection lick together offer Takaful providers an increasingly viable solution to this investment conundrum.Contributions must be invested purely in Shariahcompliant assets, i. e. , assets that are non-interest-bearing and whose returns are not derived from activities considered unethical. Shariah law forbids lend issues that are at a discount to their nominal value and, as already discussed, completely restricts the earning of interest (Riba). These two hold backs effectively rule out conventional corporate or government bonds. The expanding Sukuk market offers access to an asset class which shares some properties with conventional bonds and others with equity stock, whilst remaining Shariah-compliant.Regular Income Assets Sukuk are issued via the creation of a special purpose vehicle (SPV) by an issuing bank that has been approached by a company or government seeking funding for a particular project. Sukuk certificates are then issued in re turn for an investors funding contribution, and rank alongside the banks other senior, unsecured debt. Sukuk instruments are structured to provide a direct link to the assets that underlie the particular project and through this link confer shared ownership of these assets to the investor.Investors then receive a regular income based on a scratch rate of return. Neither this income nor the return of capital on maturity is guaranteed and both will typically vary in line with the revenue of the company (or equivalently the return on or value of the underlying assets). This potential variance is partially offset by the ability of the Sukuk manager to build up reserves when revenue exceeds the fanny rate, which can be subsequently used to make up shortfalls. Sukuk provides the Takaful market with a legitimate investment alternative to government and corporate bonds.Several issues surround these Sukuk, such as availability, control, and ownership. These issues impact their overall effe ctiveness in supporting long-term liabilities, especially income annuities. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 9 Milliman Research Report Equities A Takaful operator does not need to seek an alternative investment in order to gain exposure to equity-type risk and return.Equity stock does not pay interest and offers direct participation in the profits of a listed business whether through dividends or growth in the price of the stock. However, restrictions do exist in relation to the type of company a Takaful operator may invest in to remain Shariah-compliant. To gain exposure to equity returns Takaful operators or their investment managers must apply a screening process to eliminate stocks of companies that are exposed to forbidden industries or breach certain financial conditions.The industries deemed to be non-Shariah-compliant include banking, insurance, gambling, and those link ed to pork, alcohol, or tobacco. The financial screening looks at key financial ratios of a particular company, such as conventional debt ratio and the sum of the interest and non-compliant income compared to total revenue. Where these ratios exceed limits placed down by a companys Shariah Supervisory Board, the equity issued by the company in question is excluded from permissible investment.This screening is a continual process, as the evolving nature of a firms business practices and capital structure mean that its status as either compliant or noncompliant is not static. Real Estate and Mortgages Although there are Shariah-compliant forms of investments in real estate and mortgages, these are currently under-utilised but have significant potentials. Retakaful By entering into a reinsurance contract, conventional insurance companies are able to share risk, gain capital support, or benefit from a broader base of experience in areas such as pricing, underwriting, and claim manageme nt.Historically, Takaful operators have sometimes also had to make use of conventional reinsurance owing to the lack of a Shariah-compliant alternativethis exception was based on the dharura or necessity principle. The growth in the Retakaful market offers a solution to this problem. Retakaful provides these same facilities to Takaful operators but within a structure that remains Shariah-compliant and in a manner specifically tailored to the particulars of the Takaful market. In the same way as Takaful rovides a vehicle for participants to provide support to and share their own risk with a pool of other members, Retakaful allows Takaful funds to share risk among multiple Takaful pools. In the same way as Takaful provides a vehicle for participants to provide support to and share their own risk with a pool of other members, Retakaful allows Takaful funds to share risk among multiple Takaful pools. In this regard, the operation of a Retakaful fund is very similar to that of a direct T akaful fund.A Retakaful fund must have a Shariah Supervisory Board and the criteria it must satisfy to be considered Shariah-compliant mirror those to which a Takaful fund must adhere. The Retakaful fund receives contributions from each participating Takaful fund and distributes back surplus arising from investment and underwriting activities using one of the models described later in this report. Further, if the Retakaful fund goes into deficit then the Retakaful operator is required to make an interest-free loan or Qard Hasan to the fund to eliminate this shortfall.Re-Takaful operators may not pay commission to a Takaful fund with which it is engaged. In recent years there has been a significant growth in global Retakaful capacity, owing to major reinsurance companies such as Swiss Re, Hannover Re, and Munich Re entering the market. Their entries will help facilitate further expansion of the Takaful market, and the capital support and depth of advice that these players can offer w ill be invaluable in setting up an operation, wherever the chosen market. Retro-TakafulSome Retakaful operators retrocede conventionally on the basis of necessity because currently there is limited Retro-Takaful capacity available. There is talk of a Lloyds syndicate for Retakaful players that would imply retroceding each others business to reduce volatility and provide the spread of risk, but this has yet to materialise. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 10 Milliman Research Report takaFul operating modelsThe basic structure of a Takaful scheme involves the policyholders or participants enlisting a Takaful operator to perform the necessary investment and underwriting roles. Family Takaful, the Shariahcompliant equivalent of life insurance, is commonly structured so that a participants contributions are apportioned between two segregated funds the investment fund and the underwri ting fund. An individual (investment) account is maintained for each participant with the contributions made, net of any upfront fees. From this account, risk charges are deducted to be deposited into the pooled underwriting fund.Contributions paid into the underwriting fund are considered to be made on the Tabarru basis, to support all participants in their exposure to mortality/morbidity risk. Any covered claims suffered by the participants are paid from the underwriting fund to avoid the impartation of risk. The basic structure of a Takaful scheme involves the policyholders or participants enlisting a Takaful operator to perform the necessary investment and underwriting roles. The sharing of risk with fellow participants is in contrast to full or partial transfer of the risk to a proprietary company.This also means that if the underwriting fund is insufficient to pay claims then no recourse can be made to shareholder assets. However, in practical terms, to prevent closure of the fund, the deficiency is covered by a temporary interest-free loan (Qard Hasan) provided by the Takaful operator. This would be repaid from future surpluses arising within the underwriting fund. Nevertheless, this arrangement acts as a strong incentive for operators to properly manage the fund, thereby limiting the possibility of making future loans.Takaful is most commonly structured using the following models The Mudarabah model This is a Proprietary or Partnership model that considers the Takaful operator as a business partner with the participants. It is structured on classic profit-sharing principles, i. e. , a partnership model where the participants provide the capital, while the Takaful operator provides expertise and management of the Takaful fund. A contract details how underwriting surplus and investment profits are shared between operator and participants, similar to conventional insurance (with-profits or articipating business). The Takaful operator shares in the inves tment and underwriting surpluses via a predetermined ratio mutually agreed with the policyholders at outset. Neither the operator nor the participant can unilaterally alter this agreed sharing ratio, which is unremarkably explicitly set out in the contract at outset. From the perspective of the participants, they do not contribute at a time to the operators costs and all contributions are effectively available to meet claims.Correspondingly, the operator can generally only expect to make a profit by ensuring that the expenses of managing the operation are less than the total share of investment profit and/or underwriting surplus it may receive. If the underwriting fund runs into deficit then the operator is obliged to provide an interest-free loan or Qard Hasan, to be repaid once the fund is in surplus. The Wakala model This is an Agency model that treats the Takaful operator as an agent of the participants tasked with the administration of the Takaful fund, for which it is compe nsated through a fixed fee.The operator does not share in the risk nor in the surplus generated from the two funds (investment and underwriting) but instead receives a fixed up-front fee (commonly a percentage of contributions paid) to cover management expenses, distribution costsincluding intermediaries remunerationcost of capital, and a margin for operational profit. This fee must be pre-agreed and is commonly expressly stated in the contract. This fee can vary by product and some contracts can change over time. Competitive consideration predominates in the setting of the level and structure of this fee.On the whole, the operator will be profitable if the fee it receives is greater than its incurred expenses. Theoretically, the Takaful operator bears no insurance risks itself. The risk-bearing is seen as a process of solidarity between participants and takes place solely among the collective of insured persons (therefore the name joint guarantee). However, due to the obligation to make up for any deficits in the pooled underwriting fund, the insurer is indeed exposed to a non-negligible insurance risk it might not be able to recuperate a Qard Hasan if insufficient surplus is generated Takaful (Islamic Insurance)Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 11 Milliman Research Report over time. Furthermore, no interest can be charged on the outstanding loan, but this is one of the very intrinsic principles of Islamic finance that has to be strictly followed. In reality, therefore, the Takaful operator under a Wakala model bears more risk than the designers of the model may have intended. In the extreme, the underwriting fund can be underfunded to create perpetual deficit in the fund thus making it the responsibility of the Takaful operator to be at risk perpetually.The diagram in Figure 4 compares a typical Family Takaful structure using the Mudarabah and Wakala models. Figure 4 Comparison oF m udaraBah and Wakala models Participants Participants Investment Fund d on at urp nt S me Ta b ar io n Underwriting Fund Surplus shared in predetermined ratio between participants and operator Operator est ru Inv urp nt S me est Inv ar Contribution Investment Fund ru d s& ent rplus ym Pa g Su im in Cla erwrit d Un Ta b s& ent rplus ym Pa g Su im in Cla erwrit d Un Contribution us Wakalah Model lus Mudarabah Model on at io n Underwriting Fund Wakalah Fee (% of Contribution) Operator In the 1980s, in a pioneering Takaful regulatory development in Malaysia, scholars initially accepted the more commercial Mudarabah model. However, recently there have been concerns raised by scholars that Mudarabah may not be appropriate because of the fact that Takaful is supposed to create a surplus and not profits, and underwriting surplus is prohibited as this arises from insurance risk.Therefore the element of profit-sharing of underwriting surplus by the Takaful operator within the Mudarabah model i s deemed to be not Shariah-compliant. The pure Mudarabah model seems more akin to a business venture rather than a mutually based contract based on solidarity of its participants, which would imply that the Tabarru is working capital and is arguably not in the spirit of a donation. Furthermore, the relationship between policyholders and operators lacks transparency. The development of Takaful n the Middle East took shape later in the 1990s, with the popular preference towards a Wakala model. The development of Takaful in the Middle East took shape later in the 1990s, with the popular preference towards a Wakala model. The Wakala (agency) framework emerged as the dominant model, and Malaysian scholars have moved in favour of this model too. However, in late 2004, some scholarsparticularly those in Pakistan, Bangladesh, and South Africabegan to highlight deficiencies with the Wakala approach.As a result of the recent findings in the Takaful industry, there have been many variations of Mudarabah and Wakala developed by practitioners to channelise the limitations. The variant Takaful models considered in this section are Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 12 Milliman Research Report Variant Mudarabah model A variant of the pure Mudarabah model would be to limit the profitsharing element such that it is only applied to the investment portion, which would then be fully in line with Shariah.However, this model might not be commercially viable as it is likely that the income generated from the investment portion will be insufficient for the Takaful operator. Another variant of this model would be to charge the operating expenses directly from the Takaful fund instead of funding it from the shareholders fund (i. e. , the underwriting result is net of Tabarru, claims, Retakaful, reserve adjustments, and operating expenses).The type and amount of expenses charged to the fund should be laid out to the participants in a transparent manner, although there are concerns about the type of expenses that can be charged to the fund. With the Mudarabah model, there is also the difficulty in managing fixed expenses alongside a variable and potentially volatile surplus, although this feature indirectly encourages the efficient management of the Takaful operation. However, given the many commercial challenges facing the pure and hybrid Mudarabah models, many Takaful operators have opted for the Wakala structure. Wakala with incentive fee model Critics of the pure Wakala model cite the lack of incentives for the operator to manage the Takaful fund efficiently as the operator does not share in any profits. The operators income is a fee, which is based on turnover (i. e. , Takaful contributions). Therefore, the Takaful operator may be driven to deliver large amounts of new business without due regard to proper underwriting or claim management (although to som e end this action is deterred through the commitment of an interest-free loan or Qard).To encourage the operators to apply appropriate underwriting and investment approaches, some operators have adopted a Wakala model with incentive compensation, where the Wakala fee is adjusted (upwards) in the instance of an underwriting and investment surplus. This performance-related fee would not be permitted under a pure Wakala model though the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI, the self-regulatory body) recognises that an incentive fee is permissible. To encourage the operators to apply appropriate nderwriting and investment approaches, some operators have adopted a Wakala model with incentive compensation. Wakala Mudarabah model (hybrid) This is the most popular model today for Family Takaful operators, where a Wakala is applied on the underwriting fund and a Mudarabah on the investment profit. Specifically, the operator charges a Wakala fee fr om the Takaful contributions and all underwriting profits are distributed back to the participants. However, investment profit is shared between the participants and the operator based on a predefined ratio.There is an appeal within this model as investment profits are commonly the major source of income for Takaful operators, whereas underwriting results can easily be managed using quota share Retakaful arrangements. Wakala with Waqf model The main issue in the pure Wakala model is that the element of Gharar (uncertainty) is not fully eliminated because the contribution (treated as a donation) remains in the participants ownership and is effectively a conditional donation. Hence the participant can expect to receive the surplus back, which therefore becomes a conditional gift.However, there is uncertainty about the level and timing of the surplus it will receive. Secondly, there is a relationship between the participant and operator and another amongst participants (exchange of g ift for a gift). This creates doubts on the Wakala contract as a contract of compensation. The relationship of the Takaful operator with the participants is ambiguous because none of the participants are liable for the repayment of the outstanding loan. To overcome these concerns, Pakistani scholars developed the idea of a hybrid Wakala-Waqf model to remedy some of these inherent disadvantages.This model requires the setting up of a Waqf (endowment-trust or independent pool) that becomes the nucleus for the relationship between the participant (donor) and the operator (i. e. , both have obligations towards this trust). A Waqf is a well recognised Shariah entity which has the ability of accepting ownership or appointing ownership of asset. The objective of the Waqf is to provide relief to participants against defined losses as per the rules of the Waqf fund. By setting up a Waqf, the following advantages are derivedTakaful (Islamic Insurance) Concept, Challenges, and Opportunities Sa fder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 13 Milliman Research Report ? The relationship of participant and operator is with the Waqf fund (i. e. , ambiguity removed) ? grant of participant to the Waqf is unconditional (Gharar removed) ? Operator can be a Mudharib (or manager) of the investments of Waqf and can share in the investment profits ? Contingency reserves within the fund may be set up ? Cross-subsidy of various generations of policyholders is permissible ?Surplus distribution can be predefined on a variety of criteria with the primary condition that the operator does not get any share as a Wakeel (or representative) to the Waqf fund Currently this model is widely used in Pakistan and South Africa, and has also been adopted by the Swiss Re Retakaful branch in Malaysia. Which Model to Choose An operator can choose any of the above-stated models but the choice depends on many factors, such as the target population, regional acceptance, Shariah boa rd views, regulatory framework, product design, marketing, and pricing.As outlined above, the most common models are the Wakala and Mudarabah model or a hybrid of both Mudarabah model is less acceptable globally but perhaps more attractive as profit is shared with the policyholders. However, there is a strong opinion of scholars from especially the Middle East that underwriting profit cannot be shared with the operator as it stems from donations. The Wakala model is by far the most recognised and has the positive effect of providing a fixed and steady income stream. However, in its purest form it has limited upside potential as the only source of income is the Wakala fee.This could ill-treat competitiveness as a high up-front Wakala fee might look unattractive to participants and have adverse effects to new entrants because of the high initial costs. There has been an increasing trend towards the hybrid model which is based on the application of the Wakala model for the underwri ting portion and the application of the Mudarabah model for the investment part. Considering that investment income usually makes up the bulk of the profits, this model is viewed by many Takaful operators to be commercially viable.This is widely practiced in the Middle East and Malaysia and accepted by virtually all scholars across the world. The AAOIFI has also endorsed hybrid versions of Wakala models. In all models, although not mandated by Shariah, the Takaful operator is commonly expected to provide an interest-free loan in case of a deficit in the underwriting pool. In all models, although not mandated by Shariah, the Takaful operator is commonly expected to provide an interest-free loan in case of a deficit in the underwriting pool.This expectation requires careful risk management techniques as there is uncertainty in terms of the amount and timing of the loan to be repaid from future surplus arising. Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 14 Milliman Research Report issues and Challenges FaCing the takaFul industry The issues and challenges facing the Takaful industry are considered separately under the following sections I. Key Issues and Challenges II. Technical Issues and Challenges III.Other Issues and Challenges I. key Issues and Challenges Some of the key issues and challenges facing the Takaful industry are a. b. c. d. e. f. g. h. Lack of consumer awareness Scarcity of human resources with both insurance and Shariah expertise The shortage of Shariah scholars with appropriate experience Lack of standardisation in the industry that is due to Shariah interpretations Diverging regulatory approaches and the lack of centralised regulations Solvency and capital requirements Corporate governance Shortage of suitable assets These are discussed in further detail below. . Lack of consumer awareness Despite the introduction of Takaful, the increase in the level of penetration anticipated has yet to be realised. Many consumers are still unaware of Takaful as an alternative, and some view Takaful as commercialisation of conventional insurance into the Islamic world and reject the notion that it is a Shariah-compliant instrument. In addition, many individuals tend to downplay the importance of security and retirement planning and many are also severely dependent on the social security systemsthis is particularly evident in the Middle East.Similar to conventional insurance, Takaful coverage is typically a proposition that needs to be sold to consumers (instead of one that is bought by consumers). There is a need to fundamentally address educational issues surrounding Takaful and individual risk management amongst the Muslim societies, to develop consumer awareness. Most of the current education on Takaful is among interested or related practitioners and investors, and very few awareness campaigns are aimed at or designed for the target population.Similar to conventional insurance, Takaful coverage is typically a proposition that needs to be sold to consumers (instead of one that is bought by consumers). b. Scarcity of human resources with both insurance and Shariah expertise Future growth may also be hampered by the currently narrow pool of professionals with sufficient Takaful knowledge in areas such as law, sales, and actuarial services. Most operators would typically employ human resources, such as legal advisors and actuaries, with conventional insurance experience.These resources would typically tend to learn the Shariah aspects of Takaful and adapt their previous experience to incorporate Shariah compliance rules in their new role. Hence the mindset of most operators tends to be driven by conventional thoughts and solutions and, as a result, there has been limited original thinking in the industry. Recently, there have been various Takaful courses offered, including one offered by the Chartered Insurance In stitute (CII), which will assist in the development and creation of human resources with both insurance and Shariah expertise. c.The shortage of Shariah scholars with appropriate experience Every Takaful operator requires a Shariah Supervisory Board, which is typically comprised of three or more Shariah scholars. For a Takaful operator with regional ambitions, the need to build credibility in the target market means there are preferences for the board members to originate from the target markets or at least have experience in the target market. Scholars would ideally have experience and knowledge not only in Islamic jurisdictions but also in Takaful. This is essential as board members are prudent for certifying the Shariah compliancy of the business operations.However, the number of Shariah scholars with experience in both Islamic jurisdiction and insurance is limited inevitably, these scholars are currently seated on multiple boards, which may create conflicts of interest and Tak aful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 15 Milliman Research Report compromise the quality of advice. The shortage in scholars remains a short-term barrier on new entrants and drives up the cost of setting up a Shariah board. As the Takaful industry has only recently been stablished, there is a wide range of issues currently being debated amongst Shariah scholars and technocrats, particularly those surrounding the definitions and practices that are deemed to be acceptable and Shariah-compliant. d. Lack of standardisation in the industry that is due to Shariah interpretations As the Takaful industry has only recently been established, there is a wide range of issues currently being debated amongst Shariah scholars and technocrats, particularly those surrounding the definitions and practices that are deemed to be acceptable and Shariah-compliant.For example, the inconsistency of Shariah int erpretations can be seen in the following issues Issues that are due to regional differences There are significant regional differences in consumer attitudes and the extent of tolerance and innovation in the Takaful industry. For example, Malaysia is perceived to be more liberal and willing to embrace modern conventional concepts within the Takaful framework. In contrast, the approach in the Middle East countries is more conservative, with less willingness to embrace modern conventions.This creates challenges in transferring solutions across regions. Issues in the choice of Takaful models There is a variety of models that may be adopted by the Takaful operator in the industry, as discussed in Section 3. There is a wide variation in practices and model preferences in various countries, which is due to the varying interpretation by scholars. For example, in Saudi Arabia, the regulatorsSaudi Arabian Monetary Agency (SAMA)approve a cooperative model in which only 10% of the surplus is mandatory for distribution to policyholders.Some scholars would argue that this model does not meet the requirements of Shariah compliance. For instance, there are no specific Shariah compliance requirements for assets. yet Takaful operations are still possible, and some have been approved, within the broader cooperative model framework. Similarly in Iran (where the correct legal system is Islamic-based), Takaful remains an unknown concept as the Shia Islamic school of thought (as practiced in Iran) does not view conventional insurance to be non-Shariah-compliant.However, despite these regional variations, there is a global trend elsewhere towards a Wakalabased model without any sharing of the underwriting profits. This approach has also been formally approved by the AAOIFI, which is a step towards standardisation. However, a global standard for Takaful models remains to be seen, which is due to the varying opinions and interpretations of Shariah scholars around the world. Issues about the source of capital There is a wide variety of issues that are subject to Shariah interpretations.One of the debates amongst scholars is whether it is necessary for the original capital in a start-up Takaful provider to be Shariah-compliant. In practice some scholars typically do not question the initial source of capital as this would impede the operation of global players. Instead, the scholars would usually only insist on the usage of capital to be fully Shariah-compliant. Issues surrounding the type of risk deemed acceptable in Takaful Another topic of debate amongst scholars s the type of risks that are deemed to be acceptable within Takaful, and this issue mainly relates to General Takaful. As the concept of Takaful is to mutually guarantee all participants, there is an argument that for large risks where the number of participants is limited, those risks may not fall within the concept of Takaful. For example, Takaful coverage for government-owned projects where all the participants within the pool are government agencies may not essentially achieve the concept of mutual guarantee (as arguably there is only one participant in the pool, the government).There is a debate on whether there should be a distinction between Halal (lawful) and Haram (unlawful) risk, and if prior screening of risks is necessary for acceptance within the Takaful pool. Related to the lack of standardisation in types of acceptable risks is the lack of uniformity in the definitions of insured events and exclusions. For instance, in Family Takaful treatment of suicide, Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 6 Milliman Research Report AIDS, and contestability is non-uniform. This complicates the applicability of pricing assumptions based on experience statistics drawn from conventional business and complicates pooling of experience among Takaful operations with differing under writing and contract definitions. Issues surrounding Wakala fees and the cost of capital Another issue that is constantly debated is the extent of expenses that can be charged by the operator as Wakala fees and whether the cost of capital can be included.Some Shariah scholars have argued that the operator cannot charge participants for the cost of capital, which raises the question of the commercial viability of Takaful operators. Some Takaful operators would also choose to allow for a profit margin to be embedded within the Wakala fees, and there is further debate on the extent that this is tolerable within the bounds of Shariah. The opposing views of Shariah interpretation in different regions make Takaful standardisation even more difficult to achieve, particularly for global companies wishing to provide similar product bases across various regions.This lack of standardisation in Takaful may undermine the credibility of the industry, and may have a subsequent negative impact tow ards consumer protection, transparency, disclosure, and the overall ethics of insurance. e. Diverging regulatory approaches and the lack of centralised regulations In the absence of standardisation of a global Takaful regulatory regime, the industry is relying heavily on the opinion of the Shariah boards of the Takaful companies, subject to any local regulatory constraints. Local regulators have adopted a variety of approaches when it comes to dealing with Takaful.There are three key categories of regimes The opposing views of Shariah interpretation in different regions make Takaful standardisation even more difficult to achieve, particularly for global companies wishing to provide similar product bases across various regions. 1. A level playing field approach, such as the Financial Services intimacy (FSA) in the UK. This is the most common approach by regulators in predominantly non-Muslim countries. The FSA has adopted a no obstacles, but no special favours approach in handling T akaful business and will regulate Takaful operators within its current regulatory framework. . A pragmatic middle ground, such as the Bank Negara Malaysia (BNM), in Malaysia, where the regulators have adopted a comprehensive Islamic financial system running parallel with the conventional system, with an evolving attitude to regulations over time. 3. A more specific betrothed approach, such as the Central Bank of Bahrain (CBB). The CBB has taken the lead in considering the unique characteristics of Takaful companies and aligns the regulations of Islamic insurance as far as reasonably possible.It is useful to note that based on a level playing field regulatory approach, the FSA has outlined in its November 2007 publication entitled Islamic Finance in the UK Regulation and Challenges, three potential challenges in regulating the Takaful industry Whilst Takaful products may appear similar to conventional products, the structure of the Takaful offerings and operations are fundamentall y different compared to conventional products The role and responsibility of the Shariah Supervisory Board should be purely advisory (i. e. , not executive roles) The marketing and promotion of Takaful products must be fair, transparent, and not misleading, in the spirit of the treating customers fairly principle Due to the variety of regulatory approaches, there is an incentive to develop a centralised global regulator for the Takaful industry. There have been talks within the industry particularly expressed by practitioners at various conferences and seminars for the need to standardise the Islamic finance industry, with aims to develop standards and guidelines for Islamic financial institutions and regulators.These are mainly driven by four organisations (details of each of the following are provided in Appendix III) Takaful (Islamic Insurance) Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Due to the variety of reg ulatory approaches, there is an incentive to develop a centralised global regulator for the Takaful industry. 17 Milliman Research Report Rulings of the Islamic Fiqh Academy of the Organisation of Islamic collection (OIC) Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Islamic Financial Service