Takaful surplus usually distribute one time perannum at the end of the financial year. Referring to the ultimate sum ofsurplus, the surplus to be distributed should refer to the guidelines given byappointed actuary and endorse by the board of directors. The guideline preparedby appointed actuary are based on several factors such as expectations oftakaful participants, regulations has been established by financial regulators,internal policy of takaful institutions and contracts that have been agreedwith the takaful participants. The actuarial principles of the desiredcharacteristics of the takaful surplus distribution method are stated as followwith assumption the surplus belongs exclusively to the participants: a. EquitableThe element of equitable should beapplicable in surplus distribution which means only the participants who reallycontribute to profit entitled to get the surplus distribution. For an equitablesurplus distribution, takaful operators may adopt one of the following threemodes which are pro-rata, selective or off-setting.
b. Acceptable Participants need to accept the logic andfairness of the surplus distribution method prepared by the actuary and adoptedby the takaful company. c. Simple The method of surplus distribution mustbe simple and easy to govern by takaful company. At the same time, easy forparticipants to understand and accept the logic. It is important to avoidconfusion that the participants may encounter if the method used is too comprehensive. d. Flexible Surplus distribution must be easy tochange or modify by takaful companies if circumstances cause changes in theamount of surplus available.
e. ConsistentDistribution of surplus must in line withthe actuarial basis for the provision of contributions and liabilities. The determination of surplusis essentially an actuarial process because it relies strongly on and sensitiveto the actuarial estimation of liability provisions for the business.