Bank Negara Malaysia (BNM) has introduced a new policy framework to broaden the application of ta`awun, or mutual assistance, in the country’s takaful sector, seeking to formalise how surplus funds can support wider social protection while maintaining participant rights and fund sustainability.
The Policy Document on Broader Application of Ta`awun in Takaful sets Shariah and regulatory parameters for how licensed takaful operators may use participants’ distributable surplus and orphan surplus to address protection gaps, particularly among vulnerable, unserved, and underserved communities. The move aligns with the objectives of Shariah (maqasid Shariah) and Malaysia’s Value-Based Intermediation for Takaful (VBIT) agenda.
The policy comes as Malaysia’s takaful industry continues to expand in scale and reach. Malaysian Takaful Association (MTA) chair Wan Saifulrizal Wan Ismail said industry assets reached RM62.54 billion as of mid-2025, up from RM41.87 billion in 2020. The family takaful segment has grown to 6.69 million active certificates, with annual contributions exceeding RM9.87 billion. “Total family takaful claims paid since 2015 amounted to RM45.46 billion as of end-2024,” said Wan Saifulrizal, as reported by Sarawak Tribune. He attributed the growth to collaboration among stakeholders on policy, product development, and public awareness efforts.
BNM’s policy reiterates ta`awun as a core Islamic principle that encourages mutual support for legitimate purposes and prohibits assistance for harmful or unethical activities. In the takaful context, ta`awun underpins the risk-sharing structure, where participants contribute to a common fund that pays defined benefits when pre-agreed events occur, as set out in the Islamic Financial Services Act 2013. This structure contrasts with conventional insurance, which is based on risk transfer from policyholders to insurers. Under the previous regulatory focus, ta`awun was largely confined to relationships among participants within a single takaful fund.
The new document expands this view by allowing operators to apply ta`awun more broadly, including to third parties beyond existing participants, provided Shariah requirements and participant interests are upheld. BNM encourages operators to consider new business and operational models, potentially involving a more diverse range of Shariah contracts and structures embedded with ta`awun features.
A key element of the framework is how distributable surplus belonging to participants and orphan surplus may be applied. Operators must ensure that surplus utilisation promotes equitable circulation of resources while preserving protection needs for existing participants, and supports social cohesion by addressing protection gaps among individuals and communities facing financial constraints or commercial non-viability. To protect contracting parties, the policy stresses fairness in fund management. Under wakalah arrangements, operators act as agents for participants and must ensure that broader ta`awun initiatives do not lead to unwarranted contribution increases or additional costs that disadvantage participants.
In principle, operators must obtain express consent from participants before using their share of distributable surplus for broader ta`awun purposes. Contracts must clearly state the pre-agreed events that may trigger such utilisation, avoid conflicts of interest, and set out the operator’s obligations, including Shariah compliance and alignment with the purposes defined under the policy. The framework also allows a deemed consent mechanism in limited, tightly defined circumstances. Conditions include prior written notification, a 30-day non-response period, a cap of RM10 per participant per financial year on the surplus used, the absence of prior banking information for direct crediting, certain product exclusions, and an ongoing right for participants to revoke deemed consent.
The policy introduces detailed governance and oversight expectations. Boards are responsible for supervising the broader application of ta`awun and ensuring it is supported by robust internal policies and procedures. Shariah committees must endorse the Shariah compliance of surplus utilisation, eligibility criteria for beneficiaries, relevant legal documentation, and disclosures in promotional or public materials. Senior management is required to consider regulatory compliance, the long-term sustainability of takaful funds based on actuarial input, and potential impacts on contributions when designing policies to govern surplus use. Operators remain subject to existing frameworks on takaful operations and appointed actuaries.
On the operational side, operators must define and obtain board and Shariah approval for eligibility criteria for beneficiaries of surplus used under ta`awun. At a minimum, these criteria must cover vulnerable consumers among existing participants, unserved and underserved market segments, and specified charitable organisations or authorised religious bodies. Priority is to be given to vulnerable participants within the relevant takaful fund.
The policy also outlines the possibility of an industry-level ta`awun fund, pooling consented distributable surplus and orphan surplus from multiple operators. Such a fund could be structured using new Shariah contracts, subject to regulatory approval, and administered by a party with adequate technology and controls. Priority areas mentioned include protection related to cyber risks, climate resilience, and uninsured health coverage, with options to incorporate partial self-contribution and linkages to financial literacy or empowerment programmes.
From a conduct perspective, operators must provide adequate information to existing and prospective participants about the purpose of broader ta`awun applications, target beneficiaries, and participant rights, if any. They must also disclose the impact of ta`awun initiatives, such as benefits distributed, donations to charitable entities, and increased access to cover for unserved or underserved groups. Where operators present broader ta`awun initiatives as corporate social responsibility activities, they are required to state when CSR funds are sourced from participants’ distributable surplus or from the operator’s own resources.
