Introduction

The basic idea of an insurance agreement is that it is a mutual co-operation between two parties
to protect one of them from unexpected future financial loss. Under conventional setup the
main viewpoint of insurance is to minimize the risk while Insurance in Islam is essentially a
concept of mutual help in the cases of unforeseen events. Insurance business under
conventional system is based on uncertainty, which is prohibited in Islamic society under
Islamic principles. So there is need to clear the difference between the conventional insurance
and the Islamic insurance. We will present here conceptual and operational difference between
the Islamic Insurance and the conventional Insurance.

The Islamic Insurance (Takaful)

Takaful is the Islamic alternative to conventional insurance which is based on the idea of social
solidarity, cooperation and; joint indemnification of losses of the members. It is an agreement
among a group of persons who agree to jointly indemnify the loss or damage that may inflict
upon any of them out of the fund they donate collectively. Takaful is a plan based on solidarity
and brotherhood, which provides mutual financial aid and assistance to its participants in case
of need, whereby the participants mutually agree to contribute for that purpose.

Takaful plan it is a word of Arabic origin which means a system of Islamic insurance based on
the principle of taawuni (mutual assistance) and tabarru (voluntary contribution). Takaful
technically means joint guarantee, whereby a group of participants agree to mutually guarantee
each other against a defined loss, which suggests that the participants are both insurers and
insured in the arrangement.

The Conventional Insurance

Insurance provides the means for people to transfer the burden of uncertainty of financial loss
to the insurer, for an agreed financial consideration called the “Premium”. In exchange, the
insurer promises to provide financial compensation to the insured should a specified loss occur.
It is an effective risk transfer mechanism by which individuals or organizations can exchange
their uncertainty of financial loss or risk for the certainty of the premium. With a fixed
premium, the insured is certain that he will not have to pay more for that year. This service of
providing certainty of cost fixed premium is of immense value especially to organizations, as
it would help them budget their expenditure confidently. This is the financial security provided
by the modern conventional insurance.
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 Background
Sena Kalyan Insurance Company is the most recent concern of Sena Kalyan Sangstha (SKS)
of Bangladesh Armed Forces. Born through the Great War of Liberation, Bangladesh Armed
Forces have earned a time tested confidence of the people of the country and with that sky high
image, Sena Kalyan Insurance Company Limited will be able to serve all sections of the people
by upholding the principles of transparent perception and corporate practices in the field of
insurance.This being yet another entity of Sena Kalyan Sangstha, will add value to the existing
bondage between the partners and the organization alikeThe shareholding structure of the
company is institutional, which is unique in nature our industry. The Board of Directors is
composed of ex-officio Senior military officers .The Chairman of the Board is a serving Major
General Of Bangladesh Army, who is also the chairman of SenaKalyan Sangstha. All the shares
of the company is owned by Sena Kalyan Sangstha, which has already emerged as one of the
viable business organizations in Bangladesh.

Policies offered by Sena Kalyan Insurance Company Limited

Fire Insurance Policies

Fire and its allied perils Insurance
Life is full of unexpected events and not all of them are pleasant. Natural calamities such as an
earthquake, avalanche, storm or fire can put human life and property at risk. Fire and Allied
Perils Insurance policy safeguards against the losses that can arise due to a fire and allied perils.
This policy covers any unforeseen, sudden and physical damage to property insured in
consequence of the following perils:
 Fire, Explosion, Riots
 Strikes and Malicious Damage
 Cyclone, Flood, Tidal Wave
 Earthquake & Volcanic Eruption
 Tsunami, Aircraft, Bursting
 Impact on all property insured
 Subsidence, Collapse & Landslip

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Industrial All Risks Insurance
Industrial All Risks Insurance is a wider cover than traditional “Standard Fire and Special Peril
Insurance Policy”. It is an all risk policy covering a wide range of perils such as fire and allied
perils, burglary, accidental damage, breakdown as well as business interruption.

Property All Risks (PAR) Insurance

This policy covers all risks of physical loss, destruction or damage to the insured property
which occurred during the policy’s period and is subject to certain terms, conditions and
exclusions. This policy provides a wider coverage range than the Fire and Allied Perils
insurance policy. Noting that the PAR policy can be tailor made depending on the profession
clients and their requirements.

Hotel Owners’ All Risks Insurance (HOAR)

This is specially designed to cater to all the insurance needs of a hotel owner. This policy has
been adapted from the wording prevalent in international markets; as such coverage provided
by it meets the requirements of management agreements, which owners usually enter with
international chains of hotels. This insurance provides protection against material damage due
to fire and allied perils, business interruption following material damage, loss or damage to
plate glass, boiler and machinery breakdown, business interruption following machinery
breakdown, comprehensive general liability, and Workmen's Compensation.

House Hold Insurance

It is an insurance policy that combines various personal insurance protections, which can
include losses occurring to one's home, its contents, loss of use (additional living expenses), or
loss of other personal possessions of the homeowner, as well as liability insurance for accidents
that may happen at the home or at the hands of the homeowner within the policy territory due
to Fire & Earthquake.

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 Marine Insurance Policies

Marine Cargo Insurance

Marine Cargo insurance protects all goods while in transit depending upon the needs of the
client. For sea and air transits, the "Institute" Clauses, drafted by the Technical and Clauses
Committee of the Institute of London Underwriters are adopted for use in Bangladesh. Three
broad types of cover are available for sea transit i.e. Institute Cargo Clauses "A", "B" & "C"
and two types of cover are available for air transit i.e. Institute Cargo Clauses, Air &, Air All
Risks . On the other hand Transit by rail and road are covered either by Rail/Lorry/Truck only
or Rail/Lorry/Truck All Risks Clauses drafted by Central Rating Committee of Bangladesh.

Inland Transit Insurance

Inland Transit Insurance Policy covers the insured cargo against total loss / partial loss &
related expenses whilst the goods are in Inland. Inland transit covers domestic transits via land
conveyances and/or air shipments (domestic vessel transits are usually insured under an Ocean
Cargo Policy.

Marine Hull Insurance

The Marine Hull Insurance covers any sea and river vessels owned by individuals and legal
entities against total loss and/or partial damage of the sea vessel, collision liability, general
average and salvage, loss of freight, loss of disbursements.

Engineering Insurance Policies

Boiler and Pressure Vessel Insurance (BPV)

The Boiler and Pressure Vessel insurance provides coverage against explosion of any boiler or
pressure vessel insured whilst in the course of ordinary work. Coverage: Damages (other than
by fire) to any boiler or pressure vessels or other apparatuses.

Deterioration of Stock Insurance (DOS)

Deterioration of Stock in Cold Storage insurance is designed to meet the requirements of those
who want to insure their stocks against deterioration due to temperature rise while in cold
storage as a result of breakdown of refrigerating machinery provided such machinery
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breakdown loss is identifiable under the machinery insurance policy. Deterioration of stock
insurance is a complementary cover to machinery insurance and may only be taken out in
connection with the latter.

Contractors All Risks Insurance (CAR)

Contractors' All Risks (CAR) insurance is an insurance policy that provides coverage for both
damage to a property and third-party injury or damage claims. Contractors' all risk (CAR)
insurance policies are considered non-standard insurance policies.

Contractors Plant & Machinery Insurance (CPM)

This is an insurance of contractors’ plant and machinery that is done on an annual basis. It
covers unforeseen and sudden physical loss of or damage to the insured items, necessitating
their repair or replacement. The cover, which excludes internal breakdown, applies at work, at
rest or during maintenance operations and is not limited to a specific construction site.

Erection All Risks Insurance (EAR)

Erection All Risks Insurance policies are designed to cover the risk of loss arising out of the
erection and installation of machinery, plant and steel structures, including physical damage to
the contract works, equipment and machinery, and liability for third-party bodily injury (BI) or
property damage (PD) arising out of these operations. Coverage for delay in start-up (DSU)
costs is typically an optional coverage. Covered parties include the general contractor,
subcontractors, and in some cases suppliers and manufacturers of equipment. Examples of the
types of projects for which EAR coverage is typically purchased include power plants,
manufacturing and fabrication facilities, water and wastewater treatment facilities, and
telecommunications centers (particularly where the erection of signal towers is involved).
Some insurers combine EAR and contractors all risks (CAR) coverages into one form.
Although these terms are sometimes used interchangeably, there are some substantive
differences.

Machinery Breakdown Insurance (MBD)

Machinery Breakdown Insurance provides effective insurance cover for plant, machinery and
mechanical equipment at work, at rest or during maintenance operations. It covers unforeseen
and sudden physical loss of or damage to the insured items, necessitating their repair or
replacement. MBD insurance supplements the coverage afforded by fire insurance
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Power Plant All Risk Insurance
Plant All Risks Insurance Policy cover for plants and machinery against unforeseen physical
loss or damage that may arise from the occurrence of perils that are not specifically excluded
from the cover. The policy provides cover for the insured properties against All Risks of direct
physical loss or damage from any accidental cause to the insured plant and equipment.

Electronic Equipment Insurance (EEI)

This insurance provides cover for loss or damage to all electrical systems/equipment which
generally have only a moderate power requirement while such equipment is at work, at rest or
during maintenance operations. The Policy also covers cost of External Data Media and
Increased cost due to loss or damage to system.

Motor Business (Comprehensive/ Act Only Liability Insurance)

Motor Cycle Insurance

Motor Cycle insurance provides financial protection in the event of a motorcycle accident, loss,
theft or damage. Motorcycle insurance includes liability coverage in case the insured is
responsible for another person’s injuries or property damage. These policies provide coverage
for motorcycles, choppers, fast street bikes or “crotch rockets,” mopeds, and even Segways.

Private Vehicle Insurance

Private Vehicle Insurance covers loss or damage to vehicle and legal liability to third party's
(including passenger's) injury and property damage.

Commercial Vehicle Insurance

Commercial vehicle insurance is a policy of physical damage and liability coverages for
amounts, situations, and usage not covered by a personal auto policy. This type of business
insurance covers a variety of vehicles—from automobiles used for business, including
company cars, to a wide variety of commercial trucks.

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 Aviation Insurance
Hull Insurance
Hull insurance is an insurance policy especially designed for covering ship damage expenses.
Where the ‘Hull’ refers to the main body of the ship. Hull insurance can be understood like a
car insurance, with a difference of being for a water faring vehicle instead of land. Hull
insurance also includes any fixtures attached to the hull of the ship as a functional part, into the
definition of hull. Since the policy mostly applies to water going vessels, it is more popularly
called Marine Hull Insurance, and is a part of marine insurance.

Liability Insurance
Liability insurance is any insurance policy that protects an individual or business from the risk
that they may be sued and held legally liable for something such as malpractice, injury or
negligence. Liability insurance policies cover both legal costs and any legal payouts for which
the insured would be responsible if found legally liable. Intentional damage and contractual
liabilities are typically not covered in these types of policies.

War Insurance
War insurance is a type of insurance which covers damage due to acts of war, including
invasion, insurrection, rebellion and hijacking. Some policies also cover damage due to
weapons of mass destruction. It is most commonly used in the shipping and aviation industries.

Miscellaneous Accident Insurance

 Overseas Mediclaim ( Holiday, Study & Employment )

 Health Plan Scheme ( Hospitalisation )
 Burglary & House breaking Insurance
 Cash in safe
 Cash in Transit
 Cash on counter
 Personal Accident Insurance
 Fidelity Guarantee Insurance
 Product / Public Liability
 Workmen’s Compensation Insurance

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 Background
Islami Insurance Bangladesh Limited (IIBL), the first General Insurance (Takaful) Company
based on the Islami Shariah was registered and established under the Bangladesh Company
Act, 1994 and the Bangladesh Insurance Act, 1938 on 29th December, 1999 to transact all sorts
of general Takaful business. The Company started functioning from 1st January, 2000.

Policies offered by Islami Insurance Bangladesh Limited (IIBL)

Fire Takaful
Business places, homes and wealth require security from seen and unforeseen losses. These
might arise from fires, burglaries, natural calamities and other hazards which are an
unavoidable part of everyday life. In this regards, Fire and Allied Perils Takaful provides
comprehensive coverage against all risks to make lives and businesses secure.
Fire Takaful provides compensation to the covered person or firm in the event of damage to
property (i.e. buildings, stock, machinery and other contents). This policy extends customized
coverage for diverse industrial sector companies according to their needs. This Takaful policy
covers Fire losses due to the following:
 Basic Fire
 Fire and allied perils
 Householders
 Industrial all risks
 Business interruption

Marine Takaful
Despite meticulous planning, the various stages of transit face many challenges which can
cause monetary damages to cargo. Marine Takaful ensures complete security of valuable cargo
from any potential damage during its time on shipment vessels, and caters to all relevant
security needs of traders, shipping agents, transporters etc. There are various covers available
for the following types of cargo:
 Marine Cargo
 Marine Hull
 Marine Freight

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Motor Takaful
Motor Takaful covers against loss or damage to vehicle due to accidental fire, theft or accident.
It also covers bodily injury or death of a third party as well as loss or damage of a third party’s
property.
 Private Vehicle
 Commercial Vehicle
 Motor Cycle

Engineering Takaful
The world of engineering and construction involves a lot of factors beyond human control
which make way for all sorts of incidents. Accidents, whether minor or major, cause setbacks
and costly delays that endanger the schedule and integrity of any project. Engineering Takaful
provides construction sites the customized protection required to safeguard against unforeseen
accidents. Based on actual needs of the Participant, Engineering Takaful offers Contractor’s
Plant and Machinery/Equipment (CPM/CPE), covering civil works such as construction or
roads, bridges, dams and housing projects. Under this plan, comprehensive and adequate
protection against loss or damageswith respect to constructions plantsis made available, be they
equipment, machinery or property damages. Other major covers include Erection All Risk
(EAR), Machine Breakdown (MB)and Electronic Equipment Takaful (EET).
 Contractor’s All Risks
 Machinery Breakdown
 Deterioration of Stock
 Loss of Profit (Machinery)
 Erection All Risks

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 Premium Calculation
Conventional Insurance
In general, a premium is the amount that the insured pays for the protection and the value that
the policy provides. This rate is among the most important factors that affect the success of
insurance companies. An insurance premium is the money charged by insurance companies for
coverage. Insurance premiums for services differ from company to company. The amount of
insurance premiums charged by the insurance companies is determined by statistics and
mathematical calculations done by the underwriting department of the insurance company. The
level of insurance premium charged to a customer depends on statistical data that exists about
life history, age and health, the status of the assets. In a nutshell, the premium in the case

of conventional insurance depends on how much risk is considered among the parties
involved in the insurance contract.

Islamic Insurance (Takaful)

Premium or contribution in a Takaful contract is a form of monetary consideration from the
participant’s part, which is an obligation arising from a contract between the participant and
the operator. An insurance contract is a contract of mutual co-operation in which the
consideration is required not only from one party but from both parties, in which the operator
is unilaterally bound by the contract.

Riba (interest or usury) is totally prohibited under the Shari’ah law and under a Takaful
arrangement. To avoid Riba, Takaful treats participants’ contribution to the risk sharing scheme
not as a premium in the way conventional insurance does. In Takaful terms it is treated as being
a contribution in the form of a donation with the condition of compensation. The funds secured
from the participants' contributions or donations, must be managed and invested in accordance
with the Shari'ah. The pooled funds can be used to protect other participants from risk.

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 Conclusion

The key difference between Islamic insurance and conventional insurance rests in the way the
risk is assessed and handled, as well as how the fund in Islamic insurance is managed. Islamic
insurance (Takaful) is the second most important social institution to counter poverty and
deprivation. This position shows that Takaful is a way of dealing with poverty in any society,
no matter how backward it is. If well implemented, Takaful arrangements have the prospect of
the societal regeneration for poverty alleviation, or even its elimination, and pave ways for
sustainable economic development. It is second only to Zakat. In the end, we can conclude that
the conventional insurance is man-made while the Islamic insurance (Takaful) is based on the
principles of Islamic Sharia.

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