The Shariah Advisory Council (SAC) of Bank Negara Malaysia at its 187th meeting on 27 August 2018 decided that the application of musyarakah contract between a retakaful operator and takaful operator in managing the expense strain of the latter arising from the implementation of ‘Minimum Allocation Rate’ requirement is permissible, subject to the following conditions:
- The musyarakah capital contribution especially in the form of cash, shall not be treated and accounted as an up-front wakalah fee as such treatment is inconsistent with the nature of a musyarakah contract;
- The musyarakah capital shall be ring-fenced and shall not commingle with other capital in the shareholders’ fund; and other funds especially the tabarru` fund;
- Determination of profit and loss from the musyarakah must reflect the actual profit and loss of the identified portfolio, which must be ring-fenced from other portfolios; and
- The in-kind musyarakah capital (if any) must be valued in monetary terms at the inception of the musyarakah contract.