Insurance Products in Rastin Profit and Loss Sharing Banking

Purpose: This paper aims to explain new insurance products and policies in Rastin Profit and Loss Sharing (PLS) Banking. Rastin Banking is a full Islamic Banking System with all necessary parts for banking operations that can be installed in conventional and Islamic banks both. In this paper, we are going to explain the milestones of new insurance products and policies. Design: Rastin Banking complies with the nature of the intermediary financial activity and has a new type of banking operations. The systems and instruments of this type of banking have different risk treatments, and new insurance policy and measures should be defined to cover the risks of the operations In order to fulfill this goal, appropriate insurance policies are described. Findings: Some new insurance products are defined such as Certificate Insurance, Insurance of Market Value of Certificate, Responsibility/Engineering Insurance, Insurance of Accidents Concerning the Article of Sharing, Collateral Insurance, Loss Margin Insurance, Profit Margin Insurance, Merchandise Transportation Insurance, Production Equipment and Installations Insurance, Product Quality Insurance, Insurance of Commodity under Production, Inventory Insurance, Production Limited Loss Insurance, Transaction Limited Loss Insurance to handle Rastin Banking. Research limitations: Many of these insurance policies are new and require more elaborations for further practical development and adjustment. Practical implications: These insurance products can be used both in Rastin Banking operations as well as conventional business and finance arrangements. These insurance policies have no conflict with indisputable legal principles, and insurance companies can supply these insurance products based on their own actuary calculations. Social implications: The introduced insurance policies actually change profit and loss sharing activity to just profit sharing. Originality/value: Approach of this system and the designed insurance policies is entirely different and new.


Introduction
Insurance in Persian is called "Bimah" derived from the word "Bima", and has Sanskrit root 2 and also has the same root of the verb "Bim" (to fear) in Persian. Some others believe that this term comes from the translation of a Russian word of "Astrakhan" from a philological point of view that means as opposite of fear; this is because Russians introduced insurance in Iran for the first time. Some others believe "Bimah" is the name of a town in Tabaristan and Deilam. 3 Daily applied the meaning of Bimah is the organized grouped guarantee or coverage for facing the aftermaths of perils and losses or future unwelcoming events in socioeconomic life. Insurance is defined as a contract according to which the insurer underwrites to indemnify another (insured person) in the event of loss or damage. An insurer is a person or company offering insurance policies in return for premiums. An insured person is a person whose interests are protected by an insurance policy. On the other hand, he is an individual who contracts for an insurance policy that indemnifies him against loss of property or life or health, etc. (insured article). 4 In other words, the insurer and a. Joalah Financial Sharing (JFS) 18 b. Mudarabah Financial Sharing (MFS) 19 c. Installment Financial Sharing (IFS) 20 d. Rent Financial Sharing (RFS) 21 e. Bail Financial Sharing (BFS) 22 f. Rastin Group Funding (RGF) 23 g. Rastin Personal Security (RPS) 24 h. Rastin Social Takaful 25 (RST) 26 approved, proposal will be a reference source against entrepreneur executive operations. 13 Project is a collection of economic activities with specified and concrete plan with defined cost and terms for making profit through Rastin PLS Banking offered to PLS bank. 14 Monitoring is an action which is done by bank for protection of depositor's interests and good performance of executive operation in Rastin Banking. Bank is obliged to take measures for good operational performance. Standards for monitoring are based on Rastin Banking articles of the executive bylaw.

15
Trustee unit is a unit at PLS office of Rastin PLS bank for supervision and control of Rastin PLS proposed projects on behalf of bank regarding good performance of project in comparison to initial proposal through key indicators and financial reports and supervision for final delivery of the project. Rastin Certificates is a collection of designed certificates in Rastin PLS Banking Base system and its financial subsystems. These certificates are issued and delivered to depositor or financer instead of the received fund (deposit). Rastin Certificates (except Guarantee Certificate) are transferable and negotiable online through the Rastin Certificate Market (RCM) 32 of the bank and are issued with a nominal price and for a specified period. The owners of these certificates share the results of the project proportional to nominal price and participation period of the certificate. Various Rastin Certificates and their characteristics according to the kind of participation in the PLS Base system or its financial subsystems regarding the type of project and the used asset will be bound to Rastin Banking regulations. These certificates can be anonymous or named papers, except Guarantee Certificate that must be named. These certificates are:

PLS
1-Partnership (Musharakah) Certificate: is an anonymous or named paper which expresses the participation of depositor in one of the PLS banking products with a defined value and is issued by bank for a specified period and its owner shares the profit and loss of the subject of participation proportional to its nominal value and duration of participation according to rules and regulations of Rastin PLS Banking. This certificate is used in Rastin PLS Base System.
2-Subscripted (Pazireh) Certificate: is an anonymous or named paper which expresses the participation of depositors in one of the first or second kinds of PLS banking products with a defined value which is issued by bank for construction period for infinitude projects and its owner shares the profit and loss of the subject of participation proportional to its nominal value and duration of participation by becoming the shareholder of the company according to rules and regulations of Rastin PLS Banking. This certificate is used in Rastin PLS Base System.
3-Future Certificate: is an anonymous or named paper that cites a commitment to deliver the commodity that is issued by the bank and can be negotiated and transferred to another purchaser. By this certificate, the entrepreneur or producer is committed to delivering the commodity to the certificate holder at maturity or sales the commodity and refund the sold amount to financer according to the contract. This certificate is used in Joaleh Financial Sharing (JFS) subsystem. government to provide the sustenance of the individuals in the society.

4-Mudarabah Certificate:
is an anonymous or named paper which expresses the participation of depositor in profit and loss of a particular project (Product I) of the PLS banking products with a defined value and is issued by bank for specified period and its owner shares the profit and loss of the subject of participation proportional to its nominal value and duration of participation according to rules and regulations of Rastin PLS Banking. This certificate is used in Mudarabah Financial Sharing (MFS) subsystem.

5-Periodic Mudarabah
Certificate: is the same as Mudarabah Certificate, but the return of the project is paid to depositor periodically. This certificate is used in Mudarabah Financial Sharing (MFS) subsystem.
6-Mughasatah Certificate: is an anonym negotiable document issued by Rastin PLS bank with a nominal price for real financial participation (sharing) for a specified period. The bearer of this paper receives periodic payments relative to his share and the period of participation. Payments will be paid at the end of each period.
In the end, the entrepreneur will own the project. This certificate obtains installment until the end of the contract, and after the settlement of the contract, the entrepreneur becomes the owner of the project. The settlement is after the payout of the last installment. This certificate is used in Instalment Financial Sharing (IFS) subsystem.
7-Rental Mughasatah Certificate: is an anonym negotiable document with a defined nominal price for a defined period of time (rental tenure) issued by Rastin PLS bank, which conducts Rastin PLS activity. The owners of these certificates have right on the results of the sharing project which is proportional to the nominal value of the certificate and the duration of holding certificate until the end and receive periodic rent and installment of the valuation of the project at the end of each period. The settlement is after the payout of the last installment and rents for the certificate. At the end of the contract, the entrepreneur will become the owner of the project. This certificate is used in Instalment Financial Sharing (IFS) subsystem.

8-Musharakah Mughasatah Certificate:
is an anonym negotiable document with a defined nominal price for a defined period of time (Musharakah tenure) issued by Rastin PLS bank, which conducts PLS activities. The owner of this certificate has right on the result of the sharing project proportional to the nominal value of the certificate and the duration of holding the certificate until the end of the contract, and receive periodic installment plus income (positive/negative) yields of the project at the end of each period. After the payout of the last installment and the profit or loss (yield), the settlement takes place. In the end, the entrepreneur will become the owner of the project. This certificate is used in Instalment Financial Sharing (IFS) subsystem.
9-Mortgage Sharing Certificate: is an anonym (nameless) negotiable document with a nominal price, which is issued for a specified period by a Rastin PLS bank. The holder of these certificates shares in the yield of the asset of the project proportional to his share to the nominal price of the assessed value of the asset considering his participation period. The principal and return of sharing of these certificates will be paid to the depositor at the end of the contract. This certificate is used in Rent Financial Sharing (RFS) subsystem. 21-Rent Certificate: is an anonym negotiable document, which is issued with a defined nominal price and for a certain period by Rastin PLS bank. The owner of this certificate shares the rent of asset proportional to its assessed asset nominal price. The rent will be paid to depositor periodically, but the original fund plus the rent will be paid to the depositor at the end of the contract period. This certificate is used in Rent Financial Sharing (RFS) subsystem.

22-Guarantee Certificate:
is a named document which shows the guarantee of a certain amount of money and is issued by notary upon the mortgaged asset and if the obligation is not fulfilled, the owner must compensate it. Otherwise, the mortgaged asset will be sold through auction, and the claim of the acceptor will be settled. This certificate is used in Mortgage Securitization System (MSS).
23-Bail Certificate: is an anonym negotiable paper with a defined face value and duration issued by Rastin PLS bank branch. The owner of this certificate will receive the commodity or its price (at market price) from the entrepreneur who is obliged for this certificate. This certificate is used in Bail Financial Sharing (BFS) subsystem.
24-Social Security Certificate: is an anonym or named negotiable document with defined nominal price issued and for a specified period given to the insured person by Rastin PLS bank on behalf of the security fund in exchange for payment of insurance premium to the security fund. The holder of this certificate shares the fund capital proportionate to the value and shares the fund returns proportionate to the amount and duration of his certificate. This certificate is used in Rastin Personal Security (RPS) subsystem.

25-Personal Security Certificate:
is an anonym or named negotiable document with defined nominal price and maturity, and is issued by Rastin PLS bank on behalf of the pension fund for depositor by the request of the pension fund and equal to the amount of the deposited deposit. The holder of this certificate shares the capital of the fund in proportion to his deposit and shares the return of the pension fund proportional to the amount and duration of the deposit and receives his share (principal and profit) from the fund at maturity. This certificate is used in Rastin Personal Security (RPS) subsystem.

26-Pension Security Certificate:
is an anonym or named negotiable document, which is issued from changing the share of the depositor into several small lots at maturity, so that the holder can receive continuous pension payments from the fund. The return of this certificate will be calculated and paid to depositor according to Rastin Participation Accounting procedures for Joint Stock Company with Variable Capital (JSCVC). 33 On the other hand, if depositor or the owner of the certificate does not want to receive back his share and return from the fund in a lump sum at maturity, he can ask the fund to change his certificate into several smaller certificates with continual maturities and amounts via the agent bank. This certificate is used in Rastin Personal Security (RPS) subsystem.
27-Takaful Certificate: is an anonym or named negotiable document with a defined face value and term, which is issued by Rastin PLS bank branch. The owners of these certificates give a choice to Rastin PLS bank to use their deposits for granting to needy people graciously for a certain period and report his activities to the 28-Loan Certificate: is an anonym or named negotiable document with a defined face value and term that is issued by Rastin PLS bank. The owners of these certificates give a choice to the bank to use their deposits for extending interest-free loans to needy people for a specific period, and return the principal money back to the depositor after that period and report his activity to the depositor and supervisory authorities. This certificate is used in Rastin Social Takaful (RST) subsystem. All the above systems and instruments have different risk treatments and should be used by insurance measures to cover the risks of the projects failure and hedge the financial resources and benefits of the sides of the contracts.

Insurance Products in Rastin Banking
Financial activities of Rastin Banking need new insurance products and policies. In addition to prevailing insurances, some new insurance products were mentioned here. To safeguard the interests of depositors and to decrease risk and cover the probable losses of financial activities and also to alleviate confidence of the parties to Rastin PLS Banking contracts, some insurance coverage has been anticipated as follows: 1. Rastin Certificate Insurance: By paying a fee, bank or depositors can ask insurer companies to insure the total or a portion of the nominal value of their Rastin Certificate according to the request of the depositor or Rastin Certificate holder in charge and interest and name of the depositor or Rastin Certificate holder. Bank and insurance company can offer Rastin Certificate insurance rate and policy in Rastin Certificate Market web portal. Insuring Rastin Certificate is optional for the depositor in Rastin Banking.

Insurance of Market Value of Rastin Certificate:
Rastin Certificate holder can insure his certificate against market price fluctuations at a higher price than nominal value in his charge and interest and name. This insurance is also optional. 34 Bidabad, Bijan (2013) Rastin Certificate Market (RCM), Complementary System of Rastin Banking http://www.bidabad.com/doc/rastin-bank-rcm-en.pdf 3. Responsibility/Engineering Insurance: Responsibility/engineering insurance for covering probable losses of unexpected technical and human accidents during the execution of the project period is compulsory for entrepreneurs of Rastin PLS projects. The entrepreneur must buy corresponding insurance policies to cover the unexpected accidents in his charge and interest and name.

Insurance of Accidents Concerning the Article of Sharing:
Entrepreneur must insure the article of sharing against natural calamities, fire accident, explosion, and other unexpected accidents at least equal to the amount of provided and used sources in charge of the project, and in interest and name of the bank. This insurance fee is an acceptable cost item for the project. 5. Collateral Insurance: Entrepreneur must insure his provided collaterals in charge of himself and interest and name of the bank at least equal to the value of bank share in the project during the project execution period. The entrepreneur must reinsure the collateral until the end of the execution period so that the collaterals should be insured for all times of the execution period.
6. Loss Margin Insurance: Entrepreneur can insure the project against probable loss equal to the amount of loss he expects. This insurance is optional or compulsory in various Rastin PLS Banking Subsystems. In the case of being compulsory, the entrepreneur is responsible for compensating the occurred losses according to the regulations of that subsystem if he had not bought the necessary insurance policy.

Profit Margin Insurance:
In order to guarantee the probable profit margin, an entrepreneur can insure this margin in his charge and interest and name. This insurance is optional or compulsory according to different Rastin PLS Banking Subsystems applications.
8. Merchandise Transportation Insurance: Contract parties can insure the merchandises of the article of contract against probable risks of transportation, by mutual agreement. The assessment unit 41 of the PLS department of the bank will determine the necessity of this insurance, according to the Financial Subsystem used. If the transported commodity, raw material, and intermediate goods comprise the interests of both parties, this insurance will be compulsory for both sender and receiver of the goods. The parties should provide this insurance policy at a specified time determined by the assessment unit in charge of sender and receiver and in name and interest of the bank. 9. Production Equipment and Installations Insurance: For better safety and performance of Rastin PLS Banking activity, an entrepreneur can insure his production equipment and installations against fire accidents, explosion, natural accidents, and calamities, and the risk concerns of the second party at his own charge, interest, and name. According to the applied Financial Subsystem, assessment unit of the PLS department of the bank will determine the compulsion or optionality of this insurance.
10. Product Quality Insurance: In order to ensure the quality of the produced goods and attracting buyers, an entrepreneur can insure the quality of his products according to conventional standards. The subject of this insurance policy is compensation of probable vital and financial losses to consumers, and a third party regarding the produced commodities because of unsafe, defective, and shortcomings processes of production. This insurance policy is optional.
11. Insurance of Commodity under Production: Entrepreneur must insure the producing commodity at least equal to the nominal value of the raw material bought or delivered, besides an insurer company confirmed by the bank for production period, in charge of entrepreneur and in name and interest of the bank.
12. Inventory Insurance: For better safeguarding of performance of Rastin PLS Banking activities, an entrepreneur can insure the raw materials and products inventories against risks of a fire accident, explosion, natural accidents and calamities, theft and also other party's risk concerns at his charge, name, and interest. According to the applied Financial Subsystem, the assessment unit of the PLS office of the bank will determine the compulsion or optionality of this insurance.
13. Production Limited Loss Insurance: If the market or estimated price of the construction project (at the end of construction period) is less than its cost price, "production limited loss insurance" can be used to compensate the loss.
14. Transaction Limited Loss Insurance: Entrepreneur can insure the risk of transaction activities equal to the amount he is concerned about probable failure in his transaction activity at his own charge, name, and interest. If an entrepreneur does not insure this risk, he will bear the likely risk.
15. Transfer of Money Insurance: Bank can insure the risk of transfer of money equal to the amount he is concerned about probable failure in money transaction at his own charge, name, and interest. If the bank does not insure this risk, he will bear the probable risk.
It is possible to use coinsurance and reinsurance in all above cases. The insurer can use these kinds of insurances to pro rata the aftermaths of the occurred risks. In coinsurance, several companies will jointly insure a risk. This insurance is usually used to cover large risks such as fire accident or explosion and similar things in factories, and each insurer company bears a portion of the risk. In reinsurance, the first (direct) insurer company covers a portion of the risk, and the second insurer company will cover the remaining risk. In other words, the direct insurance company will insure a portion of the risk in another company.
Complementary insurances are a kind of insurance used by insuring companies to obtain more support for other accidents concerning the article insured. This is different from double insurance, which is referred to as multiple coverages of an item insured. By considering the applied Financial Subsystem, the assessment unit of the PLS office will define the necessity and kind of needed insurance before signing contracts. Several types of insurances as complementary insurances can be used. The necessary insurances for various Financial Subsystems are documented in Draft of Operational Bylaw of Rastin Banking 42 .
The listed insurance products have no conflict with well-known legal principles. Insurer companies can supply these insurance policies according to their actuary calculations to the bank, depositor, and entrepreneur. 43