1. Takaful Regulations – A Global Perspective
International Program on Takaful
27th July to 1st August 2015
College of Insurance
Mumbai
Dr. Abdul Samad Mohammed
CBAK, Al Kharj, KSA

2. Presentation - Outline
Importance of Takaful Regulations
Need for Takaful Regulations
Possible Remedies
Global Scenario – GCC and other important players

3. Takaful As An Entity Islamic financial institutions and products, like
their Conventional counterparts, are essentially
legal constructions
Just as any evolving and growing concept, the
young entity like Takaful also needs guidance
and opportunity in order to grow into a well-
balanced mature industry

4. Need for Takaful Regulations
Legislation
Regulation
Compliance
Implementation
Policy
Holders Interest
Policy
Holders Protection
Brand Value

5. Takaful Regulations and Business Risk
Evolving Takaful regulations is a big Business
risk
As per an international survey in 2013 & ‘evolving Takaful regulations’ have been rated as 2nd most risky in the overall risk ranking .
Regulatory gaps often brings dodgy elements in the business - challenges and cost increase

6. Developing Takaful Regulations
The Consequences
Continuing regulatory reforms have unreasonably increased compliance costs and man efforts.
Significant regulatory divergences across global markets continue to adversely impact the industry’s growth, profitability and acceptance.
Remedy
Industry facilitators including regulators and standard setters
can nurture growth by working on standardization of
regulatory parameters
Standard Takaful models to remove barriers for healthy growth
Standard-setting bodies like AAOIFI and IFSB can develop a convergence roadmap for regulators, operators shariah scholars and other stake holders

7. Takaful Regulatory Concerns
Eradicate Miss-selling
Deciding whether to have a full fledged Takaful Operator
To offer Takaful through ‘Window’s’ of existing conventional operators
Timing of payment of contributions
Takaful Pool – participants

8. Takaful Regulatory Concerns - II
Rating of Risk
Policy Services
Claims Settlement
Fund Investment Norms
Treating the Surplus and Deficit of Participants funds

9. Shariah Advisory Board
Involvement from the inception stage
Job of the Shariah Scholars - not just prohibiting product development / working mechanism but to provide an alternative route
Orientation needs to be provided to the Shariah scholars about practical market and industry implications

10. Regulatory Scenario – UAE
On par with International regulations:
Solvency norms
Investment guidelines
Financial reporting
Models used – Wakala, Mudaraba and hybrid of both models
Regulatory provisions reflect the Shariah standards recommended by the AAOIFI

11. Regulatory Scenario – Oman
Capital Market Authority regulates the financial markets in
accordance with laws of Insurance Companies (Oman insurance law)
The process of updating laws and regulations applicable has
started and is being finalized
Recent measures include the following:
Operators preferred to “Windows” by conventional operators
Minimum Capital Requirements have been doubled
Tentative approval for 3 Operators already given
Shariah complaint index launched (Investing options broadened)

12. Regulatory Scenario – KSA
SAMA provides all regulations to the financial markets in KSA.
KSA is the biggest market in the GCC countries, out of a total
premium income of nearly $10 billion about 80% is based in Saudi
Arabia
Cooperative Model is dominant (Works as a Yardstick in offering insurance products. (NCCI - Major Player)
Strictly speaking Cooperative Model is different from ‘Pure Takaful’
Surplus Split:
90% - Shareholders
10% - Policy Holders
Insurance Laws and regulations must comply with the cooperative
model, as defined in the Articles of Association of the former state
monopoly Tawuniya

13. Regulatory Scenario – Kuwait
Ministry of Commerce and Industry regulates the insurance market in accordance
with law no. 24 of 1961 (Kuwait insurance law)
There was no exclusive expression of Takaful Regulations nor there was any
mention of it in the conventional Insurance laws.
But as of now new regulations dealing with insurance and Takaful are ready to be tabled
in the Parliament for discussion and ratification soon.
The new laws and regulations are expected to deal with the following:
Increased capital requirement for insurers (From US$ 525,000 to US$ 5 million)
Enhanced liquid asset requirements for operators
Qard Hassan
Shariah Supervisory issues

14. Takaful Regulations – Sudan
The term Takaful is used in Sudan to refer to life insurance as
distinct from general insurance
The Insurance and Takaful Act, To define the scope, subject and parties of insurance and Takaful contracts
In accordance with Article 7 of the Supervision and Control Act, of the government to free the entire economy from non‐Islamic transactions
Ministry of Finance and National Economy issued the Resolution
No. 219 in 1992 to form the High Shariah’ Supervisory Board
(HSSB) of the Insurance Supervisory Authority (ISA) with the
following primary objectives:
To issue fatwa on matters raised by (ISA).
To harmonize insurance operations in accordance with Takaful laws.
To get the Shariah Supervisory Boards of the different insurance companies operating in the market on to a common platform

15. Conclusion
Regulators should encourage the Takaful operators to provide sufficient support to policy holders
Takaful operators must establish if required complex and expensive safe guards to mitigate weakness in evolving regulatory regimes
Regulations should be tailored made to Takaful model requirements with coherent provisions for the development of Takaful industry as a whole

16. Jazakallah Khair and Thanks a Lot !