The Takaful Regulation issued on Tuesday represents the ultimate legislative framework for Takaful products and companies operating in this field, said Shaikh Abdullah Salim al Salim, Executive President of the Capital Market Authority (CMA). The issuance of the new regulation, he said, marks a new phase in the development of the insurance market characterised by the expected launch of new, diverse Takaful products that offer wider options for individuals and institutions.
The new Takaful Regulation, enshrined under Decision 103/2019, came into force on Monday. It gives six months for companies to bring their status into line with the provisions of the statute.
According to audited financial indicators for 2018 indicate, the share of Takaful insurance has reached 12 per cent of the gross direct premiums and amounts to RO 53.6 million. The CMA had previously licensed two companies to carry out Takaful business which reflects the desire of a wide segment of the population to procure sharia compliant insurance products.
Al Salmi said the legislation is in response to the growth of Takaful companies in the Sultanate which started four years ago to meet the needs of individuals and institutions including Islamic banks which started their business since the beginning of the current decade to act within an integrated system of sharia compliant financial services which allowed the legislator an opportunity to avail the experience to draft the detailed clauses of the law which is robust and flexible enough to enhance the Omani experience in nonconventional insurance products.
The regulation provides adequate protection to all the parties especially the insurance policyholders and gives confidence to the market by stressing on all aspects related to agency contract, board of directors, company management, senior management and their relationship as well as regulating Takaful contracts.
The nature of the Takaful business relies on the segregation of the funds of policyholders which is known as the participants’ fund from the account of the company that is managing the fund.
The law obliges CMA to establish a Supreme Committee for Sharia Supervision for Takaful to be constituted by the Board of Directors of the CMA specifying its terms of reference and terms and conditions for the members and their remuneration. The supreme sharia supervisor shall have the powers required to practice its functions.
Al Salmi added that the regulation obligates all the companies to constitute their respective sharia supervisory committees and that the differences between the sharia supervisory committee and the board of directors of the company shall be referred to the supreme sharia committee of CMA which have the final saying. The regulation also obliges the company to appoint Sharia external supervisor to perform Sharia supervision for each financial year to ensure all activities are sound and specified the functions of the external Sharia supervisor.
Takaful is sharia compliant cooperative activity based on participation and Takaful of a group of people to encounter specific potential risks through payment of subscriptions to the company for use in compensation of the person who incur damage. Takaful includes family Takaful and general Takaful.
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