Muscat: The legislative framework for Takaful products and the companies operating in this sector have been finalised with the issuance of the Takaful Regulation, the Executive President of the Capital Market Authority Sheikh Abdullah Salim Al Salmi said.
The issuance of Decision No. 103/2019 has specified six months for the companies to adjust their position from the date the regulation comes into force on December 23, 2019.
Takaful is a type of Islamic insurance wherein members contribute money into a pool system to guarantee each other against loss or damage. Takaful-branded insurance is based on Sharia or Islamic religious law, which explains how individuals are responsible to cooperate and protect one another.
Regarding the contents of the Regulation, Al Salmi said that the legislation was in response to the growth of Takaful companies in Oman which started four years ago to meet the needs of individuals and institutions including Islamic banks.
The Executive President said that the provisions of the Takaful Regulation provide adequate protection for all the parties especially the insurance policy holders. >A6
It enhances the confidence in the market through regulating the agency contract, board of directors, company management, senior management and their relationship as well as regulating the 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. They pool the direct premiums and pay compensation in case of occurrence of risk of a participant member under cooperation contract.
He added that the Takaful Regulation guarantees the rights of each party as it contains a chapter showing the segregation process between the participants’ account and the account of insurance policy holders. It prohibits combining the assets and obligations of the shareholders’ funds and participants’ funds further to ensuring the necessity of managing the funds with due care in line with Sharia principles.
With regard to Sharia supervision, Al Salmi said 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. Such a supreme Sharia supervisor shall have the powers required to practice its functions.
He added 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 will have the final say.
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.
Al Salmi also said that the audited financial indicators for the year 2018 shows that the share of Takaful insurance has reached 12 per cent of the gross direct premiums at OMR53.6 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 invest in Sharia compliant insurance products.