Islamic insurance rules: Takaful firms to withdraw petition against SECP

Conventional insurance firms to be able to run Shariah-compliant business.

KARACHI:

After a prolonged fight with the regulator to restrict competition in the Islamic insurance industry, Takaful operators are said to have struck a deal with their conventional insurance counterparts, which will allow the latter to run Shariah-compliant insurance business through parallel window operations.

General and family Takaful companies are soon going to withdraw their constitutional petition against the Securities and Exchange Commission of Pakistan (SECP), 23 conventional insurance companies and the federation of Pakistan, The Express Tribune learnt on Friday.

Following the promulgation of Takaful Rules 2012 in the middle of last year, general and family Takaful companies challenged the new set of regulations in court, saying the SECP’s move would ‘distort’ the Islamic insurance industry.



Claiming that window operators would conduct the Takaful business “in a manner against the principles of Shariah,” the petition filed by five Islamic insurance companies resulted in a restraining order from the Sindh High Court (SHC) against implementation of new rules on August 2, 2012.

“Takaful companies have agreed to an out-of-court settlement of the issue,” a source said on condition of anonymity.

According to the deal struck behind closed doors between Islamic and conventional insurance companies, the former will withdraw their petition challenging the Takaful Rules 2012, which will leave the provision about window operations fully intact.

The resolution of the dispute in favour of conventional insurance players is expected to result in massive job creation in the insurance industry and investments amounting to billions of rupees.

Some of the biggest players, including State Life, EFU Life, Jubilee Life and Adamjee Life are reported to be eager to launch their Islamic window operations. In fact, some of these companies have vowed publicly to launch window operations within three months of the lifting of the SHC’s restraining order.

Off their high horse?

While the advocate for the petitioners requested for an adjournment at the last hearing of the case on October 8 before an SHC bench, lawyers of the SECP and insurance companies opposed it, stating that the ex-parte interim injunction order obtained by Takaful companies has actually been working against them since August 2, 2012.



“They [respondents’ lawyers] have invited our attention to the operative part of the said order, whereby ‘parties’ were directed to maintain the status quo till the next date of hearing. They submit that the said order is being complied with by them in letter and spirit, but the petitioners are carrying on with their business, although they are also parties in these proceedings,” according to the October 8 order sheet signed by SHC Justices Nadeem Akhtar and Syed Muhammad Farooq Shah.

In other words, the argument of the respondents’ lawyers was that the petitioners should not be carrying out their business in view of the interim injunction order of August 2, 2012, which was equally binding on all parties.

“The contention of the learned counsel appears to be correct,” the SHC judges wrote in their order sheet of October 8.

“Although it was a lost battle for Takaful players from day one, they have finally come around only now. While the final agreement may involve some give-and-take on the part of both sides, the removal of the window provision from the law is clearly off the negotiating table now,” said another source involved in back-door negotiations.

“It seems that all their concerns about Shariah compliance have suddenly disappeared,” he added, referring to the Takaful companies’ earlier stance on the window provision in the law.

When contacted by The Express Tribune, the deputy CEO of Pak-Qatar Family Takaful, which is one of the petitioners, declined to comment on the issue.

Published in The Express Tribune, November 2^nd, 2013.

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