Sources in the insurance industry say that the new set of regulations allows co-insurance by conventional and Islamic insurers – a key feature lacking in the original Takaful Rules 2012. CREATIVE COMMONS
Following the submission of a ‘compromise decree’, the Sindh High Court (SHC) has finally lifted the stay order against the implementation of Takaful Rules 2012.
Speaking to The Express Tribune, Securities and Exchange Commission of Pakistan (SECP) Insurance Commissioner Asif Arif confirmed on Wednesday that Takaful Rules 2012 are now effective following lifting of the stay order that kept conventional insurance companies from opening window Takaful operations for almost two years.
General and family Takaful companies challenged Takaful Rules 2012, which replaced Takaful Rules 2005, in court two years ago, claiming the SECP-approved new set of regulations would ‘distort’ the Islamic insurance industry.
However, the SECP and Takaful companies came up with a compromise decree recently that has now resulted in the SHC’s lifting of the stay order while allowing Islamic insurance companies three months’ time to meet regulatory requirements.
State Life Insurance Corporation of Pakistan, Jubilee Life Insurance and Adamjee Life Insurance have already shown their intention of launching Islamic window operations.
Although the SECP has yet to release an official statement describing the shape of the final Takaful Rules 2012, sources in the insurance industry say that the new set of regulations allows co-insurance by conventional and Islamic insurers – a key feature lacking in the original Takaful Rules 2012.
However, the initial demand of Takaful companies regarding the paid-up capital requirement for the conventional insurance companies interested in setting up Islamic window operations will not be accommodated in the new rules, sources informed.
Takaful Rules 2012 did not envisage separate paid-up capital for Takaful operations of a conventional insurance company. Takaful companies earlier claimed that not ensuring the separation of paid-up capital for the two kinds of businesses would lead to the ‘mingling of funds,’ thus making the entire exercise un-Islamic.
Currently, the minimum paid-up capital requirement for general and life Takaful/insurance companies is Rs300 million and Rs500 million, respectively.
However, Takaful companies have withdrawn this demand as part of their compromise, as they no longer insist on establishing a separate subsidiary with its own paid-up capital in case a conventional insurance company sets up Islamic window operations.
Moreover, contrary to the original demand of Islamic insurers, conventional insurance companies launching Shariah-compliant window operations will not be required to maintain a distinct separation in their Islamic and conventional operations through stand-alone, dedicated offices and staff for each line of business.
Similarly, the status of the Shariah board under the new rules will remain ‘advisory’ – as opposed to the initial demand by Takaful companies, which wanted its role to be ‘supervisory’ in nature.
Published in The Express Tribune, May 22nd, 2014.
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why they playing with peoples faith.