HUSEIN AL MEEZA analyzes the implementation of the Takaful regulations as a strategic tool to help consolidate the UAE’s key ranking in the global Takaful market.
The UAE’s Takaful industry has strongly positioned itself as a leading industry player for this insurance segment, reflecting remarkable growth over the last five years.
Industry experts are quick to note that from 2005 to 2010, the country’s Takaful segment grew at an astounding compounded annual growth rate of 135%.
The vibrancy of this growth also highlights the continuing influx of newer Takaful insurance companies and the roll-out of more Takaful products — key factors that will strongly contribute to the growth of the UAE’s insurance industry as a whole.
Potential
The UAE is also ranked third in terms of global contributions to the Takaful insurance industry, positioning itself alongside the likes of leading insurance economies such as Saudi Arabia, Malaysia, the general Southeast Asian region and North Africa.
The growth of Takaful in the UAE can also be widely attributed to the increased level of awareness of the benefits to be gained from using Takaful products.
Due to its growing popularity, Takaful has emerged as a strategic and preferred insurance solution backed by years of reinforcing, creating a strong foundation for Islamic muamalat.
Takaful regulations
Another proponent to this segment’s growth is the Insurance Authority (IA)’s recent promulgation of Resolution No. 4 of 2010, also known as the Takaful regulations, which are the UAE’s first set of standards and policies for Islamic insurers and are distinct from the traditional set of regulations imposed on conventional insurers.
The Takaful regulations provide essential details on the structure and powers of the Insurance Authority (IA) and the day-to-day operations of Takaful operators.
The new set of guidelines have been designed to provide guidance as to the structure of the Takaful policies to be issued—expressly prohibiting conventional insurers from offering Takaful products via an Islamic window.
These regulations also represent essential corporate governance requirements that help ensure the Shariah compliance of Takaful companies.
Amidst the implementation of these new regulations, Takaful companies are still required to comply with the provisions of Federal Article No. 6 of 2007, which covers the creation of the Insurance Authority (IA) and the implementing regulations covered by its establishment.
Shariah supervision
One of the key advantages of the Takaful regulations is the establishment of the supreme committee for fatwa and Shariah supervision, a national Shariah board for the Takaful industry.
According to the regulations, the supreme committee’s functions are:
• to issue key legal opinions or fatwas on insurance and investment issues for the Takaful industry that will be binding upon the industry
• to coordinate the legal opinions issued by the Shariah committees of the Takaful operators and
• to collate, classify and explain fatwas and opinions relating to Takaful issued by the Shariah supervisory boards of the Takaful operators.
The Insurance Authority (IA) is also granted powers to investigate the Shariah compliance of Takaful operators and to require Takaful operators to adjust their operations in the event that issues are identified.
A strong point made by the promulgation of the Takaful regulations is that only Takaful operators can offer Takaful products in the UAE. Conventional insurers are not allowed to offer these products even through Islamic windows.
Conclusion
The implementation of Takaful regulations is not only seen as a key factor to drive in more business to the UAE, but is also a strategic tool to help consolidate the country’s key ranking in the global Takaful market.
From a long-term standpoint, the regulations represent the much-needed legal framework that acts as a strong foundation for the Takaful industry.
It is truly a bold step towards better industry regulation, thereby assuring us more growth and brighter prospects for the future.
Husein Al Meeza is the managing director and CEO of Dubai Islamic Insurance and Reinsurance Company (AMAN). He can be contacted at
[email protected]
.