Islamic Financial Services Board (IFSB)
Mutual Insurance and Takāful in a
Changing World
12-13 November 2012 | 27-28 Zulhijjah 1433
Ceylan Intercontinental Hotel
Istanbul, Turkey
www.ifsb.org
AGENDA
About the IFSB
Takāful
IFSB Initiatives on Takāful
2
About the IFSB
3
About the IFSB
Introduction
•
•
•
Based in Malaysia, officially inaugurated on 3 November 2002, and started
operations on 10 March 2003
Serves as an international standard-setting body of regulatory and supervisory
agencies that have vested interest in ensuring the soundness and stability of
the Islamic financial services industry, which is defined broadly to include
banking, capital market and Takāful
To this end, the work of the IFSB complements BCBS, IOSCO and IAIS
BCBS (Banking)
IOSCO (Capital Markets)
SPECIFICITIES OF
ISLAMIC FINANCE
IAIS (Insurance)
4
Members of the IFSB
52
8
127
Membership as at 29 March 2012
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IFSB Initiatives
IFSB
Initiatives
Development
of Prudential
Standards
Standard
Development
Facilitating
Implementation
of the Standards
(FIS)
Awareness
Programmes
Seminars
Annual
Events
Conferences
IFSB
Summit
Islamic
Financial
Stability Forum
Roundtable
Discussions
Public
Lecture
IFSB Central Focus
Banking
Takāful
(Islamic Insurance)
Capital
Market
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Takāful
8
About Takāful
Tabarru’ Commitment (Maisir, Gharar)
Takāful
Core
Principles
Ta’awun (Mutual Cooperation)
Prohibition of Riba’ (Usury)
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Takāful vs Conventional
Takāful
Insurance
Participants’ Risk Fund
Conventional Insurer
• Sale and purchase
agreement
Risk
Premium
Policyholder
• Risk transfer from
policyholder to insurer
Donation
Claims
• Risk sharing among
participants
Participant
• No restrictions on
investment activities
Claims
• Shariah-compliant
investment activities
• Claims is paid from
the Participants’ Risk
Fund
• Insurer is liable to pay
claims from
underwriting fund /
Shareholders’ fund
• Fund is owned by
shareholders
• Tabarru’ / Donation
agreement
Takāful
Operator
Manage
• Fund is owned by
participants
Fee
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Takāful vs Conventional
Issues arising from the differences
Accounting Treatment
Fund Ownership
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Investment
-
-
Issues on Solvency
Issues on Qard
Issues on Surplus Sharing
Restricted investment
activities
Fiduciary Duties
-
Duties towards respective
stakeholders
Operator’s Fee
-
Consolidation versus
combination of financial
statements
The extent of allowable
deduction from contribution
Shariah Compliance
-
Various resolutions on
similar issue (eg Retakāful)
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IFSB Initiatives on Takāful
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Regulations for Takāful
Joint Paper
August 2006
“Issues in Regulation and Supervision of
Takāful (Islamic Insurance)”
Prudential Regulations for Takāful (Islamic Insurance)
• Corporate Governance
• Financial and Prudential Regulation
• Transparency, Reporting and Market Conduct
• Supervisory Review Process
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Regulations for Takāful
Prudential Regulations for Takāful (Islamic Insurance)
IFSB-8:
Guiding Principles on Governance for Takāful (Islamic Insurance)
Undertakings
IFSB-11: Standard on Solvency Requirements for Takāful (Islamic
Insurance) Undertakings
GN-5:
Guidance Note on the Recognition of Ratings by External Credit
Assessment Institutions (ECAIs) on Takāful and Retakāful
Undertakings
ED-14:
Standard on Risk Management for Takāful (Islamic Insurance)
Undertakings (Exposure Period: 1 Nov ‘12 – 31 Mar ’13)
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Regulations for Takāful
IFSB-8: Guiding Principles on Governance for Takāful (Islamic Insurance)
Undertakings
Principle 1.1
Principle 1.2
Governance Framework
Code of Ethics and Conduct
Principle 2.1
Principle 2.2
Governance Structure for
Participants
Procedures of Proper Disclosure
Principle 3.1
Principle 3.2
Mechanism to Sustain Solvency
Sound Investment Strategy
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Regulations for Takāful
IFSB-11: Standard on Solvency Requirements for Takāful (Islamic
Insurance) Undertakings
7 Key Features
1.
2.
3.
4.
5.
6.
7.
Total Balance Sheet Approach
Adequate Solvency Resources
Establish Solvency Control Levels
Quality and Suitability of Solvency Resources
Comprehensive RM Framework
Supervisory Review of RM Framework
Public Disclosure of Solvency Information
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Regulations for Takāful
GN-5: Guidance Note on the Recognition of Ratings by External Credit
Assessment Institutions (ECAIs) on Takāful and Retakāful
Undertakings
Criteria for Recognition
1.
2.
3.
4.
5.
Explain Meaning and Methods
Produce Accurate Ratings
Produce Analytic Clarity and Competence
Ratings should be Robust & Independent
Sound Resources & Financial Condition
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Takāful - Looking Forward
Our way forward:
 Tentative areas to be covered:
 Issues on Retakāful
 Capital Adequacy
 Stress Testing
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THANK YOU
Kartina Md Ariffin
[email protected]
Member of the Secretariat
Technical and Research
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