Clear clauses for segregation of policyholders and participants funds
Supreme Sharia Supervisory Committee, Sharia Supervisory Committee and External Sharia Supervisor to ensure sound practices of Takaful
CMA to establish Supreme Sharia Supervisory Committee
The Executive President of the Capital Market Authority HE Sheikh Abdullah Salim Al Salmi has said that the issuance of the Takaful Regulation means finalization of the legislative framework for Takaful products and the companies operating in this field adding that the new phase of the insurance market is characterized by new Takaful products featuring mature market, diversified products and wider options for individuals and institutions.
HE gave statement to the media after the issuance of Decision No. 103/2019 which specified six months for the companies to adjust their situation as from the date the Regulation coming into force on December 23,2019.
Al Salmi said the audited financial indicators for the year 2018 indicate that the share of Takaul insurance has reached 12% of the gross direct premiums at RO 53.6 million. CMA had previously licensed two companies to carry out Takaful business which reflects the desire of a wide segment of the population to get Sharia compliant insurance products.
On the contents of the Regulation, HE said the document is response to the growth of Takaful companies in the Sultanate which started four years ago to meet the needs of individuals and institutions including Islamic banks which started their business since the beginning of the current decade to act within an integrated system of sharia compliant financial services which allowed the legislator an opportunity to avail the experience to draft the detailed clauses of the law which is robust and flexible enough to enhance the Omani experience in non -conventional insurance products.
The Executive President added that the provisions of the Regulation provide adequate protection for all the parties especially the insurance policyholders and greatly heeded the issue of enhancing confidence in the market through focusing on a number of aspects related to regulating the agency contract, board of directors, company management, senior management and their relationship as well as regulating the Takaful contracts.
HE said 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. The participants fuds pools the direct premiums and pays compensation in case of occurrence of risk on a participant member of the fund under cooperation contract adding that the Regulation regulates the segregation to enhance the confidence and guarantee the rights of each party as it contain a chapter showing the segregation process between the participants’ account and the account of insurance policyholders’ and stressing on prohibiting combining between the assets and obligations of the shareholders’ funds and participants’ funds further to ensuring the necessity of managing the participants funds with due care and professionalism in line with the Sharia principles whether as to calculation of assets and separation of the assets of family Takaful branch from the assets of general Takaful and emphasizing the importance of having assets in excess of the obligations at all times. He added the regulation specified the method of dealing with the proceeds of subscriptions and surplus and the proceeds of investment, method of Al Qard Al Hassan from the shareholders’ fund to participants’ fund.
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 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 have the final saying. 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.
It is worth to note that Takaful is Sharia compliant cooperative activity based on participation and Takaful of a group of people to encounter specific potential risks through payment of subscriptions to the company for use in compensation of the person who incur damage. Takaful includes family takaful and general Takaful.