The Islamic Financial Services Industry (IFSB) and the Insurance Commission of Jordan have jointly organised the first of its kind Seminar on the Regulation of Takaful (Islamic Insurance) on 10-11 January 2005 in Dead Sea, Jordan.
Approximately 60 participants attended the two-day Seminar, with a majority of them representing organisations or regulatory bodies in the Middle East region.
Speaking at the opening session of the Seminar, Director General of the Insurance Commission of Jordan, Dr. Bassel Hindawi suggested that a working group comprising representatives from the IFSB and the International Association of Insurance Supervisors (IAIS) to be set up for the development of the regulation and supervision guidelines of Takaful industry.
“We are well aware that Takaful is growing in volume and application through markets, institutions as well as operations. Such growth and development need closer attention, review, evaluation and regulation for Takaful operators, their operations and products. As a matter of urgency, I would like to propose and in order to achieve a high degree of cooperation and comprehensive coverage of issues, a working group to be formulated, comprising representatives from the Islamic Financial Services Board and the International Association of Insurance Supervisors,” he said.
According to Professor Rifaat Ahmed Abdel Karim, Secretary-General of the IFSB, the emergence of institutions offering Islamic financial services (IIFS) over the last three decades, including the Takaful sector, has created a new challenge for the supervisory and regulatory bodies in the countries which host these institutions, as well as to the inter-governmental organizations which are responsible in monitoring the soundness and stability of the global financial system.
He added that the IIFS have been subjected to different approaches to regulation and supervision in the various jurisdictions within which they operate due to the absence of international standards designed to address the specificities of IIFS, and the lack of a thorough understanding of the complexities of their operations.
“Apart from denying the industry a level playing field, such differences in the approaches to regulating and supervising the industry have raised concerns that compliance with the various regulatory and supervisory regimes would impose additional costs on the IIFS, thereby potentially impeding the industry’s growth, and consequently, its aspiration to be fully recognized in the mainstream global financial markets which will allow the industry to reach its full potential,” said Rifaat.
Following the Seminar, three recommendations have been adapted. In line with the proposal made by Dr. Bassel Hindawi, the IFSB should play an active and complimentary role to that of the International Association of Insurance Supervisors (IAIS) by issuing prudential and supervisory standards for Takaful that would safeguard the interest of the consumers and the soundness and the stability of the financial system as a whole.
Secondly, it is recommended that priority in the IFSB work plan for Takaful should be given to specific and immediate regulatory issues that call for harmonisation across the Takaful industry as far as this is reasonably possible.
The IFSB is encouraged and as an initial step to establish a joint working group with the IAIS to produce an issues paper on the applicability of the existing IAIS core principles to the regulatory and supervisory standards for Takaful to be developed by the IFSB.
*Notes to Editors:
The Islamic Financial Services Board (IFSB) is an association of central banks, monetary agencies and inter-governmental international organizations that have an explicit mandate for promoting Islamic finance. The IFSB was established on 3 November 2002 and is based in Kuala Lumpur, Malaysia. At present, the Council of the IFSB comprises the following Full Members: Bahrain Monetary Agency, Bangladesh Bank, The Finance Ministry of Negara Brunei Darussalam, Central Bank of Egypt, Bank Indonesia, The Central Bank of the Islamic Republic of Iran, Islamic Development Bank, Central Bank of Jordan, Central Bank of Kuwait, Bank Negara Malaysia, State Bank of Pakistan, Qatar Central Bank, Saudi Arabian Monetary Agency, Bank of Sudan and the Central Bank of the United Arab Emirates. The IFSB sets and disseminates prudential and supervisory standards and core principles that are in compliance with Shari’a rules and principles for the regulation and supervision of the Islamic financial services industry.
