Nestle - Zaka

Regulatory Frame Work of
Takaful in Pakistan
Shoaib Soofi, Director (SECP)

April 27, 2007
Karachi
Controlling Documents of
Takaful
 Insurance Ordinance, 2000
 Covers all types of insurance business in Pakistan including takaful,
 Insurance Rules, 2002

 Deals with specific details like admissibility of assets, reinsurance,
licensing documents etc, applicable to all insurers,
 Takaful Rules,2005
 Notified in 2005 under the Insurance Ordinance,2000 deals with
specific additional requirements for takaful operators.
 Circulars
 Issued by SECP from time to time on various specific issues
Compliance by Takaful
Operators
 A Takaful Operator has to comply with the Takaful
Rules 2005 in addition to requirements of the
Insurance Ordinance 2000 and the Insurance Rules
2002,
 In case Takaful Rules and Insurance Rules conflict -

Takaful Rules prevail.
 In case Takaful Rules and the Insurance Ordinance

conflict – Insurance Ordinance prevail.
Major Regulatory
Requirements for Takaful
Business in Pakistan
Registration
 Registration under section 6 of the Insurance
Ordinance is required to carry on Takaful
Business,
 A person can be registered either as a Family

Takaful Operator or General Takaful Operator.
No person can be registered as a Composite
Takaful Operator.
 Window Takaful Operations by existing

Conventional Insurers are NOT ALLOWED,
Shariah Board
 Takaful Operator shall appoint a Shariah Board,
 At least 3 members,
 Members must be high calibre scholars with knowledge of

modern financial dealings,
 Responsible for approval of products, investment and

operational practices,
 There is a provision of Central Shariah Board at SECP level

which is in process
Minimum Paid up Capital
 For Family Takaful Operator:

 Rs. 500 million
 For General Takaful Operator:

 Rs. 300 million
Minimum Solvency Margin
 Admissible Assets less Liabilities,
 As per the Insurance Ordinance plus the

condition that the securities must be
approved by the Shariah Board,
 Solvency requirements being reviewed.

Minimum Statutory Deposit
 Takaful Operators have to deposit and keep
deposited with State Bank a minimum amount in
cash or approved securities.
 Currently the minimum required statutory deposit

is higher of Rs. 10 million or 10% of Paid-up-
Capital,
 The securities for this purpose must be approved

under the Insurance Ordinance and should be
instruments of “approved Islamic Financial
Institutions”.
Operational Models
 The principal model for insurance risk
management component shall be based on
Wakala
 The principal model for investment components

shall be based on “Modarba”,
 The Takaful product shall be based on the

principal of Wakala or Modarba or both.
ReTakaful/Reinsurance
 Should be as per the guidelines of Shariah
Board of Takaful Operator,
 Should be adequate to ensure continuing

compliance by Takaful Operator with the
provisions of the Insurance Ordinance,
ReTakaful/Reinsurance (con’d)
 In case Shariah Compliant Re-Takaful
Operator does not provide sufficient re-
takaful, takaful operator may be allowed to
enter into contract with conventional
reinsurance under advice of Shariah
Board,
 Risk sharing among Takaful Operators

within or outside Pakistan may be
permitted by SECP,
Maintenance of Funds
 Each Takaful Operator shall maintain two
funds:
 Shareholder Fund (SHF),

 Participants Takaful Fund (PTF)
Maintenance of Funds (cont’d)
 Shareholder Fund (SHF):
 As per Insurance Ordinance and Rules,
 Under Guidelines of Shariah Board,
 Consists of Paid-up Capital and
Undistributed Profit to Shareholders,
Maintenance of Funds (cont’d)
 Participants Takaful Fund (PTF):
 To be established and maintained for each
class of Takaful Business,
 A risk pool to which the participants’ risk

related contributions are paid and from
which risk related benefits are paid out.
Investment
 Investments of the Funds must be Shariah
Compliant under the advice of the Shariah
Board,
Market Conduct
 Participants should not be mislead or deceived,
 Ambiguities in favor of participants,
 Agents’ Training
 SECP may visit Takaful Operators to check

compliance with Market Conduct Requirements
Additional Requirements for
Family Takaful Operators
 Appointed Actuary
 Certification of products as sound and

workable,
 Financial Condition Report as part of

Annual Returns,
 Any other duty prescribed by SECP.

Additional Requirements for
Family Takaful Operators (cont’d)
 Participants Investment Fund (PIF)
 Maintained to build up surrender value in saving type

takaful products,
 A portion of each year’s contribution is invested in

this fund,
 Maintained in the form of units,
 Unit prices to be determined at least once every

month.
Key Issues
 Human Resource,
 Shariah Issues,
 Limited Investment Avenues,
 Limited Re-takaful options,

Recent Developments
 A comprehensive paper on issues in Takaful Regulation
prepared by a joint working group of IFSB-IAIS (available on
their websites) addressing the key issues like corporate
governance, prudential regulations, suitability of persons
from a regulator’s viewpoint,
 Demand from conventional insurers to allow them to do

takaful business through window operations,
 5 takaful applications in process,
 Realization to review Takaful Rules mainly to remove

anomalies and address the needs of the market.
Thank You

Nestle - Zaka

Uploaded by

Copyright:

Available Formats

Nestle - Zaka

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Nestle - Zaka

Uploaded by

Copyright:

Available Formats

Regulatory Frame Work of

Shoaib Soofi, Director (SECP)

 Insurance Rules, 2002

 In case Takaful Rules and Insurance Rules conflict -

 In case Takaful Rules and the Insurance Ordinance

 A person can be registered either as a Family

 Window Takaful Operations by existing

 Members must be high calibre scholars with knowledge of

 Responsible for approval of products, investment and

 There is a provision of Central Shariah Board at SECP level

 For Family Takaful Operator:

 For General Takaful Operator:

 Admissible Assets less Liabilities,

 As per the Insurance Ordinance plus the

 Solvency requirements being reviewed.

 Currently the minimum required statutory deposit

 The securities for this purpose must be approved

 The principal model for investment components

 The Takaful product shall be based on the

 Should be adequate to ensure continuing

 Risk sharing among Takaful Operators

 Shareholder Fund (SHF),

 A risk pool to which the participants’ risk

 Ambiguities in favor of participants,

 SECP may visit Takaful Operators to check

 Certification of products as sound and

 Financial Condition Report as part of

 Any other duty prescribed by SECP.

 Maintained to build up surrender value in saving type

 A portion of each year’s contribution is invested in

 Maintained in the form of units,

 Unit prices to be determined at least once every

 Limited Investment Avenues,

 Limited Re-takaful options,

 Demand from conventional insurers to allow them to do

 5 takaful applications in process,

 Realization to review Takaful Rules mainly to remove

You might also like