KARACHI, July 13: The Securities and Exchange Commission (SECP) has promulgated new rules to regulate the Takaful business in light of recommendations made by a committee constituted five years ago.
According to a press release, Mohammad Ali, the SECP chairman, announced promulgation of the new rules at a function here on Friday.
The rules can also be read on the SECP website.
Takaful, an Islamic alternative of insurance, is based on the principles of mutual assistance in compliance with shariah. It provides for mutual financial aid and assistance to participants in case of certain contingencies. The participants contribute to a common fund for the purpose.
The existing Takaful rules had come into effect in 2005. Over the past seven years, stakeholders brought to the notice of the authorities a number of problems faced by them.
To address these concerns, the committee examined different aspects of the trade. The areas included coherence with accounting provisions of the SEC (Insurance) Rules of 2002, guidelines for allowing conventional insurance companies to do Takaful business through specialised “window” operations, prescribing of percentages in respect of various modes of shariah-compliant investments for determining solvency.
The SECP reviewed the draft and after seeking opinion of shariah scholars and legal experts, approved the new Takaful rules.
Mohammad Ali, the SECP chief, further said SECP was committed to working with key stakeholders for development of Takaful so that the facility could be made popular.
Commissioner (Insurance) Mohammed Asif Arif said, at present, three general Takaful (non-life insurance) and two family Takaful (life insurance) companies, were operating in the country.
The number of Takaful service providers was expected to grow after promulgation of the new rules. “After some time conventional insurance companies will also be allowed to offer Takaful products.”
Pakistan is the second country in the world, after Indonesia, to have introduced window Takaful operations.
If empirical experience is anything to go by, existing conventional companies should be able to ensure better services to their clients given that they have a large sales force and a vast network of branches, according to experts.