MANAMA: Bahrain’s central bank will release a new regulatory framework for Islamic insurance (takaful) this quarter, in an overhaul of standards which the regulator hopes will attract new business in a sector it helped to pioneer.

The kingdom has been a major hub for Islamic finance in the Gulf, but in the last few years that role has been challenged by growing competition from Dubai and Doha.Bahrain already has takaful-specific rules but regulatory reform could help it grab a larger chunk of the sector, which Ernst & Young estimates will globally total $17.1 billion in gross contributions by 2015.

The new rules, developed after two years of consultations with the industry, cover the operations and solvency of takaful firms, said Abdul Rahman Mohammed Al Baker, executive director of financial institutions supervision at Bahrain's central bank.

They are expected to increase takaful firms' ability to distribute surpluses to policy holders and dividends to shareholders, he said. "We are in the final process of the new solvency framework for takaful. This will not only enhance the industry in Bahrain but also have an impact around the world."—Reuters