ISLAMABAD, Sept 7: The government has notified Takaful Rules, 2005 for the conduct of takaful operations in the country. The rules were prepared by a task force constituted by the Securities and Exchange Commission of Pakistan.

A statement issued here on Wednesday said that takaful was an Islamic mode of insurance, which provided mutual financial aid and assistance to participants in case of occurrence of certain contingencies and whereby the participants mutually agreed to contribute to a common fund for the purpose.

Under the rules, a wakalah (agency) operational model has been introduced. This model is currently in practice in many countries where takaful products have been introduced. In this model, surplus (if any) in the takaful fund is distributed to the policyholders.

The operator charges wakalah fee from contributions that covers most of the expenses of business. Rate of the fee is fixed in advance in consultation with the Shariah committee of a company. All investments are made in Shariah compliant instruments.

Under the rules, there is no provision for window products or takaful operations by the conventional insurers.

The statement said that the existing life and non-life or general insurance companies engaged in conventional business should not be permitted to underwrite takaful business or launch such products.

With the notification of the takaful rules, Pak-Kuwait Takaful Company (PKTC), which has already been granted certificate of registration for conducting general takaful business, will now be able to start its operations.

PKTC is a joint venture between Pak-Kuwait Investment Company, Takaful National, a Malaysian company, and Meezan Bank.

Applications of certain other local and international sponsors in launching takaful companies are in the pipeline.

The notification of the takaful rules is an important step in pursuance to the government’s objective of Islamizing economy and providing insurance coverage to the institutions undertaking Islamic financing.

The task force, which prepared the rules, was headed by former Chief Justice, Federal Shariat Court, Mian Mahboob Ahmed, and included Saif-ud-din N. Zoomkawala, Managing Director, EFU General Insurance Company, Mr Abdul Rahim, Executive Director, Sidat Hyder Morshed Associates, and Shafaat Ahmad, Executive Director, SECP, as its member/ secretary.

The rules were prepared and notified under the Insurance Ordinance, 2000 and can been seen on the SECP website: www.secp.gov.pk