IFSB recently announced a two month consultation period for their latest guideline for Takaful:
EXPOSURE DRAFT 20: KEY ELEMENTS IN THE SUPERVISORY REVIEW PROCESS OF TAKAFUL/RETAKAFUL UNDERTAKINGS
This guideline is very wide reaching in that it provides guidance as to supervising Takaful and Retakaful operations, including:
- Corporate Governance
- Shariah Governance
- Takaful Operational Framework
- Capital Adequacy
- Risk Management
IFSB, as an organization, complements the work of the International Association of Insurance Supervisors (IAIS), and has developed guidelines to assist in:
- Corporate governance;
- Financial and prudential regulation;
- Transparency, reporting and market conduct; and
- Supervisory review process.
There are currently five standards and one guideline most relevant for Takaful:
- IFSB-8: Guiding Principles on Governance for Takāful (Islamic Insurance) Undertakings.
- IFSB-10: Guiding Principles on Sharīʻah Governance Systems for Institutions Offering Islamic Financial Services and
- IFSB-9: Guiding Principles on Conduct of Business for Institutions Offering Islamic Financial Services
- IFSB-11: Standard on Solvency Requirements for Takāful (Islamic Insurance) Undertakings.
- GN-5: Guidance Note on the Recognition of Ratings by External Credit Assessment Institutions (ECAIs) on Takāful and Retakāful Undertakings.
- IFSB-14: Standard on Risk Management for Takāful (Islamic Insurance) Undertakings; and
- IFSB-18: Guiding Principles for Retakāful (Islamic Reinsurance).
There is also the joint IFSB–IAIS paper issued in November 2015, Issues in Regulation and Supervision of Microtakāful (Islamic Microinsurance).
IFSB is accepting comments until 28 May on this exposure draft. Of particular importance when reviewing this exposure draft is determining whether the mutuality aspect of Takaful has been allowed to hourish. There are a range of Takaful models in use worldwide currently, ranging from models which focus on offering conventional products in an Islamic manner, to models which are purely discretionary in nature and look quite unique to conventional insurance. There are many variations within these types and also many Takaful types yet to be developed. Regulations will need to encourage this innovation.