Takaful, the Islamic alternative of insurance is a scheme based on the principles of mutual assistance in compliance with the provisions of Islamic shariah, and which provides for mutual financial aid and assistance to the participants in case of occurrence of certain contingencies and whereby the participants mutually agree to contribute to the common fund for that purpose.
The existing Takaful rules were issued in year 2005. During the course of business activity and implementation of these Rules, a number of practical issues were highlighted by the stakeholders. To address these concerns, the Securities and Exchange Commission of Pakistan (SECP) constituted a committee in 2007 with a mandate to review the existing Takaful rules and recommend the possible enhancements.
The committee laid a special focus on the areas including the coherence with accounting provisions of the SEC (Insurance) Rules 2002, guidelines for allowing conventional insurance companies to do Takaful business through specialized “window” operations, prescribing of percentages in respect of various modes of the Shariah complaint investments for the purpose of determining solvency, among others.
The Committee after detailed deliberations finalized and submitted its recommendations based on which the new Takaful Rules have been drafted. The SECP reviewed the draft rules and after seeking expert opinion of Shariah scholars and legal experts, the draft new Takaful Rules have been approved by the SEC Policy Board.
