The Islamic Financial Services Board (IFSB) has issued an Exposure Draft on Guiding Principles for Retakaful (ED-18) for public consultation from 5 November 2015 to 4 January 2016, and is inviting comments from all interested parties.
The aim of ED-18 is to provide the regulatory and supervisory authorities (RSAs) and takaful market players guidance relating to retakaful. ED-18 identifies and sets forth a set of basic principles and best practices pertaining to retakaful activities of both takaful and retakaful operators. The objectives of ED-18 include:
• To provide a basis for RSAs to set rules and guidance on the operational framework of entities undertaking inward retakaful activities;
• To outline a basis for RSAs to supervise takaful and retakaful undertakings’ use of outward retakaful arrangements; and
• To suggest recommended best practices for retakaful and takaful operators and their RSAs to help address regulatory issues concerning retakaful.
ED-18 draws upon the results of an industry-wide survey conducted by the IFSB, and highlights the distinguishing features of various structures being used in various jurisdictions for offering retakaful solutions. Furthermore, ED-18 provides highlights on various dimensions of retakaful arrangements, which include inward and outward retakaful as well as co-takaful. Other pertinent issues covered in ED-18 are retakaful windows, business undertaking model, and the many types of retakaful arrangements.
A key feature of ED-18 is that it provides retakaful stakeholders with guiding principles on the conduct of the retakaful business. These guiding principles touch important elements of the retakaful practice, including governance, Shariah principles, transparency, disclosure and supervisory review process.
ED-18 also delineates relevant regulatory standards and practices that are to be implemented alongside the aforementioned guiding principles, which include the suitable adoption of IAIS’ Core Principles to ensure prudence in retakaful regulatory supervision, business and operations.
In line with the IFSB’s due process on the development of standards and guiding principles, it has organised a public hearing for ED-18 in November in Kuala Lumpur, Malaysia. A roundtable discussion on retakaful will also be held in January 2016 to have an in-depth discussion on the ED. These platforms aim to provide the industry stakeholders a greater understanding of the exposure draft, as well as to solicit feedback on its contents, prior to its final submission to the IFSB Council in April 2016. Participation in the public hearing and roundtable is free and open to all.