The Council of the Islamic Financial Services Board (IFSB) has approved the adoption of a new standard, Guiding Principles for Retakaful (Islamic Reinsurance) (IFSB-18) at its 28th meeting in Cairo in April.
IFSB-18 aims to provide regulatory and supervisory authorities (RSAs) and takaful market players industry guidance relating to retakaful by identifying and setting forth a set of basic principles and best practices pertaining to retakaful activities of both takaful and retakaful operators. In particular, the objectives of IFSB-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.
A key feature of IFSB-18 is that it provides retakaful stakeholders with guiding principles on the conduct of the retakaful business. These guiding principles touch on important elements of the retakaful practice including governance, Shariah principles, transparency, disclosure and supervisory review process. IFSB-18 also delineates relevant regulatory standards and practices that are to be implemented alongside the aforementioned guiding principles which include the suitable adoption of Core Principles issued by International Association of Insurance Supervisors (IAIS) to ensure prudence in retakaful regulatory supervision, business and operations.
IFSB-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, IFSB-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 IFSB-18 are retakaful windows, business undertaking model, and the many types of retakaful arrangements.
Since the launch of its work programme to expand its coverage of its standards to the takaful sector, the IFSB has issued three standards covering this sector. IFSB-18 expands the appropriate governance and risk management principles to accommodate the retakaful sector.
The soft copies of IFSB-18 will be available on the IFSB website,
www.ifsb.org in both English and Arabic.