Insurance companies, both general and life, have been permitted to launch Takaful’.This was stated by the Muhammad Asif Arif, Commissioner at the Securities and Exchange Commission of Pakistan (SECP) in an interview.Mr. Asif Who looks after the Insurance Division thought that the lifting of bar on conventional insurance companies also to write policies under the Shariah-compliant Takaful would broaden the base of insurance companies.
He asserted that the public concern on the insurance being compatible with Shariah was the major hurdle in the growth of insurance sector.
Asif Arif told Media that due to their resources, capacity and reach, conventional insurance companies could venture into untapped areas and increase insurance penetration which at the moment was dismal 0.9pc of the country’s GDP.
A statement by the SECP stated that the insurance products have long been criticised as not being compatible with Shariah rulings which has led to under-utilisation/procurement of insurance products in Muslim countries.
Takaful, the Islamic alternative to insurance, on the other hand has emerged globally as a Shariah-compliant tool for satisfying risk mitigation needs of the people. The Takaful, explained briefly refers to a scheme based on the principles of mutual assistance in compliance with the provisions of Islamic Shariah, 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.
Previously, only dedicated Takaful companies were allowed to underwrite takaful products, the SECP statement said.
The conventional companies could begin to underwrite takaful products after obtaining authorisation as “Window Takaful Operator” from the SECP under the Takaful Rules 2012, the statement said.
The grant of authorisation for commencing window takaful operations, was subject to the fulfilment of requirements of Shariah compliance, which included appointment of Shariah Adviser, Shariah Compliance Officer, External Shariah Compliance Auditor and a Fit and Proper Head of Window Takaful Operations. The funds of Takaful would be segregated and separate accounts would have to be maintained under the window Takaful operations by the conventional insurance companies.
A market watcher pointed out that currently five Takaful companies write the Islamic insurance business in the country. Those include Takaful Pakistan; Pak-Qatar Family Takaful; Pak Qatar General Takaful; Pak Kuwait General Takaful and Dawood Family Takaful.
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“Allowing window Takaful operations will increase the number of Takaful service providers which shall enable the Takaful industry to draw upon their years of expertise, reach, resources, brand image and loyalty of the conventional insurance companies creating a prospective win-win situation for all concerned,” the statement concluded.