The Islamic Financial Services Board (IFSB) has issued the exposure draft (ED) of Core Principles for Islamic Finance Regulation (Takāful Segment) (ED-27) for public consultation for 60 days, till 23 June 2022. The IFSB invites comments from regulatory and supervisory authorities, international organisations, institutions offering Islamic financial services, academics and other interested parties.
The standard is intended to provide a set of takāful core principles (TCPs), closely aligned with the insurance core principles (ICPs, as adopted in November 2019), but with additions and modifications where necessary to reflect the application of sharī’ah principles in takāful. The aim is to provide an international benchmark to promote a sound regulatory and supervisory system and to maintain a fair, safe and stable takāful sector for the benefit and protection of the interests of takāful participants, beneficiaries and claimants as well as contributing to the stability of the Islamic financial system. The standard aims to:
- Provide an appropriate international standard for sound regulatory and supervisory practices specifically for the takāful sector;
- Enable policymakers and supervisors to self-assess the level of observance of principles and standards in the regulations;
- Identify areas for improvement and guide development of reform agendas and responses to emerging issues; and
- Provide a basis for peer review enabling objective external assessment by specialised bodies.
Core principles for regulation of the financial sector have become standard tools to guide regulatory and supervisory authorities (RSAs) in developing their regulatory regimes and practices. They also serve as the basis for regulatory authorities or external parties such as multilateral agencies to assess the strength and effectiveness of regulation and supervision in a jurisdiction. This standard intends to complement IAIS Insurance Core Principles (November 2019) to address areas that either do not deal, or deal inadequately, with the specifics of Islamic finance.
The IFSB envisages that the Core Principles for Islamic Finance Regulation (Takāful Segment) (CPIFR-Takāful) will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems, and for identifying future work to achieve a baseline level of sound regulations and practices for takāful. Furthermore, the CPIFR-Takāful may also assist IFSB member jurisdictions in:
- Self-assessment
- Financial sector assessment as part of the Financial Sector Assessment Programme (FSAP) by the International Monetary Fund (IMF) and the World Bank
- Reviews conducted by private third parties; and
- Peer reviews conducted, for instance, within regional groupings of insurance RSAs.
This ED is complemented by a mapping table which helps to identify which provisions of the ED are specific to the takāful sector and have been added or modified, while also helping to identify the provisions that are common to both takāful and insurance that are closely aligned with the IAIS Insurance Core Principles.
A copy of ED-27 is available on the IFSB website. The Secretariat invites all interested parties, especially members of the IFSB, to send their comments to the IFSB through email to public_consultation@ifsb.org by 23 June 2022.