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  • Takaful Insurance Regulations

    • Regulation Regarding Takaful Insurance

      • Article (1) Introduction

        1.1The Central Bank seeks to promote development of the Takaful Insurance activities to ensure its effectiveness and efficiency. To achieve this, Takaful Insurance Companies that conduct its businesses and activities in accordance with the Islamic Shari’ah must ensure that all its businesses and activities are compliant with the requirements set in this Takaful Insurance Regulation (“the Regulation”) and other regulations and standards issued by the Central Bank and the Higher Shari’ah Authority (“HSA”).
        1.2This Regulation is issued pursuant to the powers vested in the Central Bank under the provisions of the Federal Law No. (6) of 2007 on Organization of Insurance Operations and its amendments, and the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities and its amendments.
        1.3Where this Regulation includes a requirement to provide information, or to take certain measures, or to address certain items listed as a minimum, the Central Bank may impose requirements, which are additional to the requirements provided in the relevant article.

      • Article (2) Objective

        The objective of this Regulation is to establish minimum requirements that Takaful Insurance Companies must comply with in relation to their Takaful Insurance activities and businesses, with a view to: 

        a. ensuring the soundness of the Companies; and 

        b. contributing to financial stability and Participants’ protection.

      • Article (3) Scope of Applicability

        3.1The provisions herein apply to all Takaful Insurance Companies, incorporated, or to be incorporated, under the provisions of laws in force in the UAE, in practicing Takaful insurance business, as well as foreign Takaful Insurance Companies licensed to practice their businesses in the UAE, in accordance with the Islamic Shari’ah Provisions.
        3.2Takaful Insurance Companies and their Takaful Insurance business are subject to the Executive Regulation, regulations, instructions, and resolutions issued by the Central Bank and the HSA pursuant to the provisions of Law and this Regulation.

      • Article (4) Definitions

        4.1The following words and expressions wherever used herein shall have the meanings ascribed thereto, unless the context requires otherwise:
        1. Islamic Shari’ah Provisions:
          1. The resolutions, Fatwas, regulations and standards issued by the Higher Shari’ah Authority in relation to activities and businesses of the Company ("HSA’s Resolutions"),

          2. The resolutions and Fatwas issued by the Internal Shari’ah Supervision Committee of the respective Company, in relation to activities and businesses of such Company ("ISSC’s Resolutions"), provided that they do not contradict HSA’s Resolutions.

             

        2. Contribution: The consideration which the Participant undertakes to pay on basis of the donation (Tabarru’) commitment for his/her subscription in Participants’ Account with the Company in order to compensate the damages or pay the benefits to the eligible beneficiary.
           
        3. Takaful Insurance: A collective contractual arrangement aiming at achieving mutuality and cooperation among a group of Participants against certain risks, whereby each Participant pays certain Contribution to form an account called the Participants’ Account. This account is used for paying the entitled compensations and/or benefits when risk is realized, in accordance with the terms and conditions. The Company manages this account and invests its funds.
          All transactions of the Takaful Insurance Company should be in accordance with the Islamic Shari’ah Provisions.
           
        4. Participants’ Account: An account created by the Company to deposit the Contribution amounts, the returns from its investment, and the revenues from the Takaful Reinsurance (Retakaful). The personal capacity implications should be attributed to this account and it should have financial independency from the Company. This account shall be responsible for compensating Participants, beneficiaries and affected third parties, in accordance with the terms of the Takaful Insurance Policies. The Wakala fees and the amounts of compensation and/or benefits are paid to the Participants from this account, in addition to the relevant allocations or reserves, as determined by the Central Bank. The Company must manage the account on behalf of the Participants by Wakala and it must represent it in all matters related thereto.
          This account is termed as (Risk Coverage Account) in family Takaful insurance.
           
        5. Takaful Insurance Accounts: It covers all the Company’s accounts, including Participants’ Accounts and/or Participants’ Accounts for family Takaful insurance, and shareholders’ accounts.
           
        6. Company/ Companies: The Takaful Insurance Company, which is incorporated and practices its business in accordance with the provisions of the Law, the Executive Regulation and this Regulation, and whose carried out businesses and activities are in accordance with the Islamic Shari’ah Provisions.
           
        7. Law: The Federal Law No. (6) of 2007 on Organization of Insurance Operations and its amendments.
           
        8. Executive Regulation: The executive regulation for the Federal Law No. (6) of 2007 issued under the resolution of the Insurance Authority’s Board of Directors No. (2) of 2009.
           
        9. Internal Shari’ah Supervision Committee: A body appointed by a Company, comprised of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products of the Company and ensure its compliance with Islamic Shari’ah in all its objectives, activities, operations, and code of conduct.
           
        10. Participant: An individual that holds a Participation Membership Policy and a Takaful Insurance Policy, who undertakes to regularly pay the Contribution, and who, or his/her legal heirs or assignees, where assignment is allowable, shall have the right to receive compensations or benefits provided by the Participants’ Account.
           
        11. Central Bank: Central Bank of the United Arab Emirates.
           
        12. Higher Shari’ah Authority: An authority that exercises the mandates and authorities stipulated in this Regulation and the notices issued by the Central Bank.
           
        13. Participation Membership Policy: The policy containing key bases and principles of Takaful Insurance applied by the Company to govern its relation with the Participants, which should be accepted by the Participant upon subscription.
           
        14. Takaful Insurance Policy: The policy concluded between the Company and the Participant that contains the contract’s terms and conditions, the rights and obligations of the parties or the beneficiaries of the Takaful Insurance as well as any endorsement to this policy.
        4.2Save as provided for in Article (4.1), the words and expressions included herein shall have the same meaning assigned thereto under Article (1) of the Law.

      • Takaful Insurance Business

        • Article (5) Practicing Takaful Insurance Business

          Takaful Insurance business shall be practiced by licensed Takaful Insurance Companies only.

        • Article (6) Types of Takaful Insurance

          Direct Takaful Insurance activities are classified into three types:

          1. Takaful Insurance of persons and funds accumulation operations.
          2. Property Takaful Insurance.
          3. Liability Takaful Insurance.

        • Article (7) Classes of Personal Takaful Insurance

          Personal Takaful Insurance includes the following classes:

          1. Family Takaful Insurance of all forms.
             
          2. Health Takaful Insurance of all forms.
             
          3. Personal Accident Takaful Insurance associated with family Takaful insurance.

        • Article (8) Classes of Property and Liability Takaful Insurance

          Property and Liabilities Takaful Insurance includes the classes referred to in Article (5) of the Executive Regulation, provided that they do not include anything that contradicts Islamic Shari’ah Provisions.

        • Article (9) Combining Takaful Insurance Types

          9.1The Company may not combine the business of Personal Takaful Insurance and the business of Property and Liability Takaful Insurance.
          9.2As an exception to Article (9.1) above, an existing Company that is licensed to carry out both types of insurance may continue to do so in accordance with the Article (25) of the Law.

        • Article (10) Management of Takaful Insurance Operations

          Risk management and investment operations associated with Contributions shall be carried out by the Company on the basis of Wakala or Wakala and Mudaraba or any other form, provided that it is approved by the Central Bank and the HSA. The relationship between the Company and the Participant must be subject to these provisions stated in the Participation Membership Policy (“PMP”).

        • Article (11) Participation Membership Policy

          11.1The Company shall develop Participation Membership Policy to offer it to those who wish to subscribe in the Participants’ Account for any type or class of Takaful Insurance. The policy must be signed by both parties and a copy should be given to the Participant. The following must be taken in consideration when preparing the PMP:
          1. The PMP must be separate from the Takaful Insurance Policy, which must be consistent with the principles stated in the PMP.
          2. The PMP must address the bases and rules governing the Takaful relationship between the Company and the Participant, including the legal nature of this relationship.
          3. The PMP must elaborate that payments made by the Participant are made as donation (Tabarru’) commitment and/or investment for part of it, as applicable.
          4. The PMP must name the account in which the Participant will participate in.
          5. The PMP must disclose that the Company provides goodwill loan (Qard Hasan) when the assets of Participants’ Account are insufficient to repay the obligations incurred on such account.
          6. The PMP must state the amount of Wakala fees due to Company and the method of its calculation, as well as the share of the Company from the Mudaraba profit or Wakala fees for investing the Participants’ Account and the method of calculating such share or fees.
          7. The PMP must disclose the information that relates to the Company's policy for investing the portions allocated for investment from the Contributions, provided such policy is compliant with the Islamic Shari’ah Provisions.
          11.2The PMP mentioned in Article (11.1) must be approved by the Company's ISSC.
          11.3The PMP must then be presented to the Central Bank for approval before offering it to those concerned.
          After soliciting the opinion of the HSA, the Central Bank may object to the PMP contents if incorporating any provisions in contrary to legal provisions or Islamic Shari’ah Provisions, or if containing an explicit prejudice to the interests of the Participants.
          11.4The Company must maintain a record of PMPs. Such record shall be subject to inspection and audit by the Internal Shari’ah Supervision Committee and the Central Bank.

      • Internal Shari’ah Supervision Committee

        • Article (12) Formation of the Internal Shari’ah Supervision Committee

          12.1The Company must form a committee to be called the Internal Shari’ah Supervision Committee (“ISSC”). The ISSC must consist of at least three members nominated and appointed as follows:
          1. The ISSC members must be nominated by the Company’s board of directors.
          2. The candidates' names and qualifications must be presented to the HSA at the Central Bank for approval at least forty-five days prior to the meeting of the Company's general assembly. In case the approval request is declined, the Company must nominate a substitute to the disapproved candidate.
          3. The candidates' names must be presented to the Company's general assembly to approve their appointment as ISSC members and must inform the Central Bank of the names of those appointed as ISSC members within ten days after the general assembly meeting.
          4. The ISSC membership term must be three years, which can be renewable.
          5. The ISSC members must elect a chairman and vice-chairman from amongst them. The chairman shall represent the ISSC before the Company’s board of directors, its general assembly, the Central Bank, and the HSA.
          12.2In case a ISSC membership seat becomes vacant, the Company's board of directors must appoint a member to fill in the vacant membership to complete the duration stated in the Article (12.1/d), after presenting the nominee’s name and qualification to the HSA for approval. Such appointment must be presented to the general assembly of the Company in its first subsequent meeting for approval.

        • Article (13) Fit and Proper Criteria

          A candidate to be a member in the ISSC must meet the conditions and criteria adopted by the HSA and issued by the Central Bank under this Regulation. Previous provisions in this regard must apply until the relevant standards are issued by the HSA.

        • Article (14) Responsibilities of the Internal Shari’ah Supervision Committee

          14.1The ISSC must undertake the following:
          1. Set the basic Shari’ah principles for the Company’s operations.
          2. Review all the Company's transactions, the Takaful insurance products, policies, contracts, and documents which the Company uses in order to ensure compliance with the Islamic Shari’ah Provisions; and approve the same before placing them into practical use.
          3. Review the Takaful insurance transactions and the investments conducted by the Company, and show to what extent they are compliant with the Islamic Shari’ah Provisions.
          4. Approve any activity carried out by the Company or reject it, if such activity is not compliant with the Islamic Shari’ah Provisions.
          5. Issue Fatwas, resolutions, and providing opinions in relation to Company’s activities presented to the ISSC. Insurance broker, surveyor, adjustor and consultant, and actuary - associated with a specific Takaful Insurance operation in a Takaful Insurance Company - may seek the opinion of the ISSC of the Company regarding the Islamic Shari’ah Provision for the operation they are involved in, and do that through the Company. The ISSC must provide them with its opinion through the Company.
          14.2The ISSC may undertake other responsibilities that may be required by the HSA and issued by the Central Bank under this Regulation.

        • Article (15) Authorities of the Internal Shari’ah Supervision Committee

          The ISSC resolutions are binding on the Company. The ISSC must have the right to access, at any time, all Company's records, contracts, and documents. The ISSC may require clarifications as it deems necessary to perform its tasks and the Company's senior management must provide such clarifications. In case the ISSC was not enabled to perform its functions, it must state that in a report to the board of directors. If the board of directors fails to meet the ISSC’s request, it must notify the HSA, whose resolution must be binding on the Company.

        • Article (16) The Charter of the Internal Shari’ah Supervision Committee

          The Company must set, by a resolution of its board of directors, the charter for the ISSC. The charter must be in accordance with the format set by the HSA, and a copy thereof must be sent to the Central Bank for approval.

        • Article (17) Annual Shari’ah Report

          17.1The ISSC must prepare an Annual Shari’ah Report to the Company's general assembly, and it must be in accordance with the format set by the HSA, indicating the compliance of the Company with the provisions of Islamic Shari’ah in all its businesses and activities.
          17.2The ISSC must provide the HSA with a copy of the Annual Shari’ah Report no later than one month prior to the date of the general assembly of the Company, in order to make any comments.

      • The Internal Shari’ah Control

        • Article (18) The Internal Shari’ah Control

          Internal Shari’ah Control must be established in each Company according to what is required by the HSA and issued by the Central Bank.

      • The Higher Shari’ah Authority

        • Article (19) The Higher Shari’ah Authority

          19.1The HSA shall establish the Shari’ah general rules, standards, and Shari’ah principles for the businesses and activities of Companies. It shall undertake supervision and oversight on the ISSCs and the Shari’ah controls of Companies.
          19.2The HSA shall state its opinion regarding the regulations and standards issued by the Central Bank pertaining to the Companies’ activities.

        • Article (20) The Higher Shari’ah Authority Expenses

          Companies subject to the provisions of this Regulation must bear the expenses of the HSA, including remunerations, allowances and expenses of its members, and the mechanism of funding its establishment and continuity of its functioning, as determined by the board of directors of the Central Bank.

      • Takaful Insurance Accounts

        • Article (21) Participants’ Accounts

          The Companies practicing all types and classes of Takaful Insurance must undertake to adopt complete separation between the personal Takaful Insurance business on the one hand, and the property and liability Takaful Insurance business on the other hand, in terms of technical, financial, and administrative aspects. In particular, there should be two accounts (or more) for the Participants completely separated per the type of insurance practiced by the Company.
          The funds available in each account must be allocated to meet the account’s liabilities and management expenses.

        • Article (22) The Participants’ Accounts for Family Takaful Insurance

          The Contributions in the family Takaful insurance must be divided into two accounts:

          1. Investment Account: to which the portion of Contributions allocated for investment in this type of Takaful Insurance must be transferred.
          2. Risk Coverage Account: to which the portion of Contributions allocated for risk coverage in this type of Takaful Insurance must be transferred.

        • Article (23) Accounts for Other Takaful Insurance Types and Classes

          23.1One or more accounts called (Participants’ Account) must be opened with the Company per the non-family Takaful insurance types and classes. The accrued Contributions must be recorded in such account(s), in addition to the investment revenues realized from investing the funds accumulated in the said account(s).
          23.2Due compensations and benefits must be paid from the Participants' Account in accordance with the terms and conditions of Takaful Insurance Policies.
          23.3Inputs and outputs of such account(s) must be determined in accordance with the applicable accounting rules.
          23.4The assets and liabilities of the Participants’ Account should be completely separate from the Company's assets and liabilities, and should not include the deposit required in accordance with Article (42) of the Law.

      • Participants' Rights

        • Article (24) Sharing the Participants Accounts’ Surplus

          24.1After soliciting the opinion of the ISSC, the Company must establish the rules under which Participants share the surplus realized in the Participants’ Accounts, either collectively for all accounts or individually for each account subject to complete separation between the family Takaful insurance accounts and other accounts; and provided that Participants in one account may not share in the surplus realized in the other account.
          24.2The surplus in the Participants’ Accounts must be determined with the knowledge and approval of the Company's actuary.
          24.3The Company may retain a portion of the surplus to form a contingency provision to counter future contingent circumstances, in addition to the technical provisions stated for in the Law as well as the instructions issued thereunder.
          24.4The Company must not distribute profits to the shareholders from any surplus realized by the Participants’ Accounts, except for the consideration collected by the Company for managing such accounts as prescribed under the Participation Membership Policy or as an incentive in accordance with the Central Bank’s instructions in this regard.

        • Article (25) Participation in the General Assembly Meetings

          25.1After obtaining the approval of the competent authorities in the UAE, the Company must develop by-laws defining the eligible Participants who have the right to attend the Company's general assembly meetings of the Company. This must include setting the criteria to be met by the Participant to have the right to attend such meetings, either in terms of the size of his/her Contribution, the period of dealing with the Company, or other criteria. Such by-laws must be submitted to the Central Bank for approval.
          25.2The Participants mentioned in Article (25.1) must be invited to attend the said meetings via the approved method in this regard, and they should be provided with all documents presented to the general assembly.
          25.3The aforesaid Participants must have the right to attend and discuss matters arising. without having voting rights in the meetings.

        • Article (26) The Actuarial Report on Reviewing the Takaful Insurance Accounts

          A Participant in the Takaful Insurance Accounts must have the right to receive a copy of the Actuary’s report on reviewing the Takaful Insurance Accounts, and the Company must meet his/her request within ten business days.

      • General Provisions

        • Article (27) The Goodwill Loan (Qard Hasan)

          27.1In case the Participants Account’s assets are insufficient to meet the account’s liabilities, the Company must provide a Qard Hasan to the Participants’ Account. This commitment in providing a Qard Hasan is not a contractual commitment towards the Participants’ Account but its purpose is to comply with this Regulation. The ISSC must ensure this commitment is not taken into account when determining the Wakala fee.
          27.2The obligation to provide the Qard Hasan must be comprehensive subject to a maximum equal to the total of the Company’s shareholders equity.
          27.3The Company has the right to recover this Qard Hasan from the realized surplus(s) in subsequent periods whether in one payment or several installments as decided by the Company's general assembly, and after obtaining the approval of the ISSC.
          27.4In case the Company does not provide a Qard Hasan to meet a loss realized in the Participants’ Account(s), the Company must notify the Central Bank and carry out the necessary action within fifteen days from the date of notification. If the Company fails to do so, the Central Bank may take such actions deemed necessary, including the suspension of the Company from carrying out business for a period it deems appropriate.

        • Article (28) Takaful Reinsurance

          28.1The Company must ensure that its outbound or inbound Takaful reinsurance business (“Retakaful”) must be compatible with the Takaful Insurance basic principles and in pursuance to the directives and decisions of the ISSC.
          28.2The Company may only cede the outbound reinsurance business to Retakaful or Takaful Insurance Companies. In case such Companies do not have the adequate capacity, or due to the requirements of distributing the liabilities and risks to a proper number of Companies, the Company has the right to deal with reinsurance Companies, as per the standards approved by the HSA and issued by the Central Bank under this Regulation.
          28.3The Company may share the risks liability with Takaful Insurance Companies or insurance Companies as needed inside and outside the UAE.

        • Article (29) Zakat Fund

          29.1The Company must establish a Zakat fund to deposit the Zakat due on the Company's transactions as permissible under its articles of association.
          29.2The Zakat fund must have an independent account from the other Company's accounts, whether those related to the shareholders or Participants. The ISSC must approve the method of managing the account.
          29.3Disbursement from Zakat fund account must be made under a decision of the Company's board of directors, and in accordance with the Islamic Shari’ah Provisions as approved by the ISSC.
          29.4The Company’s board of directors must develop by-laws to regulate the operation and management of Zakat fund, provided that members appointed to manage it must not receive any remuneration for their work in managing or supervising the fund.
          29.5In all cases, the Company must calculate the Zakat due on the shareholders and must disclose it, after the approval of the ISSC, within the annual financial statements.

        • Article (30) Breaching the Islamic Shari’ah Provisions

          In case it has been proven that the Company has carried out business not compliant with the Islamic Shari’ah Provisions, the Company must be required to rectify its status in line with the Islamic Shari’ah Provisions within thirty days from the date of notification. If the Company fails to do so, the appropriate legal actions may be taken, including the suspension of the Company from carrying out business. Anyone proven to have been involved in an intentional Shari’ah breach shall be held accountable.

        • Article (31) Transfer of the Company Control

          The Company must obtain prior approval from the Central Bank regarding changes in the control over the Company. The control over the Company means having the capability whether directly or indirectly, to control the Company's decisions and its financial and Takaful policies.

        • Article (32) Transfer of the Takaful Insurance Portfolio

          32.1The provisions of the Law, in particular the provisions of Articles (71) and (72) thereof, shall apply to the procedures and method of transferring the Takaful Insurance portfolio.
          32.2The Takaful Insurance portfolio may be transferred only to another Takaful Insurance Company that practices the same type and classes of the Takaful Insurance as practiced by the Company.

      • Final Provisions

        • Article (34) Enforcement and Sanctions

          34.1Violation of any provision of this Regulation may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank.
          34.2Without prejudice to the provisions of the Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Company, or barring individuals from the UAE insurance sector.

        • Article (35) Interpretation of Regulation

          The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.

        • Article (36) Publication and Application

          This Regulation shall be published in the Official Gazette in Arabic, and shall come into effect one month from the date of publication.

          1. A Company must comply fully with the provisions of this Regulation within the effective date.
          2. If the Company was not able to demonstrate full compliance within the effective date, then the Company must submit a plan within the effective date, to the Central Bank containing the steps that the Company will take in order to demonstrate full compliance. The Central Bank will decide on the adequacy of the proposed plan.

    • Standard re Shari’ah Governance for Takaful Insurance Companies

      Effective from 8/9/2023

      • Article (1) Introduction

        1.1The Central Bank seeks to promote development of the Takaful Insurance activities to ensure its effectiveness and efficiency. To achieve this, Takaful Insurance Companies must have in place comprehensive and effective governance frameworks to enhance the compliance with Islamic Shari’ah Provisions to ensure their resilience, and promote general financial stability.
         
        1.2This Standard Re Shari’ah Governance For Takaful Insurance Companies (“the Standard”) is issued pursuant to the powers vested in the Central Bank under the provisions of the Federal Law No. (6) of 2007 on Organization of Insurance Operations and its amendments, and the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities and its amendments.
         
         This Standard complements the requirements outlined in the Regulation Regarding Takaful Insurance and the Corporate Governance Regulation for Insurance Companies.
         
        1.3Where this Standard includes a requirement to provide information, to take certain measures, or to address certain items listed as a minimum, the Central Bank may impose requirements, which are additional to the requirements provided in the relevant article.
         

      • Article (2) Objective

        2.1The objective of this Standard is to set the minimum requirements for the Companies (“the Company”) to ensure their compliance with Islamic Shari’ah Provisions in all their objectives, activities, operations, and code of conduct.
         
        2.2This Standard elaborates on the supervisory expectations of the Central Bank with respect to Shari’ah Governance for Takaful Insurance Companies.
         

      • Article (3) Scope of Application

        3.1This Standard applies to all incorporated Takaful Insurance Companies. The Companies established in the UAE with Group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Standard is adhered to on a solo and Group-wide basis.
         
        3.2This Standard must be read in conjunction with the standards and resolutions issued by the Central Bank and the Higher Shari’ah Authority (“HSA”) and notified to Takaful Insurance Companies.
         

      • Article (4) Definitions

        For the purposes of this Standard, the following words and phrases shall have the meanings stated below.
         
        a.Senior Management: The individuals or body responsible for managing the Company on a day-to-day basis in accordance with strategies, policies and procedures set out by the Board, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of functions of compliance, Internal Shari’ah Control, internal audit and Internal Shari’ah Audit.
         
        b.Independence: Ensuring that the ISSC is not subject to any form of undue influence when issuing resolutions and Fatwas in accordance with the Shari’ah parameters, and ensuring that the Internal Shari’ah Control Division and Internal Shari’ah Audit Division are also not subject to any form of undue influence. This should be carried out to strengthen the confidence of Participants, shareholders and stakeholders in the Company’s compliance with Islamic Shari’ah Provisions.
         
        c.External Shari’ah Audit: An annual assessment conducted by external body to inspect and assess the Company’s compliance with Islamic Shari’ah Provisions and the level of adequacy and effectiveness of its Shari’ah governance systems.
         
        d.Internal Shari’ah Audit: The regular process to inspect and assess the Company’s compliance with Islamic Shari’ah Provisions and the level of adequacy and effectiveness of Company’s Shari’ah governance systems.
         
        e.Islamic Shari’ah Provisions:
         
        a.The resolutions, Fatwas, regulations and standards issued or approved by the Higher Shari’ah Authority in relation to businesses and activities of the Company ("HSA’s Resolutions"),
         
        b.The resolutions and Fatwas issued or approved by the Internal Shari’ah Supervision Committee of the respective Company, in relation to businesses and activities of such Company ("ISSC’s Resolutions"), provided that they do not contradict HSA’s Resolutions.
         
        f.Contribution: The consideration which the Participant undertakes to pay on basis of the donation (Tabarru’) commitment for his/her subscription in Participants’ Account with the Company in order to compensate the damages or pay the benefits to the eligible beneficiary.
         
        g.Takaful Insurance: A collective contractual arrangement aiming at achieving mutuality and cooperation among a group of Participants against certain risks, whereby each Participant pays certain Contribution to form an account called the Participants’ Account.
         
         This account is used for paying the entitled compensations and/or benefits when risk is realized, in accordance with the terms and conditions. The Company manages this account and invests its funds.
         
         All transactions of the Company shall be in accordance with the Islamic Shari’ah Provisions.
         
        h.Participants’ Account: An account created by the Company to deposit the Contribution amounts, the returns from its investment, and the revenues from the Takaful Reinsurance (Retakaful). The personal capacity implications should be attributed to this account and it should have financial independency from the Company. This account shall be responsible for compensating Participants, beneficiaries and affected third parties, in accordance with the terms of the Takaful Insurance Policies. The Wakala fees and the amounts of compensation and/or benefits are paid to the Participants from this account, in addition to the relevant allocations or reserves, as determined by the Central Bank. The Company must manage the account on behalf of the Participants by Wakala and it must represent it in all matters related thereto.
         
         This account is termed as (Risk Coverage Account) in family Takaful insurance.
         
        i.Takaful Insurance Accounts: All accounts existing at the Company, including Participants’ Accounts and/or Participants’ Accounts for family Takaful insurance, and shareholders’ accounts, noting that the Takaful Insurance is exclusively of the Participants’ Accounts.
         
        j.Subsidiary: An entity (the 'first entity') is a subsidiary of another entity (the 'second entity') if the second entity:
         
        a.holds a majority of the voting rights in the first entity;
         
        b.is a shareholder of the first entity and has the right to appoint or remove a majority of the Board or managers of the first entity;
         
        c.is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity; or
         
        d.if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity.
         
        k.Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
         
        l.Fatwas: Juristic opinions on any matter pertaining to Shari’ah issues in Takaful Insurance, issued by HSA or ISSC.
         
        m.Internal Shari’ah Control Division (or Section): A technical division (or section) in the Takaful Insurance Company that supports the ISSC in its mandate.
         
        n.Internal Shari’ah Supervision Committee: A body appointed by a Company, comprised of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products of the Company and ensure its compliance with Islamic Shari’ah Provisions in all its objectives, activities, operations, and code of conduct.
         
        o.Board: Takaful Insurance Company’s board of directors.
         
        p.Group: A group of entities which includes an entity (the ‘first entity’) and:
         
        a.any Parent of the first entity;
         
        b.any Subsidiary of the first entity or of any Parent of the first entity;
         
        c.any Affiliate.
         
        q.Participant: An individual that holds a Participation Membership Policy and a Takaful Insurance Policy, who undertakes to regularly pay the Contribution, and who, or his/her legal heirs or assignees, where assignment is allowable, shall have the right to receive compensations or benefits provided by the Participants’ Account.
         
        r.Shari’ah Non-Compliance Risks: Probability of financial loss or reputational risk that Takaful Insurance Company might incur for not complying with Islamic Shari’ah Provisions.
         
        s.Confidential Information: Information that is publicly unavailable and which may only be disclosed where permitted.
         
        t.Regulation: Regulation regarding Takaful Insurance issued in 2022.
         
        u.Company/Companies: The Takaful Insurance Company, which is incorporated and practices its business in accordance with the provisions of the Law, the Executive Regulation and the Regulation regarding Takaful Insurance, and whose all businesses and activities are in accordance with the Islamic Shari’ah Provisions.
         
        v.Higher Shari’ah Authority: An authority that exercises the mandates and authorities stipulated in Regulation regarding Takaful Insurance and the notices issued by the Central Bank.
         

      • Article (5) General Requirements

        5.1The Company must comply with Islamic Shari’ah Provisions in all of its objectives, activities, operations and code of conduct at all times.
         
        5.2The Company must have in place governance controls and mechanisms in accordance to its size and complexity of its operations to ensure compliance with Islamic Shari’ah Provisions in all of its objectives, activities, operations and code of conduct.
         
        5.3Branches of foreign licensed Takaful Insurance Companies that conduct businesses and activities in accordance with the Islamic Shari’ah Provisions must adhere to this Standard or establish equivalent arrangements to ensure regulatory comparability and consistency. The equivalent arrangements, if applicable, shall include the matters related to general assembly, the Board and its committees without contradicting the prevailing laws in the UAE. The equivalent arrangements shall be submitted to the Central Bank for approval.
         
        5.4The Shari’ah governance of a Company must include the following as minimum requirements:
         
        a.Stating the responsibility of the Board in regards to the Company’s compliance with Islamic Shari’ah Provisions, the complete supervision on the Company, and establishing an adequate Shari’ah governance framework.
         
        b.Identification of the Senior Management responsibilities related to the Company’s compliance with Islamic Shari’ah Provisions and providing adequate resources for implementation of Shari’ah governance requirements to ensure that the Company’s businesses are carried out in compliance with Islamic Shari’ah Provisions.
         
        c.Appointment of a qualified Internal Shari’ah Supervision Committee (“ISSC”) in accordance with the fit and proper requirements set out in this Standard.
         
        d.Establishment of Internal Shari’ah Control Division.
         
        e.Establishment of Internal Shari’ah Audit Division1.
         
        f.Publication of the ISSC’s Resolutions regarding the Company’s products, services, fees, and other basic mechanisms governing its operations.
         
        5.5This Standard must be implemented through a set of policies and procedures that outline the structure, roles, responsibilities, accountability, scope and duties of different functions, and reporting lines and communication channels between different functions with regard to the Company’s compliance with Islamic Shari’ah Provisions.
         
        5.6The Company must spread awareness regarding Takaful Insurance and boost the culture of compliance with Islamic Shari’ah Provisions within the Company, including conducting workshops for the members of the Board and Senior Management on Takaful Insurance and compliance with Islamic Shari’ah Provisions.
         

        1 The requirements stated in (d) and (e) are not related to the number of employees within the concerned division, as the division can be managed by one person. The number of employees required is subject to the size and nature of the business of each Company. The number of employees is determined, after consultation with the ISSC, to carry out their responsibilities.

      • Article (6) Responsibilities of the Board

        6.1The Board of a Company is ultimately responsible for the Company’s compliance with Islamic Shari’ah Provisions. The Board is expected to be aware of Shari’ah Non-Compliance Risks and its potential impact on the Company. Accordingly, the Board is responsible for establishing and implementing a Shari’ah governance framework that is commensurate with the size and complexity of the Company’s operations and its risk appetite, to ensure its compliance with Islamic Shari’ah Provisions.
         
         The Shari’ah governance framework shall incorporate the three lines of defense approach comprising the business line, Internal Shari’ah Control function, and Internal Shari’ah Audit function.
         
        6.2The Board must nominate ISSC members to the general assembly which has the authority to establish the ISSC and to appoint its members.
         
        6.3The Board must, in coordination with the ISSC, ensure the development, approval and implementation of internal policies related to the Company compliance with Islamic Shari’ah Provisions.
         
        6.4The Board must maintain an effective communication with the ISSC, and conducting meetings to discuss issues pertaining compliance with the Islamic Shari’ah Provisions, with at least one meeting per financial year.
         
        6.5The Board must refer to the ISSC for all Shari’ah matters related to the Company’s activities, operations and code of conduct.
         
        6.6The Board must ensure that the annual Shari’ah report issued by the ISSC is submitted to the HSA for review and approval before presenting it to shareholders at the general assembly.
         
        Board’s Risk Committee
         
        6.7The Board’s Risk Committee (“Risk Committee”) must
         
        a.supervise and monitor management of Shari’ah Non-Compliance Risks, and set controls in relation to this type of risk, in consultation with ISSC and through the Internal Shari’ah Control Division.
         
        b.approve the establishment of framework for management of Shari’ah Non-Compliance Risks as part of the overall risk management system of the Company, and must review it and oversee its implementation by the Senior Management.
         
        c.ensure there is an information system that enables the Company to measure, assess and report Shari’ah Non-Compliance Risks. It must also ensure that reports are submitted on a timely manner to the Board and Senior Management, in suitable formats for their use and understanding.
         
        Board’s Audit Committee
         
        6.8The Board’s Audit Committee (“Audit Committee”) must:
         
        a.evaluate the effectiveness of the Company’s internal policies that were approved by the ISSC and designed to monitor compliance of the Company with Islamic Shari’ah Provisions.
         
        b.assess the effectiveness and adequacy of Internal Shari’ah Audit and its contribution in ensuring Company’s compliance with Islamic Shari’ah Provisions. The Audit Committee’s responsibility includes the following:
         
        -Assess the independence, effectiveness and adequacy of Internal Shari’ah Audit scope and programs.
         
        -Review the reports prepared by the Internal Shari’ah Audit Division to ensure that all necessary measures have been undertaken.
         
        -Facilitate the work of the Internal Shari’ah Audit Division.
         
        -Hold regular meetings with the head of the Internal Shari’ah Audit Division with a minimum of two meetings in a financial year.
         
        c.review the scope, results, and adequacy of the External Shari’ah Audit review (if applicable). In addition, the Audit Committee’s responsibility includes the following:
         
        -Facilitate the work of the External Shari’ah Auditor.
         
        -Review the reports prepared by External Shari’ah Auditor to ensure that the Senior Management have taken all necessary measures in this regard.
         
        -Hold meetings with the External Shari’ah Auditor with a minimum of once in the financial year.
         
        6.9It is recommended that the Audit Committee invites a member of the ISSC to attend the meetings when discussing the Internal Shari’ah Audit report to ensure compliance of the Company with the resolution of the ISSC concerning the content of the report. The Audit Committee and the member of ISSC cannot change the ISSC’s resolution in this regard.
         

      • Article (7) Responsibilities of the Senior Management

        7.1The Senior Management must execute and manage the Company’s businesses and activities in compliance with Islamic Shari’ah Provisions.
         
        7.2The Senior Management is responsible before the Board for:
         
        a.submitting Shari’ah matters related to all Company’s businesses and activities, including its policies, internal regulations, code of conduct, services and products to the ISSC, and should not consider approval of any of the Group’s Shari’ah supervision committees (or equivalent committees) outside the UAE as substitution to approval of the ISSC, and
         
        b.ensuring implementation of the ISSC’s Resolutions.
         
        7.3The Senior Management must fully disclose all relevant information required by the ISSC in a transparent, accurate and timely manner.
         
        7.4The Senior Management shall provide the ISSC with financial and human resources that are commensurate with the Company size and the nature of its business.
         
        7.5The Senior Management must:
         
        a.facilitate work of the Internal Shari’ah Control Division, Internal Shari’ah Audit Division and External Shari’ah Audit (if applicable),
         
        b.ascertain that the Shari’ah auditors are not obstructed in their work,
         
        c.enable Shari’ah auditors to access information or staff, from all different levels.
         
        7.6The Senior Management is responsible to establish sufficient knowledge regarding the compliance with Islamic Shari’ah Provisions in the Company.
         
        7.7The Senior Management must report to the Board regarding Company’s compliance with Islamic Shari’ah Provisions in all of its businesses, activities, policies, internal regulations, and code of conduct.
         

      • Article (8) Internal Shari’ah Supervision Committee

        Membership, Appointment and Composition
         
        8.1The Board shall nominate the members of the ISSC, and send the member’s appointment request to the HSA for approval prior to presenting its nomination to the general assembly.
         
        8.2The Company’s general assembly has the authority to appoint the ISSC members based on the Board’s nomination and after the HSA and the Central Bank’s approval.
         
        8.3The composition of ISSC members in a Company must not be less than (3) three members that meet the fit and proper criteria (as prescribed in this Standard).
         
        8.4Emirati members in the ISSC must not be less than one third.
         
        8.5The membership of each member in the ISSC is subject to the following:
         
        a.must not exceed three ISSC memberships in Takaful Insurance Companies inside the UAE,
         
        b.must not exceed a total of fifteen (15) ISSC (or equivalent committees) memberships in Islamic financial institutions and Takaful Insurance Companies inside and outside the UAE,
         
        c.only one member of the Company’s ISSC may have more memberships than what is stated in Article (8.5/b).
         
        8.6The HSA may exempt UAE nationals from the Article (8.5) if appropriate.
         
        8.7If a position of ISSC member becomes vacant, at any time, and that causes lack of quorum (more than the half), the Board must nominate a substitute member and seek approval as per the process in Article (8.2).
         
         However, if a position of ISSC member becomes vacant, at any time, and this leads to non-compliance with the Article (8.3) of this Standard, but it does not breach the quorum, the Board may appoint a member after obtaining approvals of the HSA and the Central Bank on the appointment. It is not required in this case to hold the general assembly for the appointment provided that the appointment is tabled to the general assembly for final approval in its next meeting.
         
        8.8The term of office for ISSC members shall be specified in the Company’s engagement letter with a minimum of three years, and may be renewed for a similar period based on the Board’s recommendation and after obtaining approvals of the HSA and the Central Bank, and presenting the same to the general assembly.
         
         The engagement letter must also specify the responsibilities of the ISSC members and their remuneration. The remuneration must not be linked to the performance of the ISSC members. Alongside the engagement letter, the Company must attach the ISSC charter.
         
        8.9The appointment of an ISSC member is valid for the said period, stated in Article (8.8), without the need to approach the HSA and general assembly for approvals every year. The approvals are required only in the following cases:
         
        a.First time appointment of the ISSC member/s; and
         
        b.Renewal of the appointment of the ISSC member/s for a similar period (three years).
         
        8.10The ISSC member must not serve the same Company as ISSC member for more than twelve years consecutively from the date of issuance of this Standard. The calculation of term period shall be restarted if membership is suspended for three years.
         
        Fit and Proper
         
        8.11Member of the ISSC must:
         
        a.be a Muslim individual (not a company);
         
        b.hold a bachelor degree (as a minimum) in Islamic Shari’ah, particularly in jurisprudence of financial transactions, from a university that is acknowledged in Shari’ah studies, or have a minimum of 10 years’ experience in Fatwas issuance related to jurisprudence of financial transactions;
         
        c.have proven competence and expertise, especially in jurisprudence of financial transactions;
         
        d.have a strong comprehension of insurance in general and Takaful Insurance in particular, and should have worked in the spectrum of Islamic finance and/or Shari’ah supervision for a minimum of ten (10) years whether in direct employment or advisory level, or at least fifteen (15) years of post-graduation experience in teaching and scientific research related to jurisprudence of financial transactions and Takaful Insurance;
         
        e.have good knowledge of the legal and supervisory framework related to financial and insurance activities in the UAE;
         
        f.be excellent in Arabic, and preferably to have good knowledge of English; and
         
        g.have good conduct and behavior, particularly with regard to credibility, integrity, and reputation in professional and financial transactions.
         
        8.12HSA may exempt UAE candidates from some of the clauses stated in Article (8.11) that would not impair their competence in performing their duties, provided that the candidate commits to the development and training required by the HSA.
         
        Termination or Resignation of ISSC Member
         
        8.13Termination or resignation of ISSC members requires a no-objection from the HSA and the Central Bank, before being presented to the general assembly for approval.
         
        8.14The request must clarify the reasons for termination or resignation of the ISSC member.
         
        Responsibilities of ISSC
         
        8.15The ISSC undertakes Shari’ah supervision of all businesses, activities, products, services, investments, contracts, documents, and code of conducts of the Company.
         
         The ISSC issues resolutions and Shari’ah Fatwas that are binding upon the Company. The members of the ISSC are accountable for the resolutions and Fatwas they issue to the Company, and their compliance with the standards and resolutions issued by the HSA.
         
        8.16The ISSC must monitor, through the Internal Shari’ah Control Division and Internal Shari’ah Audit Division, the Company’s compliance with Islamic Shari’ah Provisions.
         
        8.17The ISSC must hold at least four meetings per year, and at least one meeting per year with the Company's Board, in accordance to the format charter approved by the HSA.
         
        8.18The ISSC shall decide on Shari’ah matters that relate to all businesses and activities of the Company, including its policies, internal regulations and code of conduct, and this includes carrying out the following responsibilities:
         
        a.Reviewing the Takaful Insurance operating model, underlying contracts and supporting materials (e.g. underwriting and claims settlement manual/guidelines etc.).
         
        b.Reviewing and approving the policy and procedures that govern Takaful Insurance Accounts (e.g. segregation of accounts and transparent financial resources flow between the accounts etc.), surplus distribution, and deficit coverage
         
        c.Reviewing and approving the Company’s products, services and marketing materials.
         
        d.Reviewing and approving the investment policy and the Shari’ah screening criteria to ensure the compliance of the investment activities in both shareholders’ accounts and Participants’ Accounts, with the Islamic Shari’ah Provisions.
         
        e.Reviewing and approving the Retakaful agreements concluded by the Company to ensure their compliance with the Islamic Shari’ah Provisions.
         
        f.Setting controls for ceding to conventional reinsurance on an exceptional basis, and the permission to add the revenues from the conventional Reinsurance to the Participants’ Account.
         
        g.Setting controls for co-insurance with the conventional insurance companies.
         
        h.Reviewing the Zakat calculation and specifying the amount of Zakat due on each share of the Company.
         
        i.Reviewing the charity account before granting the approval for disposal.
         
        j.Reviewing the financial statements of the Company to ensure compliance with Islamic Shari’ah provisions.
         
        k.Preparing an annual Shari’ah report.
         
        l.Continuous monitoring the Company's business and activities, through Internal Shari’ah Control Division and Internal Shari’ah Audit Division, in terms of its compliance with the Islamic Shari’ah Provisions.
         
        8.19In fulfilling its responsibilities, the ISSC may engage the experts and consultants with appropriate expertise in the relevant fields (e.g. insurance, law, accountancy and investment management) as required. The said experts and consultants may attend and contribute to ISSC meetings without voting on the Fatwa or resolution.
         
        8.20In case a Shari’ah non-compliance issue is identified, the ISSC must review and approve:
         
        a.remedial measures, if such remediation is feasible.
         
        b.the treatment required by Shari’ah for the outcome of the Shari’ah non-compliance issue if the remediation is not feasible.
         
        c.preventive measures to avoid reoccurrence of such issues.
         
         Reporting the above to the Company’s Board or its relevant committee. If the Company fails to address the proposed remedial action, the ISSC must report it to the HSA or the Central Bank.
         
        8.21The ISSC must review and approve all business operations, products, services investments, and financial securities that the Company executes, issues, manages, promotes, or offers to its customers (Participants and potential Participants) in order to ensure the compliance with the Islamic Shari’ah provisions. The approvals from other ISSCs, within or outside the UAE, in relation to the above, should not be used as a substitute to the ISSC approval.
         
        Annual Shari’ah Report
         
        8.22The ISSC must issue an annual Shari’ah report stating the extent of Company’s compliance with Islamic Shari’ah Provisions. It should be published within the financial statement in the Company’s disclosures and other means possible, in accordance with this Standard and requirements issued by HSA.
         
        8.23The annual Shari’ah report of the ISSC must contain the main components specified by the HSA.
         
        8.24The annual Shari’ah report must be submitted to the HSA for review and approval prior to presenting the same at the general assembly.
         
        Performance Assessment of ISSC
         
        8.25The Company in coordination with the Chairperson of the ISSC shall develop an assessment for ISSC based on the following aspects:
         
        a.Shari’ah and scholarly aspects in terms of the member’s participation in decision making, discussions, and review of contracts, documents and reports submitted to the ISSC. This represents 70% of the assessment.
         
        b.Organizational aspect in terms of members’ attendance of meetings and adherence to meeting schedule (dates and times), and other procedures prescribed by the ISSC charter, in line with this Standard. This represents 30% of the assessment.
         
         The Company should inform each ISSC member upon appointment and at the beginning of each financial year about the assessment criteria.
         
        8.26At the end of the financial year, the Chairperson of the ISSC shall provide the HSA with a report on performance assessment taking into consideration the instructions issued by the Central Bank that relates to development and training of individuals who work in Shari’ah Supervision in Islamic financial institutions.
         
        8.27Based on the performance assessment, the Company may encourage the ISSC members to attend/participate to any relevant program/training that relates to global development in Takaful Insurance and Insurance.
         
        ISSC Charter
         
        8.28The Company must adopt a charter for the ISSC that defines details of decision making process and their implementation, and sets adequate methods to fulfill ISSC’s responsibilities without prejudice to the requirements of this Standard, and in accordance to the template approved by the HSA.
         
        ISSC Independence
         
        8.29ISSC members must be independent in conducting their responsibilities. The following controls and guidelines, as a minimum, must be observed to ensure the independence of ISSC members:
         
        a.A member of the ISSC must not have a first-degree relative as member of a Company’s Board or Senior Management in the Company.
         
        b.A member of the ISSC must not be an owner/shareholder of/in a company that provides consultancy or Shari’ah services to the Company where he/she acts as member of ISSC.
         
        c.A member of the ISSC must not be employees of the Company or any of its Affiliates when serving as member of the ISSC and should not provide services to the Company outside the scope of the ISSC’s assigned functions.
         
        d.A member of the ISSC shall not accept any allowance from the Company or its Affiliates other than the allowance he/she receives for being member of the ISSC, the allowance for attending ISSC meetings, and other matters related thereto. If a service or product is offered to a member of the ISSC, such member shall be treated as ordinary customers and shall not receive any preferential treatment.
         
        e.A member of the ISSC or his/her first or second-degree relatives, shall not own a share equal to/or more than 5% of the Company.
         
        f.A member of the ISSC must not hold controlling interests in companies’ shares and/or other investments in which the Takaful Insurance Accounts’ funds are invested in.
         
        g.The entitlement to ISSC allowances shall not be conditional on achieving certain results, or linking it to the results of the services provided by the ISSC (conditional remuneration).
         
        8.30In case of conflict of interest, including non-compliance with Article (8.29), a member of the ISSC must do the following to resolve the said case:
         
        a.disclose any conflict of interest cases, to the ISSC, related to his/her family members or business partners or companies he/she has interest in;
         
        b.where there is a temporary conflict of interest, abstain from participating in the relevant discussion, decision or action; or
         
        c.if the issue remains unresolved, the ISSC member with the issue of independence impairment must notify and report to the Company’s Senior Management in writing to take the necessary actions.
         
        8.31The Company must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the independence of any ISSC member.
         
        Accessibility
         
        8.32The ISSC members have the right to access at any time all the records, contracts and documents of the Company, and it may request the clarifications it deems necessary to perform its responsibilities, and the Company’s Senior Management must provide such clarifications and information.
         
        8.33In the event that the Company fails to enable the ISSC to perform its responsibilities, the ISSC must state the same in a report and submit it to the Company’s Board or the Board’s audit committee. If the ISSC’s request has not been addressed, the ISSC must inform the Central Bank and the HSA.
         
        Confidentiality
         
        8.34A member of the ISSC must not disclose Confidential Information of the Company unless such disclosure is required by the Central Bank or by law.
         
        Consistency
         
        8.35The ISSC members should strive to achieve unanimity in relation to the resolutions and Fatwas. The ISSC shall not resort to majority vote unless members are unable to reach unanimity within a reasonable period.
         
        8.36In cases where disagreement arises over a Shari`ah opinion, between members of the ISSC, or disagreement between the ISSC and the Board, over the compliance or noncompliance of a particular matter with the provisions of Islamic Shari`ah, the disagreement shall be referred to the HSA, whose opinion on the matter shall be final.
         

      • Article (9) Internal Shari’ah Controls

        9.1The Company must establish effective internal Shari’ah controls comprising three lines of defense approach that are independent from each other, which includes:
         
        a.the first line of defense, represented by the business line, which shall set clear policies, procedures, and controls, approved by the ISSC, for executing the business activities in a manner compliant with Islamic Shari’ah Provisions at all times.
         
        b.the second line of defense, represented by the Internal Shari’ah Control Division, which undertakes the functions prescribed in Article (10) , and it shall not be organizationally part of any business division or reporting to it.
         
        c.the third line of defense represented by Internal Shari’ah Audit Division, which undertakes Shari’ah audit and monitors compliance prescribed in Article (11), and it shall not be organizationally part of any business division or reporting to it.
         
        9.2The Company must provide sufficient financial and human resources that suit the size and nature of Company’s activities so that Internal Shari’ah Control Division and Internal Shari’ah Audit Division can carry out their work effectively and efficiently, in consultation with the ISSC.
         
        9.3The Internal Shari’ah Control Division and Internal Shari’ah Audit Division perform two different tasks, and must be separate from each other in terms of reporting and human resources, in accordance with the three lines of defense approach.
         

      • Article (10) Internal Shari’ah Control Division

        10.1.Each Company shall have in place an Internal Shari’ah Control Division in its Shari’ah governance framework. This division ascertains Shari’ah compliance and supports the ISSC in its duties. It is comprised a number of employees that is commensurate with the size and the nature of the Company’s operations. The ISSC shall supervise the work of this division from the technical perspective.
         
        10.2.The Company must have specified work procedures related to the Internal Shari’ah Control Division and it must carry out its duties in line with the said procedures.
         
        Fit and Proper
         
        10.3.The Company must appoint a head for the Internal Shari’ah Control Division, after obtaining the Central Bank’s approval, who shall report to the Board. The head of this division must:
         
        a.be a Muslim;
         
        b.have a university degree in Islamic Shari’ah, or relevant specializations;
         
        c.have a professional certificate in Shari’ah supervision and/or Takaful Insurance from one of the organizations that supports Islamic finance like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the General Council for Islamic Banks And Financial Institutions (CIBAFI), or other recognized institutions that issue similar certifications. It is also preferable to have a professional certificate in insurance issued by a local or an international organization;
         
        d.have an experience of ten (10) years, as a minimum, in the field of Shari’ah supervision in Islamic financial institutions, including at least five (5) years Shari’ah supervision in Takaful Insurance;
         
        e.practice his/her duties on full-time basis, and it is not permissible to combine between the job of a head of the Internal Shari’ah Control Division and any other job in the Company;
         
        f.have good conduct and behavior, where he/she must not have been sentenced by a court in crimes related to honor or honesty, or was convicted of offences and sentenced to imprisonment;
         
        g.have excellent command of English and reasonable command of Arabic.
         
        The Internal Shari’ah Control Functions
         
        10.4.The Internal Shari’ah Control Division shall undertake the following functions:
         
        Firstly: ISSC Secretariat Function
         
         This function undertakes the following:
         
        a.preparing, and organizing the meetings of the ISSC,
         
        b.preparing and drafting the minutes of the meetings,
         
        c.communicating the resolutions to the relevant functions of the Internal Shari’ah Control Division and Internal Shari’ah Audit Division in addition to other divisions in the Company,
         
        d.following up with resolution implementation as per the follow-up list required by the ISSC,
         
        e.filing resolutions and Fatwas, and
         
        f.Following up administrative matters related to the ISSC.
         
        Secondly: Shari’ah Consultations Function
         
         This function provides consultation based on the ISSC’s Resolutions in regards to:
         
        a.contracts, documents and other aspects related to the Company’s products and services, including products manual, policies, internal procedures,
         
        b.Company’s Shari’ah related inquiries and issues,
         
        c.marketing/advertising materials and publications,
         
        d.customers complaints (related to the compliance with Islamic Shari’ah Provisions), and
         
        e.other Shari’ah issues faced by the Company especially the ones related to Takaful Insurance operating model and products.
         
        Thirdly: Shari’ah Research & Development Function
         
         This function undertakes the following:
         
        a.conducting research for related Shari’ah and procedural issues requested by the ISSC,
         
        b.contributing, with other relevant divisions in the Company, to the development of products and formulation policies, procedures, and contracts, and
         
        c.other areas of development in the Company.
         
        Fourthly: Shari’ah Compliance Function
         
         This function does not report to any other compliance function in the Company. It concerns with Shari’ah compliance and it is responsible to conduct the following:
         
        a.performing regular Shari’ah monitoring and assessment on the Company’s businesses and activities to ensure Shari’ah compliance with resolutions, regulations, standards, which are issued by the Central Bank and the HSA,
         
        b.ensure the first line of defense conducts the tasks in accordance with the approved procedures from the relevant entities, in particular the ISSC (e.g. segregation between the Participants' Accounts and the Shareholders’ accounts, the existence of a documented and approved mechanism for the distribution of surplus to the participants, deficit in Participants' Account is covered via Shari’ah compliant mechanisms), and
         
        c.ensure the Company establishes a Zakat Fund.
         
         The Shari’ah compliance function must not be outsourced to external entities.
         
        Fifthly: Shari’ah Training Function
         
         This function is responsible for the following:
         
        a.conducting training for Company’s staff on those aspects of their duties related to Company’s compliance with Islamic Shari’ah Provisions,
         
        b.qualifying employees with the information and skills that they need based on the nature of work of each employee, to ascertain that the Company complies with Islamic Shari’ah Provisions at all times, and
         
        c.assisting the Senior Management in implementing a continuous professional Shari’ah-related training and development program.
         
        10.5.The Internal Shari’ah Control Division must not issue resolutions or Fatwas. Instead, the Internal Shari’ah Control Division must refer back to the ISSC in all matters that it considers and all tasks it carries out, unless there were resolutions or Fatwas issued for the matters before.
         
        10.6.Internal Shari’ah Control Division staff shall not undertake any executive powers or responsibilities related to the businesses and activities that may be monitored by themselves.
         
        Reporting Lines
         
        10.7.The Shari’ah compliance report must be submitted to the ISSC to look at the technical Shari’ah matters prior to submitting the same to the chief executive officer. The Shari’ah compliance function must have the right for direct access to the Board.
         
        10.8.The duties of the Shari’ah compliance function must complement the compliance function of the Company. This function must have a dotted reporting line to the head of compliance of the Company to submit reports regarding the compliance with Islamic Shari’ah Provisions for information. The head of compliance shall not have any authority or responsibility related to the Shari’ah Compliance function.
         
        10.9.In matters related to promotions, bonus, performance assessment, and termination, the Internal Shari’ah Control Division’s head and staff shall be carried out by the Board or its committees in consultation with the ISSC and it must not be carried out by the Senior Management.
         

      • Article (11) Internal Shari’ah Audit Division

        11.1.The Internal Shari’ah Audit Division undertakes Shari’ah audit and monitors Company’s compliance with Islamic Shari’ah Provisions. This is conducted through an annual plan to collect and assess evidence of Company’s activities and transactions to ensure their compliance with Islamic Shari’ah Provisions and ensure the adequacy of internal procedures and Shari’ah governance framework.
         
        11.2.Within the Shari’ah governance framework, the Company must have specified work procedures related to Internal Shari’ah Audit Division.
         
        Fit and Proper
         
        11.3.The Company must appoint a head for Internal Shari’ah Audit Division2, after obtaining the Central Bank’s approval, who shall report to the Board. The head of this division must:
         
        a.be a Muslim;
         
        b.have a university degree in Islamic Shari’ah, or relevant specializations;
         
        c.have a professional certificate in Shari’ah supervision and/or Takaful Insurance from one of the organizations that supports Islamic finance like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the General Council for Islamic Banks And Financial Institutions (CIBAFI), or other recognized institutions that issue similar certifications. It is also preferable to have a professional certificate in insurance issued by a local or an international organization;
         
        d.have an experience of ten (10) years, as a minimum, in the field of Shari’ah supervision in Islamic financial institutions, including at least five (5) years Shari’ah Control in Takaful Insurance;
         
        e.practice his/her duties on full-time basis, and it is not permissible to combine between the job of a head of Internal Shari’ah Audit Division and any other job in the Company;
         
        f.have good conduct and behavior and not have been sentenced by a court in crimes related to honor or honesty, or was convicted of offences and sentenced to imprisonment;
         
        g.have excellent command of English and reasonable command of Arabic.
         
        11.4.The internal Shari’ah auditor must meet the requirements mentioned in Article (11.3), except for the condition of experience; where the internal Shari’ah auditor must have a minimum practical experience of five (5) years in Internal Shari’ah Audit.
         
        The Internal Shari’ah Audit Functions
         
        11.5.Internal Shari’ah Audit Division shall carry out the following functions:
         
        a.Development of Internal Shari’ah Audit manual, and to undertake review and update the manual on a regular basis,
         
        b.Prepare the annual Shari’ah audit plan, which must be approved by the ISSC in coordination with the Audit Committee. This should adopt the best practices in this regard (for example, the risk based Shari’ah Audit),
         
        c.Undertake assessment of businesses and activities of the Company to ensure the Company’s Shari’ah compliance with the requirements issued by the Central Bank, resolutions of the HSA, and resolutions of the ISSC,
         
        d.Undertake assessment of effectiveness of the internal Shari’ah supervision to ensure that the Company’s compliance with Islamic Shari’ah Provisions,
         
        e.Ensure that the products and services, forms, contracts, agreements, the execution procedures of activities and transactions, and other related matters are approved by ISSC,
         
        f.Conduct regular field audit to the Company’s internal and external divisions, and branches (if any),
         
        g.Coordinate and exchange their findings and reports with the internal audit division,
         
        h.Prepare internal audit forms and programs required for conducting inspection, and to verify and document the sound execution of transactions in light of the HSA’s Resolutions and ISSC’s Resolutions,
         
        i.Conduct meetings with the Company’s divisions to discuss the Shari’ah observations and require setting appropriate measures to avoid such issues, in cooperation with relevant entities inside the Company, and
         
        j.Prepare a report of the outcomes of the Internal Shari’ah Audit.
         
        11.6.Internal Shari’ah Audit Division staff shall not undertake any executive powers or responsibilities related to the businesses, activities, and contracts that may be audited by them.
         
        11.7.The Internal Shari’ah Audit must not be outsourced to external entities. The Internal Shari’ah Audit division may be assisted by additional external bodies after the approval of the Central Bank.
         
        Reporting Lines
         
        11.8.The head of Internal Shari’ah Audit Division shall report to the Board. The head of Internal Shari’ah Audit Division shall submit the reports to the ISSC for resolutions on Shari’ah matters stated in his/her reports. He/she shall then report with the ISSC resolutions to the Audit Committee for the implementation of their content and follow-up of their requirements.
         
        11.9.The Internal Shari’ah Audit Division submits its reports to the ISSC and to the Audit Committee biannually (at minimum3).
         
        11.10.In matters related to promotions, bonus, performance assessment, and termination, Internal Shari’ah Audit Division’s head and staff shall not report to the Senior Management they are auditing, but to the Board, through the Audit Committee, and in consultation with the ISSC.
         

        2 In the event of not appointing a head for Internal Shari’ah Audit Division, the Company shall appoint a trainee auditor or more (depending on the Company’s size) and he/she meets the minimum requirements for internal Shari’ah auditor (not requirements for a head) to be trained in Shari’ah auditing. After five years of the issuance of this Standard, the name of trainee auditor shall be submitted to the Central Bank for approval as a head of this division. At the same time, the Company shall appoint an external Shari’ah auditing company to perform the responsibilities of the head of Internal Shari’ah Audit Division with the participation of the trainee Shari’ah auditor.
        3 The frequency of reports submitted by the Internal Shari’ah Audit division depends on the size and nature of the Company’s works, which might require submitting more reports.

      • Article (12) External Shari’ah Audit

        12.1The Company may appoint a specialized external body to conduct External Shari’ah Audit. This task must be undertaken by an independent external Shari’ah audit company approved by the Central Bank (“External Shari’ah Auditor”).
         
        12.2.The External Shari’ah Auditor shall assess compliance of the Company with the Islamic Shari’ah Provisions in light of inter alia the following:
         
        a.regulations and standards issued by the Central Bank from time to time; and
         
        b.HSA’s Resolutions and ISSC’s Resolutions.
         
         He/she must meet the ISSC members to discuss the findings, before preparing the report.
         
        12.3.The External Shari’ah Auditor shall prepare a report for the Company’s Board and ISSC, giving their opinion on:
         
        a.the status of Shari’ah compliance of the Company;
         
        b.the risks associated with the Shari’ah non-compliance;
         
        c.the capacity and quality of the entity’s risk management system to measure, manage and mitigate the Shari’ah Non-Compliance Risks; and
         
        d.any other issues deemed significant in External Shari’ah Auditor with respect to Islamic Shari’ah Provisions.
         

      • Article (14) Interpretation of Standard

        The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Standard.

      • Article (15) Compliance with the Standard

        15.1.The Company must set a Shari’ah governance framework in accordance to this Standard within 180 days from the date of issuing this Standard. The same must be submitted to the Central Bank for approval.
         
        15.2.The Company must comply fully with the requirements of this Standard within one year from publishing this Standard.
         

    • Standard Re Annual Shari’ah Report of Internal Shari’ah Supervision Committee for Takaful Insurance Companies

      N 880/2024 Effective from 9/2/2024

      • Article (1) Introduction

        1.1This Standard Re Annual Shari’ah Report of Internal Shari’ah Supervision Committee for Takaful Insurance Companies (“Standard”)complements the requirements outlined in the Regulation Regarding Takaful Insurance (“Regulation”),and the Standard Re Shari’ah Governance for Takaful Insurance Companies issued by the Central Bank, with the aim to promote development of the insurance system and to ensure its effectiveness and efficiency.
                 		  
        1.2Takaful Insurance Companies (“Company/Companies”) are required to have in place Shari’ah governance policies and mechanisms to ascertain that Annual Shari’ah Report that is issued by the Internal Shari’ah Supervision Committee (“Annual Shari’ah Report”) is compliant with requirements outlined in this Standard, and applicable standards and regulations.
                 		  
        1.3Where the Standard requires providing information, or undertake certain measures, or address particular provisions, as a minimum requirement, the Central Bank may impose (new) requirements additional to those specified in the relevant article (of the Standard).
                 		  

      • Article (2) Objectives

        2.1This Standard contains requirements and guidance that facilitate the implementation of the requirements related to the issuance of the Annual Shari’ah Report.
                 		  
        2.2The Standard provides clarity on the supervisory expectations with respect to the Annual Shari’ah Report.
                 		  

      • Article (3) Scope of Applicability

        3.1The Standard applies to all Takaful Insurance Companies licensed by the Central Bank.
                 		  
        3.2The Standard must be read in conjunction with the standards and resolutions issued by the Higher Shari’ah Authority (“HSA”) and notified to Companies.
                 		  

      • Article (4) General Requirements For Issuing The Annual Shari’ah Report

        4.1The Annual Shari’ah Report represents annual disclosure of the Internal Shari’ah Supervision Committee (“ISSC”) on the level of Company’s compliance with Islamic Shari’ah Provisions. Accordingly, responsibility for preparing the Annual Shari'ah Report rests with the ISSC, within the mechanisms and requirements stipulated in the Standard.
                 		  
        4.2The Annual Shari’ah Report shall be presented at the general assembly in accordance with the applicable regulatory requirements.
                 		  
        4.3The Annual Shari’ah Report shall be submitted to the HSA for review and approval prior to its submission at the general assembly, no later than one month prior to the date of the general assembly of the Company, in order to make any comments.
                 		  
        4.4The ISSC must verify accuracy and validity of all information in the Annual Shari’ah Report before its submission to the HSA.
                 		  
        4.5The ISSC must ascertain that all information required to be stated in the Annual Shari’ah Report as per the template in Article (6) are included in the designated places of the report before submitting it to HSA.
                 		  
        4.6The ISSC must ensure that all duties fulfilled by the ISSC, as outlined in the Annual Shari’ah Report, are well documented for audit purposes.
                 		  
        4.7The Company shall publish the Annual Shari’ah Report in the Company’s disclosures of financial statements and other available means.
                 		  

      • Article (5) Compliance With The Standard

        5.1The template of the Annual Shari’ah Report as per the Article (6) sets out the minimum requirements as to the principal information and disclosures to be included in the Annual Shari’ah Report.
                 		  
        5.2The ISSC may add further information to the Annual Shari’ah Report, if necessary, according to the template in this Standard.
                 		  

      • Article (6) Template For The Annual Shari’ah Report (English)

        Template for the Annual Shari’ah Report (English)

        Annual Report of the Internal Shari’ah Supervision Committee of (name of theTakaful Insurance Company)

        Issued on: (issue date)

        To: Shareholders of (name of the Takaful Insurance Company) (“the Company”)

        After greetings,

        Pursuant to requirements stipulated in the relevant laws, regulations and standards (“the Regulatory Requirements”), the Internal Shari’ah Supervision Committee of the Company (“ISSC”) presents to you the ISSC’s Annual Report for the financial year ending on 31 December (“Financial Year”).

         

        1.

        Responsibility of the ISSC

        In accordance with the Regulatory Requirements and the ISSC’s charter, the ISSC’s responsibility is stipulated as to:

        undertake Shari’ah supervision of all businesses, activities, products, services, contracts, documents and business charters of the Company; and the Company’s policies, accounting standards, operations and activities in general, memorandum of association, charter, financial statements, allocation of expenditures and costs, and distribution of profits between participants’ accounts and shareholders’ accounts (“Company’s Activities”) and issue Shari’ah resolutions in this regard, and

        determine Shari’ah parameters necessary for the Company’s Activities, and the Company’s compliance with Islamic Shari’ah Provisions within the framework of the rules, principles, and standards set by the Higher Shari’ah Authority (“HSA”) to ascertain compliance of the Company with Islamic Shari’ah Provisions.

        The senior management is responsible for compliance of the Company with Islamic Shari’ah Provisions in accordance with the HSA’s resolutions, fatwas, and opinions, and the ISSC’s resolutions within the framework of the rules, principles, and standards set by the HSA (“Compliance with Islamic Shari’ah Provisions”) in all Company’s Activities, and the Board bears the ultimate responsibility in this regard.
         

        		  
        2.

        Shari’ah Standards

        The ISSC shall comply with the Shari’ah standards issued and approved by the HSA.
         

        		  
        3.

        Duties Fulfilled by the ISSC During the Financial Year

        The ISSC conducted Shari’ah supervision of the Company’s Activities by reviewing those Activities, and monitoring them through the internal Shari’ah control division or section, internal Shari’ah audit division or section, and (if applicable) external Shari’ah audit, in accordance with the ISSC’s authorities and responsibilities, and pursuant to the Regulatory Requirements in this regard. The ISSC’s activities included the following:
         

        		  
         a.Convening (number) meetings during the year.
                 		  
         b.Issuing fatwas, resolutions and opinions on matters presented to the ISSC in relation to the Company’s Activities.
                 		  
         c.Reviewing and monitoring compliance of policies, procedures, accounting standards, operating model and product structures, contracts, documentation, business charters, and other documentation submitted by the Company to the ISSC for approval.
                 		  
         d.Reviewing the Takaful Insurance operating model, underlying contracts and supporting materials (e.g. underwriting and claims settlement manual/guidelines etc.).
                 		  
         e.Reviewing and approving the Company’s products, services and marketing materials.
                 		  
         f.Reviewing and approving the policy and procedures that govern Takaful Insurance Accounts (e.g. segregation of accounts and transparent financial resources flow between the accounts etc.), surplus distribution, and deficit coverage.
                 		  
         g.Ensuring the compliance of the segregation between Takaful Insurance accounts and shareholders accounts, allocation of costs and expenditures on the accounts, and the underwriting surplus policy with Islamic Shari’ah Provisions.
                 		  
         h.Reviewing the financial statements of the Company to ensure compliance with Islamic Shari’ah provisions.
                 		  
         i.Reviewing the investment policy and approving the Shari’ah screening criteria to ensure the investment activities in both shareholders’ accounts and participants’ accounts, are comply with the Provisions of Islamic Shari’ah.
                 		  
         j.Reviewing the risk ceding arrangements of the participants’ account with other insurance companies (Retakaful insurance, conventional reinsurance, co-insurance with Takaful insurance/conventional insurance companies) and confirming its compliance with Islamic Shari’ah Provisions.
                 		  
         k.Supervision through the internal Shari’ah control division or section, internal Shari’ah audit division or section, and (if applicable) external Shari’ah audit, of the Company’s Activities including supervision of executed transactions and adopted procedures on the basis of samples selected from executed transactions, and reviewing reports submitted in this regard.
                 		  
         l.Providing guidance to relevant parties in the Company - to rectify (where possible) incidents cited in the reports prepared by internal Shari’ah control division or section, internal Shari’ah audit division or section, and/or (if applicable) external Shari’ah audit - and issuing of resolutions to set aside revenue derived from transactions in which non-compliances were identified for such revenue to be disposed towards charitable purposes.
                 		  
         m.Approving corrective and preventive measures related to identified incidents to preclude their reoccurrence in the future.
                 		  
         n.Reviewing the Zakat calculation and specifying the amount of Zakat due on each share of the Company.
                 		  
         o.Communicating with the Board and its subcommittees, and the senior management of the Company (as needed) concerning the Company’s compliance with Islamic Shari’ah Provisions.
                 		  
         p.(add other works that the ISSC wants to mention in this report).
                 		  
          The ISSC sought to obtain all information and interpretations deemed necessary in order to reach a reasonable degree of certainty that the Company is compliant with Islamic Shari’ah Provisions. (the phrase “External Shari’ah audit” is included in the report if applicable, otherwise it should be deleted).
                 		  
        4.

        Independence of the ISSC

        The ISSC acknowledges that it has carried out all of its duties independently and with the support and cooperation of the senior management and the Board of the Company. The ISSC received the required assistance to access all documents and data, and to discuss all amendments and Shari’ah requirements. (Factors that have affected independence, if any, must be mentioned).
         

        		  
        5.

        The ISSC’s Opinion on the Shari’ah Compliance Status of the Company

        Premised on information and explanations that were provided to us with the aim of ascertaining compliance with Islamic Shari’ah Provisions, the ISSC has concluded with a reasonable level of confidence, that the Company’s Activities are in compliance with Islamic Shari’ah Provisions, except for the incidents of non-compliance observed, as highlighted in the relevant reports. The ISSC also provided directions to take appropriate measures in this regard.

        (Add a statement on any other breaches to the Shari’ah provisions, resolutions and controls established by the Higher Shari’ah authority, if applicable). 

        The ISSC formed its opinion, as outlined above, exclusively on the basis of information perused by the ISSC during the financial year.

        		  

         

         Signatures of members of the Internal Shari’ah Supervision Committee of the Company

        Member’s NameType of Membership Signature
        Member’s NameType of Membership Signature
        Member’s NameType of Membership Signature

         

         

        (End of the Template)

    • Standard Re Charter of Internal Shari’ah Supervision Committee for Takaful Insurance Companies

      N 882/2024 Effective from 9/2/2024

      • Article (1) Introduction

        1.1 This Standard Re Charter of Internal Shari’ah Supervision Committee forTakaful Insurance Companies (“Standard”) complements the Standard Re Shari’ah Governance forTakaful Insurance Companies that conduct their activities and businesses in accordance with the provisions of Islamic Shari’ah (“Company”/ “Companies”).
                 		  
        1.2 The Companies must establish Shari’ah governance policies and governance mechanisms to ascertain that the adopted Charter of the Internal Shari’ah Supervision Committee (“Charter”) is compliant with requirements outlined in this Standard and the relevant requirements outlined in the regulations, standards and resolutions issued by the Central Bank and the Higher Shari’ah Authority (“Regulations, Standards and Resolutions”).
                 		  
        1.3 Where the Standard requires providing information, or undertaking certain ( measures, or addressing particular provisions as a minimum requirement, the Central Bank may impose (new) requirements additional to those specified in the relevant article (of the Standard).
                 		  

      • Article (2) Objectives

        2.1 This Standard contains provisions and guidance to facilitate the implementation of requirements related to setting the Charter as stated in the Standard Re Shari’ah Governance for Takaful Insurance Companies.
                 		  
        2.2 This Standard clarifies the supervisory expectations with respect to the Charter.
                 		  

      • Article (3) Scope of Applicability

        3.1 The Standard applies to all Takaful Insurance Companies licensed by the Central Bank.
                 		  
        3.2 The Standard must be read in conjunction with the standards and resolutions issued by the Higher Shari’ah Authority and notified to Companies.
                 		  

      • Article (4) Compliance with the Standard

        4.1 The Template of the Charter, as per the Appendix, sets out the minimum requirements that must be stated in the Charter. The Company may state additional articles or details to the Charter’s Template provided that such addition does not contradict with the requirements stated in the relevant Regulations, Standards, and Resolutions.
                 		  
        4.2 The Takaful Insurance Companies must comply with the requirements stated in this Standard within one year from the date of issuance of the Standard.
                 		  

         

         

         

         

         

         

        Khaled Mohamed Balama

        Governor of the Central Bank of the UAE

         

      • Appendix: Template of the Charter

        • Charter for Internal Shari’ah Supervision Committee in (insert the name of the Takaful Insurance Company)

          • 1. Introduction

            This Charter specifies the functional controls of Internal Shari'ah Supervision Committee of (insert the name of the Takeful Insurance Company, and its meetings’ management, decision-making process, and other procedural matters (“Charter”).

          • 2. Definition of Internal Shari’ah Supervision Committee

            The Internal Shari’ah Supervision Committee (“ISSC”) is a body appointed by the Takaful Insurance Company, comprised of scholars specialized in Islamic financial transactions, with the mandate to independently supervise transactions, activities, and products of the Company to ensure it is compliant with Islamic Shari’ah in all its objectives, activities, operations, and code of conduct.

          • 3. Qualification of Members of ISSC

            Every member considered for, and appointed to the ISSC must meet the fit and proper requirements stipulated in the Regulations, Standards and Resolutions issued by the Central Bank and the Higher Shari’ah Authority (“Regulations, Standards and Resolutions”).

          • 4. Independence of the ISSC

            The Company must comply with the controls and guidelines specified in the Regulations, Standards and Resolutions to ascertain independence of the ISSC members.

          • 5. Appointment of ISSC, Membership Meriod, Dismissal And Resignation Of The Members

            1.5 The Company shall ensure that it executes and outlines:

              a.appointment and formation of the ISSC,
             
              b.duration of the membership, 
             
              c.dismissal or resignation of its members, as specified in the Regulations, Standards and Resolutions.
             
            2.5 The ISSC shall select from among its members a chairperson and a deputy chairperson in its first meeting.
             

          • 6. Responsibilities And Authorities Of The ISSC

            The ISSC shall adhere to the requirements regarding responsibilities and authorities of the ISSC stipulated in the Regulations, Standards and Resolutions.

          • 7. The ISSC’s Meetings And Issuance of Resolutions

            7.1The ISSC shall meet regularly, at least four times in the fiscal year, and the period between any two meetings shall not exceed 120 days.
                         		  
            7.2Quorum for ISSC meetings is constituted by presence of majority of the ISSC members. The ISSC resolutions are issued through the unanimous agreement or the majority vote by its members present in a meeting, and in case of tied votes, the vote of the chairperson prevails. The opinion of the member who is not in favour of the ISSC’s resolution must be recorded in the minutes of meeting with its reasoning.
                         		  
            7.3Attendance of an ISSC member must not be less than 75% of the total meetings held during a year. An ISSC member may attend or convene the meeting in full through video or audio means of communication, if necessary, provided that this is recorded in the minutes of the meeting and approved by the ISSC members.
                         		  
            7.4The ISSC may invite to its meeting the Company’s directors, employees, experts, advisors, and other parties that ISSC decides in order to obtain clarification regarding data and information needed by ISSC in relation to the issues under their review. The said attendees must not be present at the time of the ISSC’s decision-making in the related matters.
                         		  
            7.5The ISSC may issue resolutions by circulation in urgent cases, provided unanimity is reached. Every resolution issued by circulation shall be recorded in the minutes of the first meeting held after the issuance. In case of a disagreement, the ISSC shall hold a meeting as soon as possible in order to resolve lack of consensus.
                         		  
            7.6Resolutions of the ISSC must be written in a clear form, and be accompanied by procedures necessary for implementation of the provisions contained therein in a manner that ensures adequate execution. The ISSC specifies the details that must be accompanied with the resolution in relation to its implementation.
                         		  

          • 8. Methodology Of ISSC’s Functions

            8.1The ISSC must thoroughly investigate matters on its agenda to establish adequate (fact-based) understanding related to nature of the presented matter. If a matter does not become clear to the ISSC, the ISSC may postpone issuance of the resolution or request additional information or supporting studies, and accordingly (in this case) the subject matter shall be presented again after the request is addressed.
                         		  
            8.2The Company shall ensure that the ISSC is given sufficient time to investigate the matters submitted to the ISSC, and review any contracts and documents that may relate to the presented matters.
                         		  
            8.3The ISSC shall explore the Shari’ah ruling on the matter it is examining by leveraging the opinions of Shari’ah jurists in the credible schools of law, while ensuring that the Shari’ah ruling does not contradict the Shari’ah standards or resolutions issued by the HSA, even if such ruling differs from rulings issued by the ISSC in the past.

                         		  
            8.4Fatwas issued by ISSCs of other institutions are not binding on the Company’s ISSC, and existence of those fatwas do not obviate the need for a resolution from the Company’s ISSC, even if the members are same.
                         		  
            8.5The resolutions of the ISSC are binding on the Company in accordance with the applicable laws and standards.
                         		  
            8.6The Company shall comply with interpretations of the ISSC regarding the HSA’s resolutions and standards and their implementation.
                         		  

          • 9. Subcommittees Of The ISSC

            To facilitate the decision-making process in urgent matters, the ISSC may choose to authorize an executive member or an executive sub-committee, from among its members, and determine their responsibilities. Resolutions of the executive member or the executive subcommittee shall be presented to the ISSC at its subsequent meeting. Neither the executive member nor the executive committee has the right to issue a resolution on:

              a.transactions that contain new structures, business models, mechanisms, or documentation that have not previously been endorsed by the ISSC,
             
              b.transactions that may negatively impact some of the participants e.g., approving a particular policy for surplus distribution, or
             
              c.adopting a plan of internal Shari’ah audit or endorsing reports submitted by the internal Shari’ah audit.
             

          • 10. Internal Shari’ah Controls Functions

            The Company shall comply with the requirements related to Internal Shari'ah Control functions as stipulated in the Regulations, Standards and Resolutions.

          • 11. Engagement (Appointment) Letter

            The Company shall ensure that:

              a.the engagement letter by which a candidate is appointed to the ISSC conforms to the requirements specified in the Regulations, Standards and Resolutions,
             
              b.the candidate has accepted the content of the engagement letter before his/her name is submitted to the HSA and the General Assembly for approval, and
             
              c.the engagement letter must be available in Arabic.
             

          • 12. Approval, Effectiveness, Amendment and Review of the Charter

            The Charter may be amended based on a request by the ISSC and approved by the board of directors, and the amendment will be effective from the date of its approval. The ISSC reviews the Charter at least once every two years or sooner if needed.

             

            Approval of the Charter

             

            Sheikh:Mr./Ms.:
            Chairman of the ISSC Chairman of the Board

             

             

            ....................................................

             

             

            .......................................................

            Date of Signing:Date of Signing:
            Date of Approval: (Date of the latest signature above)

             

             

             

            (End of the Charter’s template)