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  • 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.