Standard Re Charter of Internal Shari’ah Supervision Committee for Takaful Insurance Companies
N 882/2024 Effective from 9/2/2024Article (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
7.1 The ISSC shall meet regularly, at least four times in the fiscal year, and the period between any two meetings shall not exceed 120 days.
7.2 Quorum 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.
7.3 Attendance 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.
7.4 The 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.
7.5 The 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.
7.6 Resolutions 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
8.1 The 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.
8.2 The 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.
8.3 The 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.
8.4 Fatwas 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.
8.5 The resolutions of the ISSC are binding on the Company in accordance with the applicable laws and standards.
8.6 The 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)