The UAE ranks number 1 internationally for its initiatives that have codified Islamic Financial Transactions and Takaful Insurance

: 3/10/2015

Abu Dhabi- March 10, 2015

The UAE ranked number one internationally for its initiatives that pass laws and legislations that regulate the Islamic financial transactions sector, including the Takaful insurance industry.


In a press release issued on Tuesday, the IA affirmed that the UAE is a global pioneer in creating initiatives that regulate Islamic financial transactions and the Takaful insurance industry. The UAE follows a unique model that considers and issues Takaful legislations and laws that are followed across international markets.


According to the press release, the UAE pursues the creation of a global Islamic financial transaction product, by conducting a comprehensive codification of the Takaful sector. It aims for its recommendations to be adopted internationally in accordance with competitive standards that are adequate to all markets worldwide.


The IA explained that the UAE is seeking a comprehensive law to govern Islamic financial transactions, in which the Islamic insurance sector constitutes a part thereof. By transforming Jurisprudential and Sharia (lawful) opinions into laws and legislative regulations that can be adopted by insurance markets and by judicial and legal authorities, new frameworks can be used as a reference across international markets. The IA indicated that once it is developed and adopted in reality, this initiative would constitute a   turnaround in the area of Islamic financial transactions. It will contribute to the achievement of sustainable growth at the level of the international Takaful industry.


The IA’s press release emphasized the UAE’s superiority in the area of legislations and laws that support Islamic financial transactions, the Takaful insurance sector, and other areas. It has translated its international leadership and the universality of its development model under the direction of H. H. Sheikh Khalifa bin Zayed Al Nahyan (President of the UAE) and H. H. Sheikh Mohammed bin Rashid Al Maktoum (Vice President and Prime Minister of the United Arab Emirates and Governor of Dubai). The IA indicated that this superiority proves that the UAE is on top in all fields and is developing based on international standards. The UAE’s people are capable of creativity, innovation, and competitiveness in international forums.


The IA’s press released noted that the UAE has multiple and diverse initiatives for regulating the Takaful insurance industry. They are founded on many core pillars, including the Takaful insurance statute, the financial, technical, investment, and accounting aspects, and others.


The press release stated that the UAE has issued the Takaful insurance law of 2010, which represents the lead in insurance which has been taken by the UAE at the regional level. It is also considered one of the most comprehensive laws at the Islamic level. The financial regulations, which regulate the financial, technical, investment, and accounting activities of Takaful insurance companies, were issued at the end of 2014. This has given the UAE the lead at the regional level, as it has adopted state-of-the-art solvency measurement requirements which have improved the credit rating of the UAE’s companies. It has also reinforced the positive outlook that rating institutions have of the UAE, as well as those of global financial and investment institutions.


The financial regulations designed for Takaful insurance companies constitute a milestone in the history of the UAE’s insurance sector. The regulations are consistent and competitive with the best applicable standards worldwide and, at the same time, they are compatible with the Takaful insurance law applicable in the UAE. The regulations are also consistent with the principles of the honorable Islamic law; it has been demonstrated that the policies which are required to be adopted in Islamic insurance companies are consistent with the terms of the Principal-Agent (Wakala) model or the Wakala & Mudarabah model. In addition, the provisions related to the distribution of the surplus accrued by the underwriters of Takaful insurance and the importance of separating the assets of participants’ accounts from those of the company’s shareholders’ accounts also comply with Islamic law.


When issuing financial regulations to Takaful insurance companies, the IA has adopted the best global legislative practices when developing their regulations. The laws facilitate adoption on one hand and oversight on the other hand, and in a manner that upgrades the principles and technical rules required to promote the establishment of modern and advanced regulatory principles for the UAE’s insurance market as per international best practices. This approach protects the rights of policyholders and shareholders alike, and protects the companies from any future potential risks.


The financial regulations that target Takaful insurance companies include the financial, technical, investment, and accounting aspects. These include principles of investing policyholders’ rights, the solvency margin and minimum security amounts, the principles for calculating technical allocations, defining the company's assets against the insurance liabilities that arise, the regulations that enforce companies to develop and maintain their records, and the data and records that should be delivered to the IA.



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