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The IFSB Issues Exposure Draft of the Core Principles for Islamic Finance Regulation (Takāful Segment) (ED-27) for Public Consultation

Date posted: 31 March 2022

31 March 2022, Kuala Lumpur - The Islamic Financial Services Board (IFSB) has today issued the Exposure Draft of Core Principles for Islamic Finance Regulation (Takāful Segment) (ED-27) for Public Consultation for a period of sixty days, starting from 31 March 2022 until 23 June 2022. The IFSB invites comments from regulatory and supervisory authorities, international organisations, institutions offering Islamic financial services, academics and other interested parties.

This standard is intended to provide a set of Takāful Core Principles (TCPs), closely aligned with the ICPs (as adopted in November 2019), but with additions and modifications where necessary to reflect the application of Sharī’ah principles in takāful. The aim is to provide an international benchmark standard to promote a sound regulatory and supervisory system and to maintain a fair, safe and stable takāful sector for the benefit and protection of the interests of takāful participants, beneficiaries and claimants as well as contributing to the stability of the Islamic financial system. Ultimately, the standard intends to achieve the following objectives:

1. To provide an appropriate international standard for sound regulatory and supervisory practices specifically for the takāful sector;
2. To enable policymakers and supervisors to self-assess the level of observance of principles and standards in the regulations;
3. To identify areas for improvement and guide development of reform agendas and responses to emerging issues; and
4. To provide a basis for peer review enabling objective external assessment by specialised bodies.

Core Principles for regulation of the financial sector have become standard tools to guide Regulatory and Supervisory Authorities (RSAs) in developing their regulatory regimes and practices. They also serve as the basis for regulatory authorities or external parties such as multilateral agencies to assess the strength and effectiveness of regulation and supervision in a jurisdiction. This standard intends to complement the IAIS Insurance Core Principles (November 2019) to address areas that either do not deal, or deal inadequately, with the specificities of Islamic finance.

The IFSB envisages that the Core Principles for Islamic Finance Regulation (Takāful Segment) (CPIFR-Takāful) will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems, and for identifying future work to achieve a baseline level of sound regulations and practices for takāful. Furthermore, the CPIFR-Takāful may also assist IFSB member jurisdictions in: (a) self-assessment; (b) financial sector assessment programme (FSAP) by the International Monetary Fund (IMF) and the World Bank; (c) reviews conducted by private third parties; and (d) peer reviews conducted, for instance, within regional groupings of insurance RSAs.

Considering the size of the document, this ED is complemented by a mapping table which is provided as a guide to easily identify which provisions of the ED are specific to the takāful sector and have been added or modified, while also helping to identify the provisions that are common to both takāful and insurance that are closely aligned with the IAIS Insurance Core Principles.

The IFSB will be conducting an online public hearing (via webinar) as part of the public consultation process. Participation in the webinar is free and open to all.

The soft copy of ED-27 is available on the IFSB website, www.ifsb.org and the Secretariat invites all interested parties, especially members of the IFSB, to send their comments to the IFSB through email to [email protected] by 23 June 2022 at the latest.