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  • HC-9 HC-9 Takaful and Retakaful Companies

    • HC-9.1 HC-9.1 Principle

      • HC-9.1.1

        Companies which refer to themselves as "Takaful or Retakaful" must follow the principles of Islamic Shari'a.

        January 2011

    • HC-9.2 HC-9.2 Shari'a Supervisory Board

      • HC-9.2.1

        Takaful and Retakaful companies which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. In ensuring compliance with Shari'a principles, each Takaful or Retakaful insurance licensee must establish a Shari'a Supervisory Board ('SSB') consisting of at least three Shari'a scholars and must comply with AAOIFI Governance Standard for Islamic Financial Institutions No.1 ('Shari's Supervisory Board: Appointment, Composition and Report').

        January 2011

      • HC-9.2.2

        The function of the Shari'a Supervisory Board is to review the operations of the takaful company and ensure that these are compliant with the principles of the Shari'a. In doing so, the Shari'a Supervisory Board is likely to provide guidance and advice to the takaful company's Board and management on all aspects of a takaful operation, with a particular focus on product design, the handling of claims and surpluses, the calculation and allocation of the operator's costs, the approval of investments and accounting issues.

        January 2011

      • HC-9.2.3

        In the case of overseas insurance firms operating according to takaful principles, the requirement to appoint a Shari'a Supervisory Board in Paragraph HC-9.2.1 may be waived by CBB, if the firm has appointed an equivalent Shari'a Supervisory Board at the parent entity level, of sufficient expertise and credibility.

        January 2011

      • HC-9.2.4

        An insurance firm licensed to conduct insurance business according to takaful principles must comply with all other AAOIFI governance standards for Islamic Financial Institutions.

        January 2011

      • HC-9.2.5

        For takaful firms, full compliance with AAOIFI Governance Standard No.1 is required. The CBB would actively encourage full compliance with all the AAOIFI governance standards but in so doing accepts that these standards themselves include not only standards but also guidance.

        January 2011

      • HC-9.2.6

        The office of Shari'a Board Member is a controlled function: see Module AU (Authorisation).

        January 2011

      • HC-9.2.7

        The Shari'a Board requirements contained in Section HC-9.2 are additional to the other high-level control requirements contained in this Module.

        January 2011

    • HC-9.3 HC-9.3 Governance and Disclosure per Shari'a Principles

      • HC-9.3.1

        Insurance firms which refer to themselves as "Takaful" or "Retakaful" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles.

        January 2011

      • HC-9.3.2

        In addition to its duties outlined in Chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the insurance licensee's Corporate Governance Committee and the Shari'a Supervisory Board (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.

        January 2011

      • HC-9.3.3

        The Board shall set up a Corporate Governance Committee (see also Chapter HC-8). In this case, the Committee shall comprise at least three members to co-ordinate and integrate the implementation of the governance policy framework.

        January 2011

      • HC-9.3.4

        The Corporate Governance Committee established under Chapter HC-9 shall comprise at a minimum of:

        (a) An independent director to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;
        (b) A Shari'a scholar who is a SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues (if any), and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and
        (c) An independent director who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the Board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.
        January 2011

      • HC-9.3.5

        The Corporate Governance Committee shall be empowered to:

        (a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and
        (b) Provide the Board of directors with reports and recommendations based on its findings in the exercise of its functions.
        January 2011

    • HC-9.4 HC-9.4 Terms of Appointment and Competence of the Shari’a Supervisory Board (SSB)

      • SSB Competence/ Fit and Proper Criteria

        • HC-9.4.4

          The Board of directors of the insurance licensee must carry out a background check and consider the following criteria when assessing the fitness and propriety of individuals to serve on the SSB:

          a) Have a clean background, a good character and conduct by being recognised for honesty, integrity and good reputation in their professional business and/or financial dealings, and not previously been convicted of any moral turpitude, felony or criminal offence;
          b) Have competence, diligence, capability and soundness of judgement;
          c) Have strong proficiency in Arabic, as they need to be very conversant with the primary sources of the Shari’a;
          d) Have at least a bachelor degree (or its equivalent) in Islamic Shari’a;
          e) Have a certified degree in Fiqh al Muamalat (Islamic commercial jurisprudence) with strong understanding of Usul Al Fiqh (rules of Islamic jurisprudence);
          f) Have adequate understanding of Takaful/retakaful and accounting;
          g) Have accumulated overall experience of at least seven years in Shari’a related scholarly pursuits (e.g. teaching, research, fatawa issuance, etc).
          Added: October 2020

        • HC-9.4.1

          The appointment of the SSB must be made formally in writing, by way of a contract for service for a minimum period of three years.

          Added: October 2020

        • HC-9.4.2

          Benefits and remuneration of the SSB must be set in aggregate by the general assembly.

          Added: October 2020

        • HC-9.4.3

          Where the Takaful/retakaful licensee fails to appoint the SSB within 3 months of the annual general meeting or to extend the term of the previous SSB, the CBB has the right to appoint a temporary SSB for which all costs related to the appointment will be borne by the Takaful/retakaful licensee in addition to any liabilities related to the delay in the appointment of the SSB.

          Added: October 2020

        • HC-9.4.5

          For purposes of Paragraph HC-9.4.1, at least one SSB member should have a fair understanding of the legal and regulatory framework applicable to the functions of the insurance licensee.

          Added: October 2020