Takaful Laws in Pakistan
Government of Pakistan
Ministry of Commerce
Islamabad, the 3rd September 2005
NOTI FI CATI ON
S.R.O. 905(1)/2005 – In exercise of the powers conferred by sub-section (1) of section 167 of the
Insurance Ordinance, 2000 (XXXIX of 2000), read with clause(lxiv) of section 2 and the second
proviso to section 120 thereof, the Federal Government, is pleased to make the following rules,
the same having been previously published as required by subsection (1) of the said section 167,
namely :
1. Short title and commencement.-(1) These rules may be called the Takaful Rules, 2005.
(2) These shall come into force at once.
2. Definitions. – (1) In these rules, unless there is anything repugnant in the subject or
context, -
(a) accept re-Takaful includes risks from Takaful pools or re-Takaful pools managed
by other Takaful or re-Takaful operators for inclusion in Takaful pools managed by the
Takaful operator;
(b) Bank means the State Bank of Pakistan;
(c) Central Shariah Board means the Central Shariah Board constituted by the
Securities and Exchange Commission of Pakistan under rule 33;
(d) contribution means Takaful charge or instalment payable by a participant;
(e) Family Takaful means Takaful for the benefit of individuals, groups of
individuals and their families as elaborated in the provisions of the Ordinance pertaining
to life insurance business;
(f) General Takaful means Takaful other than Family Takaful;
(g) mudaraba based contract means a Takaful contract based on the principle of
mudaraba;
(h) Ordinance means the Insurance Ordinance (XXXIX of 2000);
(i) participant includes, where Takaful policy has been assigned, the assignee for the
time being and, where he is entitled as against to participant Takaful Fund to the benefits
of the policy, the legal heirs of a deceased participant;
(j) “Participants’ Investment Account (PIA)” means the investment account of the
participants under a Family Takaful plan;
(k) “Participants’ Investment Fund (PIF)” means a separate fund comprising of the
underlying assets representing the units of the PIA under a Family Takaful plan;
(l) “Participants Takaful Fund (PTF)” means a separate risk pool to which the
participants’ risk related contributions are paid and from which risk related benefits are
paid out;
(m) “Participants’ membership documents (PMD)” means the documents detailing
the benefits and obligations of a participant;
(n) Principal Officer means a person, by whatever designation called, appointed by a
Takaful operator and charged with the responsibility of managing the affairs of the
Takaful operator;
(o) re-Takaful means an arrangement consistent with sound Takaful principles for re-
Takaful of liabilities in respect of risks accepted or to be accepted by the Takaful operator
in the course of his carrying on Takaful business and includes ceding risks from Takaful
pool(s) managed by the Takaful operator(s) to one or more re-Takaful pool(s) managed by
any other one or more Takaful operator(s) in line with Takaful principles;
(p) Shariah Board means a Shariah Board constituted by a Takaful operator for its
Takaful business under rule 34;
(q) Shariah compliant investments means investment that adhere to principles and
injunctions of Islam as laid down in Shariah (i.e., the Quran, Sunnah, Ijma and Qiya) and
established by practice and usage and as approved by the Shariah Board of the Takaful
operator;
(r) Takaful benefit includes any benefit, whether pecuniary or not, which is secured
by a Takaful policy, and the word “pay” and other expressions, where used in relation to
Takaful benefit, shall be construed accordingly;
(s) “Takaful broker” means a person who is permitted by the Securities and
exchange Commission to carry on Takaful business as Takaful broker;
(t) Takaful business means business of Takaful whose aims and operations do not
involve any element which is not in consonance with the injunction of Islam as laid down
in the Shariah;
(u) Takaful policy includes any contract of Takaful for Family Takaful business or
General Takaful business whether or not embodied in or evidenced by an instrument in the
form of a participants’ membership document, and references to issuing a policy shall be
construed accordingly;
(v) Takaful operator means a person who is permitted by the Securities and
Exchange Commission to carry on Takaful business as Takaful operator ;
(w) Wakala based contract means a Takaful contract based on the principle of
Wakala ; and
(x) Window Takaful Operator means a life insurer registered under the Ordinance
and carrying out the business of Family Takaful under window operations within its
corporate structure, and follows the rules applicable to other Takaful operators.
(2) The words and expressions used but not defined herein shall have the same
meaning as are assigned to them in the Ordinance.
3. Classes of Takaful business.-(1) For the purposes of these rules, Takaful business shall
be divided into the classes as specified in section 4 of the Ordinance.
(2) A Takaful operator may underwrite any or all classes of Takaful business provided
that under each of the classes of Takaful business, approval shall be obtained from the
Commission as to the permissibility of underwriting that class of Takaful business and the
types of risks that may be permissible within each class. The objective of this being that
risks of non-permissible classes of Takaful business such as which may not be in
accordance with the principles of indemnification of losses or insurance of businesses of
non-permissible items as defined by the Shariah Board may not be included in the Takaful
operations.
4. Composite Takaful.-The Commission shall not grant registration to any applicant nor
would it permit grant an existing insurer the permission to underwrite and to carry on the
businesses both of Family Takaful and General Takaful conjointly.
5. Window products or Takaful operations by conventional insurer.-(1)Existing life and
non-life or general insurance companies carrying on conventional business shall not be permitted
to underwrite Takaful business or launch such products :
Provided that in case an existing non-life or general insurer wishes to transform its
business into Takaful business, it shall be given a period of not more than one year from the date
it start underwrite Takaful products, after which it would be required to underwrite Takaful
products only. After this period, the licence of that insurer for underwriting conventional
insurance business shall stand cancelled automatically. This period shall be meant to give such
insurer time to establish itself in Takaful operations.
2. The Commission, after at least five years of the start of Takaful operations in
Pakistan, may allow window Takaful operations in consultation with the Ministry of
Commerce to conventional insurance companies, subject to such terms and conditions as
may be recommended or specified by the Commission from time to time.
6. Requirement for carrying on business as Takaful operator.-Subject to these rules, Takaful
business shall not be carried on in Pakistan by any person as Takaful operator who is not eligible
under section 5 of the Ordinance and has not been granted a certificate of registration by the
Commission under section 6 of the Ordinance.
7. Use of word “Takaful”.-No person other than a registered Takaful operator
shall, without the written consent of the Commission, use the word “Takaful” or any other word
implying similar meaning indicating that such person carries on Takaful business in the name,
description or title under which it carries on business in Pakistan or make any representation to
such effect in any bill-head, letter paper, notice or advertisement or in any other manner
whatsoever .
8. Takaful operational model.-(1) The principal operational model for insurance risk
management and the investment component shall be based on the Islamic concept of wakala and
modarba, respectively.
(2) All contributions received under Family Takaful contracts shall be credited to the
Takaful Business Statutory Fund. All such contributions shall be divided into the following
components, the determination of each component being clearly and unambiguously
defined in the participants’ membership documents (PMD), namely: -
(a) Investment component;
(b) risk related component; and
(c) Takaful operator’s fees.
(3) A separate Participants Takaful Fund (PTF) shall be created within the Takaful
business Statutory Fund to which the risk related component of
contributions and Takaful operator’ s fees shall be credited and from which benefits shall
be paid out.
(4) The investment component shall be credited to one or more Participants’
Investment Funds (PIFs) , the proportion to be credited to each PIF being defined in the
PMD. Each PIF shall be divided into Participants’ Investment Accounts (PIAs), a separate
account being maintained for each PIA. Investment of funds may be made in consonance
with the Islamic concept of the mudaraba, wakala or a combination of mudaraba and
wakala at the option of the Takaful operator (or its Appointed Actuary in case of Family
Takaful) and the Shariah Board as clearly spelled out in the participants’ membership
documents.
(5) All contributions received under General Takaful contracts, net of any Government
levies, shall be credited to one or more Participants Takaful Funds (PTFs). A General
Takaful operator may create a single PTF or separate PTFs for different classes of business.
9. Participants Takaful Fund.-(1) A PTF shall be a separate fund the purpose of which
shall be the pooling of risks amongst the participants. The role of the Takaful operator shall be the
management of the PTF and related risks. At the initial stages of the set-up of the PTF the Takaful
operator and any of its shareholders may at their discretion make an initial donation or qard-e-
hasna to the PTF. The objectives of the PTF shall be to provide relief to participants against
defined losses as per the PTF rules and the PMD.
(2) The Takaful operator shall define the PTF rules which shall be in accordance with
the generally accepted principles and norms of insurance business suitably modified with
guidance by the Shariah Board of the Takaful operator. Any subsequent changes to the
PTF rules shall also be approved by the Shariah Board.
(3) The income of the PTF shall consist of the following, namely :-
(a) Contributions received from participants (other than the portion transferred to
the PIF under Family Takaful policies) including Takaful operator’ s fees
which should be a part of the contributions;
(b) claims received from re-Takaful operators and re-insurers;
(c) investment profits generated by the investment of funds and other reserves
attributable to participants in the PTF;
(d) salvages and recoveries;
(e) qard-e-hasna by the shareholders fund to the PTF in case of a deficit;
(f) commission received from re-Takaful operators and reinsurers; and
(g) any donation made by the shareholders.
(4) The outgo from the PTF shall consist of the following, namely:-
(a) Losses settled related to participants risks and expenses directly related to
settlement of claims such as surveyors’ fees, etc, but not including any
office expenses. All expenses to be charged to the PTF (other than benefit
payments) shall need to be defined in the PTF rules and the PMD;
(b) re-Takaful and reinsurance costs;
(c) Takaful operator’ s fees, which shall not be determined with reference to
the surplus in the PTF;
(d) share of investment profits of the mudarib’ share,
a as or a
PTF s
percentage of the funds as wakala fees for investment management or any
other combination thereof approved by the Appointed Actuary (in the case
of Family Takaful operator) and Shariah Board of the Takaful operator;
(e) surplus distributed to participants; and
(f) return of qard-e-hasna to the Shareholders Fund ;
(5) Subject to the provisions of the Ordinance, technical reserves required to
be set up in the PTF shall consist of all of the following reserves or any one of them, or any
combination of two or more of them or such other reserves as the Appointed Actuary of the
Takaful operator may require to be provided, namely :-
(a) Unearned contributions reserves ;
(b) incurred but not reported reserve ;
(c) deficiency reserve ;
(d) contingency reserve ;
(e) reserve for qarde-e-hasna to be returned in future ; and
(f) surplus equalization reserve .
10. Shareholders Fund (SHF).-(1) A Shareholders’ Fund shall be maintained for Family and
General Takaful business, on similar basis, as per the requirements under the Ordinance and the
Securities and Exchange Insurance Rules, 2002, for life insurers, and non-life insurers,
respectively. The Shareholders Fund shall be maintained under the guidelines provided by its
Shariah Board and Central Shariah Board. The SHF shall consist of the paid-up capital and
undistributed profits to the Shareholders.
(2) In the case of General Takaful operator, the income of the Shareholders Fund shall
consist of the following, namely: -
(a) Takaful operator’ s fees, which shall not be determined with reference to the
surplus in the PTF;
(b) profit on the investment of the SHF; and
(c) proportion of the investment profit generated by the investment of the PTF or the
fees for investment as per the PTF rules and the PMD.
(3) The expenses of the Shareholders Fund shall consist of all the expenses related to
the Takaful operator other than those mentioned in the PTF rules and the PMD and shall
include all marketing as well as administrative, investment and operational expenses,
except commissions or over-riders paid to the business intermediaries, benefit payments
and related expenses such as surveyors’ fees.
(4) The shareholders must undertake to discharge unconditionally all the contractual
liabilities of the PTF, but their liability in this regard shall not exceed the SHF.
11. Qard-e-hasna.-When the PTF including reserves are insufficient to meet their current
payments less receipts, the deficit shall be funded by way of an interest-free loan (qard-e-hasna)
from the SHF.
12. Relationships.-(1) For the risk sharing portion the relationship of the participants and of
the Takaful operator shall be directly with the PTF. The Takaful operator shall act as the wakeel
of the PTF and the participants shall pay contributions to the PTF.
(2) Being members of the PTF, the participants shall be entitled to the benefits as per the
PTF rules and the PMD.
(3) The shareholders shall provide an undertaking to the PTF to provide the members
benefits in the event that there is a deficit in the PTF at any point by giving a Qard-e-hasna
to the PTF. The shareholders shall, however, have the right to recover the Qard-e-hasna
payments to the PTF from future surpluses in the PTF.
(4) The other relationship with the Takaful operator shall be that of either mudarib or
wakeel or both , where in the case of the PTF, the Takaful operator shall also act either as
mudarib or wakeel or both to the PTF. Further in the case of the Family Takaful plans
with a savings element, the Takaful operator shall also act either as mudarib or wakeel or
combination of mudarib or wakeel relating to the PIF.
13. Payment of losses.-(1) The Takaful operator shall, on the basis of set rules and
regulations to be defined for the PTF and in the PMD, pay the losses of participants of the fund
from the same fund as per its rules. Besides this, all expenses that shall be incurred for providing
Takaful benefits such as re-Takaful contributions shall also be met from the same fund.
(2) The PTF rules shall lay out the broad terms and conditions under which claims and
other benefits shall be payable and conditions and limitations which shall be applicable.
The PMD shall contain specific details related to the risks covered for a specific risk and
member.
(3) The PTF as well as PMD for each class of Takaful business shall be approved by
the Shariah Board of the Takaful operator and after its approval the same shall be filed
with the Commission and unless objected to in writing within fifteen days of such filling
by the Commission the same shall assumed to be approved and remain in force and if
objected to in writing the objections shall be removed by the Takaful operator to the
satisfaction of the Commission.
14. Sharing of surplus.-(1) At the end of each financial year the Takaful operator shall evaluate
the assets and liabilities of the PTF and determine whether the operation for that particular period
had produced a surplus or a deficit for sharing amongst the participants.
(2) The determination of surplus in the PTF shall be done at least once each accounting
year.
(3) The determination of surplus shall be done by the Appointed Actuary for a Family
Takaful operator; and by the Management of General Takaful operator. Such surplus shall
be determined by carrying out evaluation as at the date of such determination.
(4) Surplus at each valuation date shall be made up of technical results and investment
returns related to the PTF. Surplus shall arise from the total contributions paid by the
participants to the PTF less the total value of claims paid (less claims received from re-
Takaful or reinsurance and recoveries made) to hem for the risks covered under the PTF,
less Takaful operator’ s fees charged related to Takaful operations managed by the
Takaful operator, less commission paid to the intermediaries and the change in the
technical reserves.
(5) Takaful operator may hold a portion of the surplus as a contingency reserve (over and
above the technical provisions). The rest of the surplus shall be distributed to participants
in proportion to the contributions to the PTF net of any risk related claims, which they
may have received during the intervaluation period.
(6) In the case of General Takaful business the distribution of surplus shall be after each
valuation. Contracts completing their risk period in the accounting year for which the
valuation is done shall be taken into account for surplus distribution based on the results of
the previous valuation.
(7) In the case of Family Takaful business the surplus distribution may be done after each
actuarial valuation or it may be distributed only to those participants who actually leave
the risk pool by way of termination of membership which may be due to the payment of
benefits as per the PMD or otherwise. The determination of surplus shall consider the
method of surplus distribution.
(8) A Takaful operator may compute the distributable surpluses on the basis of the
combined results of all the classes of business or calculate the surpluses separately for
each class.
(9) The distribution of surpluses to participants may be carried out more frequently than
yearly, depending on the administration and computer systems of the Takaful operator.
(10) The Board of Directors, with the consent of the Shariah Board of the Takaful
operator shall initially set out the detailed mechanism for the distribution of such surplus,
and the frequency of distributions made annually, or more frequently after the technical
evaluation of assets and liabilities. The mechanism shall form a part of the PTF and shall
also be mentioned in the PMD.
(11) The Takaful operator may distribute surplus either in cash or adjust against future
contributions or in the case of Family Takaful contracts, credit the surplus to the PIA.
However in the case that a member does not wish to continue as a participant in the PTF it
shall be necessary to pay surplus to such member based on his entitlement.
(12) If a participant wishes to donate its surplus for social or charitable purposes, this
shall be done by the Takaful operator.
15. Deficit .-In case of a deficit in the PTF, the Takaful operator shall undertake to give Qard-
e-Hasna to the PTF to make good of the deficit. The Qard-e-Hasna may be recovered from future
surpluses without any excess on the actual amount given to the PTF.
16. Management and marketing expenses.-(1) All the administrative and management
expenses of the Takaful operator, except those enumerated under sub-rule (4) of rule 9 , shall be
borne by the shareholders in consideration of receiving a stipulated proportion of the gross
contributions to the PTF by way of Takaful operator fee.
(2) The shareholders shall be responsible for all expenses of management and
marketing, etc. Shareholders’ income shall include the Takaful operator fee and
investment management fee or share, for the PTF and the PIF and investment income on
the SHF. Takaful operator fees to be charged and the investment management fee or share
shall be explicitly defined in each PMD and Takaful contract.
(3) All expenses of Takaful business shall form part of the expenses of Takaful
Business Statutory Fund for Family Takaful operators; and Shareholders Fund for General
Takaful operators.
17. Funds.-(1) A Takaful operator shall maintain and administer two funds, one to be
known as the Participants Takaful Fund (PTF); and the other the Shareholders Fund (SHF).
Further in the case of Family Takaful plans, a Participants’ Investment Fund (PIF) related to the
Participants’ Investment Account (PIA) shall also be maintained;
(2) For Family Takaful business, the PTF, PIF and PIA shall be linked to the Takaful
Business Statutory Fund.
18. Participants’ Investment Fund (PIF).-(1) In the case of Family Takaful plans, a portion
of the contributions each year shall be invested to build up surrender values for the participants.
These shall be maintained in the form of units for each participant in a Participants’ Investment
Account (PIA). The underlying assets against these units shall be maintained in a separate fund to
be called the Participants’ Investment Fund.
(2) The income and expenses of the PIF shall be maintained separately and unit price
shall be determined at least once every month.
19. Investment management of funds.-Investment of participants contributions within the
PTF as well as in the PIF shall be managed under a wakala contract, a mudaraba contract or a
combination contract as determined to be sound and workable by the Shariah Board of the
Takaful operator. The Takaful operator shall set the fee structure and the profit sharing ratio on
the investment management based on the advice of the Shariah Board and the Appointed Actuary,
if any.
20. Product design.-A Takaful product shall be based on the principle of wakala or mudaraba
or both. The Appointed Actuary of the Family Takaful operator shall ensure that the products are
sound and workable whereas the Shariah Board of the Takaful operator shall ensure that these
conform to the Islamic principles.
21. Deposits.-(1) A Takaful operator shall at all times maintain a deposit with the State Bank
of Pakistan in accordance with the provisions of section 29 of the Ordinance.
(2) Any such deposit shall be made in cash or instrument of an approved Islamic financial
institution. This deposit shall be marked as a lien to the State Bank of Pakistan.
22. Shareholders funds under capital or equity raised by the sponsor or Takaful
operator.-(1) For a Takaful operator, the Shareholders funds shall be maintained only in
securities or in a manner which is not against Islamic principles and shall comprise mainly of
securities which are approved by the Shariah Board of the Takaful operator.
(2) All income accruing and receivable in respect of a deposit shall be payable to, and
receivable by, the Takaful operator making the deposit.
(3) The Takaful operator who has made a deposit under this rule may at any time
substitute assets comprising the deposit cash and securities as may be specified by the
Shariah Board.
23. Books and records of Takaful business.-(1) Every Takaful operator shall maintain
proper books and records of its business. The provisions of section 45 of the Ordinance shall
apply to all Takaful operators.
24. Establishment and maintenance of Participants Takaful Funds, and allocation
of surplus.-(1) Every Takaful operator shall establish and maintain a Participants Takaful
Fund in respect of the class or each of the classes of Takaful business carried on by the
Takaful operator in Pakistan so far as that business relates to policies issued in Pakistan.
(2) There shall be paid into a Participants Takaful Fund all receipts of the
Takaful operator properly attributable to the business to which the Participants
Takaful Fund relates (including the income of the Participants Takaful Fund), and
the assets comprised in the Participants Takaful Fund shall be applicable only to
meet such part of the PTF’ s liabilities and expenses as is properly so attributable.
(3) In the case of a Participants Takaful Fund established in respect of Family
Takaful business, no part of the Participants Takaful Fund shall be allocated by
way of Takaful benefits to participants except with the approval of the Appointed
Actuary and out of a surplus of assets over liabilities as shown on the last
statutory valuation of the Participants Takaful Fund and on the making of any
such allocation that surplus shall be treated for purposes of this rule as reduced by
the amount allocated.
(4) In the event of winding up, assets comprised in the deposit made by a
Takaful operator under these rules shall be treated as assets of the Participants
Takaful Fund established by the Takaful operator, and sub-rule (2) shall apply to
those assets accordingly. In the event of winding up and if at the same time the
Participants Takaful Fund is in deficit, the deposit should first be made available
to meet that deficit. Only the left over shall be reimbursed to the shareholders.
(5) A Participants Takaful Fund established by a Takaful operator for any
class of business shall, notwithstanding that the Takaful operator at any time
ceases to carry on that class of business in Pakistan continue to be maintained by
the Takaful operator so long as the Takaful operator is required under these rules
to maintain proper books and records for policies belonging to that class.
25. Requirements as to assets of PTF.-(1) The assets of the PTF shall be kept
separate from all other assets of the Takaful operator, and shall not include assets
comprised in a deposit under these rules, nor any amounts on account of goodwill, the
benefit of development expenditure or similar items not realizable apart from the business
or part of the business of the Takaful operator.
(2) The Commission may, in respect of assets of the PTF, require a Takaful
operator.-
(a) not to make investments of a specified class or description; and
(b) to realize, before the expiration of a specified period or such extended
period as the Commission may allow, the whole or specified proportion of
investment of a specified class or description held by the Takaful operator when
the requirement is made.
26. Solvency requirement.-For the purposes of solvency requirement, subject to
sections 32 to 39 of the Ordinance, all investments out of the Takaful operator and
Participants Takaful Funds shall be made in the modes and securities approved by the
Shariah Board of the Takaful operator.
27. Investment guidelines.-(1) The Takaful operator shall be required to invest his
available funds in his PTF and PIF in the modes and products that adhere to principles
established by the Shariah and all such modes and products shall be approved by the
Shariah Board of the Takaful operator.
(2) Limitations in terms of percentage investments in different Shariah
compliant investments shall be issued by the Commission from time to time as
new instruments become available in the market.
(3) The following guidelines shall be followed for investments of the surplus
funds in the PTF, namely:-
(a) Investment in Shariah compliant Government securities.-Any Shariah
compliant Government instrument such as Islamic bonds and securities restricted
to eighty per cent of the funds; and
(b) Investments in immoveable property.-The Takaful operators shall be
allowed to invest in immoveable property subject to the following conditions,
namely:-
(i) the use and intended use of the property should be in compliance with the
Islamic principles; and
(ii) return on rented property may be in the form of fixed rent but in case of
delayed payments penalty may be charged and the penalty amount shall be given
to charity.
(c) Investment in Joint Stock Companies.-The Takaful operator may invest
its funds in joint stock companies. However, investments in non-Shariah
compliant preferred stocks, debentures and interest based redeemable capital
securities are not allowed. For investments in the common stocks of joint stock
companies, the following guidelines should be followed in consultation with the
Shariah Board, namely:-
(i) The main business of the investee company must not violate Shariah.
Therefore, it is not permissible to acquire the shares, debentures or certificates of
the companies providing financial services like conventional banks or the
companies involved in business prohibited by Shariah like alcohol production,
gambling or night club activities, etc;-
(ii) the Shariah Board of the Takaful operator shall take into consideration
factors such as the proportion of income of the investee company from
interest bearing accounts or non-Shariah based activities, the debt to equity ratio
and cash or cash equivalents of the investee company; and
(iii) investment decision shall be based on fundamental value of the companies
instead of short-term speculations.
(d) Investments in redeemable capital.- The Takaful operator may also
make its portfolio investments through various mutual funds operating under the
Shariah principles and approved by the Commission. Before making any
investment therein, the Takaful operator shall have the procedures and practices
being followed by such funds scrutinised by its Shariah Board.
(e) Investments in redeemable capital.-The Takaful operators may invest
their funds in Shariah compliant instruments like Musharika Certificates, Term
Finance Certificates (TFCs), Participation Term Certificates (PTCs), etc.
However, in case of investment in redeemable capital it shall be necessary that the
certificates are issued in compliance with the Islamic injunctions and the scheme
of their issue be examined by the Shariah Board of the Takaful operator. The
basic conditions as laid down earlier for investments in the common stock of joint
stock companies should also be followed.
(f) Placement of excess funds with banks and Islamic financial
institutions.-
The Takaful operators may invest a portion of their funds in liquid or short notice
deposits schemes of Islamic banks and their branches or other Islamic financial
institutions, placements in PLS saving accounts of Islamic banks and placement in
current accounts of traditional banks without any return thereon.
(g) Financing under Islamic modes through the Islamic banks and
financial institutions.-The Takaful operators may make arrangements with the
Islamic banks operating in Pakistan to directly finance under musharika,
murabaha, ijara (lease), salam, istisna contracts approved by the Commission.
28. Re-Takaful.-(1) The Takaful operator shall ensure that the re-Takaful and
reinsurance arrangements are consistent with the sound Takaful principles and are as per
the guidelines provided by its Shariah Board.
(2) The provisions of section 41 of the Ordinance and rule 15 of the Securities
and Exchange Commission Insurance Rules, 2002, shall also apply to Takaful
business.
(3) In the event that the capacity provided by a Shariah complaint re-Takaful
operator is not sufficient to support the business strategy of the Takaful operator,
the Takaful operator, under advice of its Shariah Board, may be allowed to enter
into re-Takaful and reinsurance contracts with conventional reinsurance
companies till such time that proper re-Takaful arrangements are available.
(4) In the case of a Takaful operator the compulsory cession to the Pakistan
Reinsurance Company Limited (PRCL) shall not be applicable. Howevr, where a
share is offered to a conventional reinsurance company, in such a case it shall be
necessary to first offer this to PRCL as per the requirements of the Ordinance.
(5) The Takaful operator may be permitted by the Commission to share risks with
other Takaful operators within and outside Pakistan.
29. Acceptance of risk by Takaful operator.-(1) Subject to sub-rules (2) and (3), no
Takaful operator shall accept any risk in respect of any general business unless and until
the contribution payable is received by the Takaful operator or is guaranteed to be paid
by such person.
(2) Where the contribution payable under sub-rule (1) is received by any
person, including a Takaful agent or a Takaful broker, on behalf of a Takaful
operator, such receipt shall be deemed to be receipt by the Takaful operator for
the purposes of that sub-rule and the onus of proving that the contribution payable
was received by a person, including a Takaful broker, who was not authorized to
receive such contribution shall lie on the Takaful operator.
(3) Any refund of contribution, which may become due to a participant on
account of the cancellation of a policy or alteration in its terms and conditions or
for any other reason shall be paid by the Takaful operator, from the PTF, directly
to the participant and a proper receipt shall be obtained by the Takaful operator
from the participant and such refund shall under no circumstances be paid or
credited to any other person, including a Takaful broker.
30. Control of forms of proposal, policies and brochures.-(1) The Commission
may by notice in writing require a Takaful operator to submit the forms of proposal and
policies for the time being in use by the Takaful operator, and any brochure which is for
the time being in use there by the Takful operator for describing the terms or conditions
of, or the benefits to be or likely to be derived from, policies; and where the whole or part
of any such forms or brochure is not in Urdu or English there shall be submitted with it a
translation in the Urdu or English.
(2) A requirement under this rule, unless it is otherwise provided therein, shall
apply to all such forms and brochures as aforesaid coming into use after the
making of the requirement and before the Commission notifies the Takaful
operator that the requirement is withdrawn.
(3) If it appears to the Commission, after affording the Takaful operator an
opportunity of being heard that any such form or brochure as aforesaid
contravenes or fails to comply with any provision of these rules or is in any
respect likely to mislead, it may, by notice in writing, direct the Takaful operator
to discontinue the use of the form or brochure either forthwith or from a date
specified in the notice.
Explanation.-For the purpose of this rule, the expression “brochure” includes any
leaflet, circular or similar advertising matter, whether printed or not.
31. Shariah compliance audit.-Takaful operator shall appoint a Shariah compliance
auditor who will conduct its audit for each accounting period.
32. Accounting regulations.-The regulations and statements under section 46 of the
Ordinance shall apply to Takaful business with appropriate modifications based on the
advice of the Shariah Board of the Takaful operator.
33. Central Shariah Board.-A Central Shariah Board (CSB) may be appointed by
the Commission for advice on any aspect of Takaful operations.
34. Shariah Board.-(1) Each Takaful operator shall appoint a Shariah Board (SB) of
not less than three members which shall be responsible for the approval of products,
documentation as well as approval of all operational practices and investment of funds
which shall be filed with the Commission.
(2) Since the Shariah scholars on the religious boards carry great
responsibility, the Takaful operator shall appoint only high calibre scholars who
are specialized jurists in fiqh almu’ amalat (Islamic commercial jurisprudence) to
such Boards. In addition, they shall have knowledge of modern financial dealings
and transactions.
(3) The Takaful operator shall submit to the Commission details of the
members of its Shariah Board at the time of commencing Takaful business and at
later dates if there is a change in the composition of the Shariah Board. The
Commission may within thirty days of such submission, based on reasonable
grounds, require a Takaful operator in writing to reconstitute its Shariah Board.
35. Meeting between Central Shariah Board and Shariah Boards.-The Central
Shariah Board may hold meetings with the members of the Shariah Boards of all Takaful
operators, individually or jointly, anytime it deems fit to discuss development of Takaful
business and also may hold such meetings on the request of Shariah Board of the Takaful
operators.
36. Agent training.-Each Takaful operator shall include in its agent training course, a
classroom course on Takaful concepts of a minimum of eight hours duration. Every agent
of the Takaful operator intending to sell Takaful business shall be required to attend such
course.
37. Business in rural areas.-To ensure a steady growth of Takaful business in all
parts of Pakistan, the Takaful operator shall be encouraged to market Takaful products
effectively in rural areas.
38. General.-(1) The provisions of the Ordinance, the Insurance Rules, 2002, and the
Securities and Exchange Commission (Insurance) Rules, 2002, shall also be applicable in
addition to these rules.
(2) In case of any conflict between these rules and the Insurance Rules, 2002,
and the Securities and Exchange Commission (Insurance) Rules, 2002, the
provisions of these rules shall prevail.
F.No.1(55)/ 2003-Ins.II
(Munawar Akhtar Islam)
Deputy Secretary
