SECP’s new rules on Takaful blocked by Sindh High Court (By IFN)

PAKISTAN: The Securities and Exchange Commission of Pakistan (SECP) has been blocked from implementing its newly released Takaful regulations, barely a month after the rules were hailed as heralding a new era for the country’s insurance industry.

The commission received the restraining order from the Sindh High Court, in the midst of hearing a constitutional petition filed by Pakistan’s five fully-fledged Takaful operators, Dawood Family Takaful, Pak-Qatar Family Takaful, Pak-Qatar General Takaful, Pak-Kuwait Takaful Company and Takaful Pakistan.

According to the petitioners, the new rules, which allow conventional insurers to offer Takaful services, did not consider the opinions of religious scholars who advised the SECP that the rules are not in line with Shariah. The Takaful firms also raised the issue of allowing insurers to conduct Takaful alongside their conventional business, without checks or balances to ensure the principles of Shariah are not violated.

The developments have thrown cold water on earlier optimism of a new growth momentum in Pakistan’s insurance industry, as conventional insurers have shown keen interest in foraying into the Takaful space. Within days of the SECP’s release of the Takaful Rules 2012 on the 20th July, State Life Insurance Corporation, the country’s leading insurer which is also government-owned, announced plans to launch Shariah compliant operations by the middle of next year.

The interest for Takaful by conventional insurers is despite slower growth seen in the Shariah compliant sector. According to reports, total gross premiums collected by Takaful firms amounted to PKR3.3 billion (US$34.94 million) in 2011, just 2.8%-worth of the amount collected by conventional insurers during the same period.

A point to note is that under the new regulations, the SECP has set conditions that conventional insurers planning to offer Takaful products must appoint a Shariah advisor and a Shariah compliance officer; and set up one or more statutory funds exclusively for the Takaful business.

Therefore, could the Takaful petitioners’ move to block the new rules have emerged more out of the threat of heightened competition amid an already small market, instead of due to Shariah concerns?

See: http://redmoney.newsweaver.co.uk/pa4of58t7rsh38rwoni3wx?email=true&a=6&p=26407135&t=21773135