Implementation of Islamic Financial Services Act 2013 could see disposal of General Takaful businesses by bank-backed Takaful operators (BY IFN)

Implementation of Islamic Financial Services Act 2013 could see disposal of General Takaful businesses by bank-backed Takaful operators

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MALAYSIA: HSBC Amanah Takaful, Prudential BSN Takaful, CIMB Aviva Takaful and Hong Leong MSIG Takaful could consider letting go of their General Takaful business as a pre-emptive step before the new Islamic Financial Services Act 2013 (IFSA) comes into play next month. The Act, which will replace existing legislations for Islamic banking and Takaful institutions in the country, was gazetted on the 22nd March 2013 and is currently pending implementation. The IFSA will require the composite license of insurance to be separated into two capitalized legal entities of general and life Takaful at a minimum of RM100 million (US$30.78 million) each, within a period of five years from the enforcement of the law. According to a source, it is not expected of bank-backed Takaful companies to readily inject additional capital to set up a separate General Takaful unit, as the non-life sector is not a major contributor to the companies’ overall business. He added that the Takaful operators will instead focus on retaining and building the more profitable business line, which is life insurance or Family Takaful business. In anticipation of the new law’s enactment, industry players have speculated that there will be shifts in the Malaysian Takaful landscape, including more mergers and acquisitions among Takaful players as they look to increase in size to maintain a leading edge and fulfill additional capital requirements. Mohamed Hassan Kamil, the group director of Takaful Malaysia, also previously said that the implementation of the new law could spur staff poaching and talent retention problems as the industry becomes more competitive.