Regulation of takaful insurance business

In the pipeline for a long time, takaful insurance gave rise to numerous religious and legal writings well before the establishment of the first company of this type in Sudan in 1979.

Some sources date the first texts in favor of Islamic insurance to Ibn Abidin, a Syrian jurist who, as early as 1836, laid the foundations for a takaful insurance contract. In 1906, Ibn Abidin's theses were validated by the Egyptian Mufti Muhhamed Bakhit.

In fact, it wasn't until 1976 that the process gained momentum, with the publication by Saudi religious authorities of a religious opinion (Fatwa) in favor of Islamic insurance. Since then, many countries have legislated in favor of the introduction and development of Islamic insurance.

By the end of 2022, only three countries had a 100% Islamic insurance market. At the same time, 34 other countries have developed a regulatory framework governing this activity.

This perfectly logical multiplicity of regulatory provisions and the different interpretations of Islamic law (Sharia) are actually hampering the international development of this type of insurance, which is struggling to standardize its products on a global scale.

Regulation of takaful insurance in the Gulf Cooperation Council

In Saudi Arabia, the law governing the supervision of cooperative insurance companies was published in 2003 (Royal Decree No. M/32). Market control was delegated to the Saudi Arabian Monetary Agency (SAMA). In another major development, a new law published in 2005 stipulates that all insurers on the market must comply with the rules and principles of Sharia law.

A few years after Saudi Arabia, in 2010 the United Arab Emirates introduced the first legislation (resolution No. 4) regulating takaful activity in the country.

In Kuwait, by virtue of law no. 125 of 2019, control of the insurance business was entrusted to the Insurance Regulatory Unit. This law legalizes takaful products, offered since 2000 by Wethaq Takaful and First Takaful.

In Oman, takaful activity is governed by Royal Decree no. 11 of 2016, which regulates takaful operations.

In Bahrain, Islamic insurance is subject to specific regulations (Takaful/Retakaful Module 2005), under the supervision of the Central Bank of Bahrain (CBB), the market's supervisory authority since 2002.

⁽¹⁾ Takaful companies ranked by date of creation

Regulation of takaful insurance in the MENA zone (excluding GCC) and Asia

In Malaysia, one of the pioneers of takaful insurance, the first law regulating this activity was enacted in 1984. In 2013, a turning point was reached by the market, following the repeal of the 1984 provisions and their replacement by a new regulatory framework specific to Islamic financial services. The new regulations reinforce Sharia principles in takaful operations.

In Morocco, after taking into consideration the directives of the High Council of Ulema, the Moroccan Parliament approved, in July 2019, law 59-13 governing takaful activity. This provision amends and supplements law 17-99 on the insurance code, promulgated on 06/10/2016.

In 2021, ACAPS, the insurance supervisory body, integrated takaful into the Insurance Code by means of a circular, and granted the first three licenses to local operators in December of the same year.

In Algeria, an executive decree setting out the terms and conditions for takaful business was published in February 2021. On 13 December 2023, the government held its first reading of a draft bill governing the activity.

In Tunisia, the legal framework for takaful was promulgated in 2014. This was Law No. 2014-47 of July 24, 2014, amending and supplementing the Insurance Code by inserting a 7^th title dedicated to takaful insurance. In December 2019, a new regulatory text was issued to specify the tax regime applicable to this type of insurance.

In Egypt, for over ten years, takaful companies, including Egyptian Saudi Insurance House (ESIH), operated under limited supervision. It wasn't until 2014, with the publication of decree no. 8, that the first real regulation appeared.

In Iran, so-called traditional insurance complies with Islamic principles. The takaful model used in the Middle East has no currency in Iran, as local companies do not, for example, have a Sharia Board. However, some companies are looking into the possibility of marketing takaful products of the same type as those developed in other Muslim countries. This development is mainly aimed at the Sunni population, estimated at 10 million.

⁽¹⁾ Takaful companies ranked by date of creation