Oman’s Takaful law expected soon

According to the Times of Oman, a final approval for the draft takaful or Islamic insurance regulation, which was cleared by the State Council in February, is expected soon.

The draft Takaful Insurance Law, which was prepared by the insurance regulator, Capital Market Authority (CMA), is expected to give the much-needed impetus to the development of the Islamic financial sector.

The law, which was drafted with the assistance of a consultant in line with the principles of the Islamic Financial services Board, was circulated among all related parties, especially insurance firms for their feedback, before seeking approval from various entities like the Ministerial Council and the Ministry of Legal Affairs.

Ahmed Ali Al Mamari, who heads the Directorate of Insurance Supervision at CMA, said that the minimum capital for a Shari’ah compliant insurance firm is fixed at OMR10 million and the company should float an initial public offering to list its shares on the local bourse. Unlike the banking sector, window operations are not allowed in takaful business.

The draft law sets out the regulatory code for takaful operators, including oversight and reporting requirements, product standards and liquidity levels. The draft regulation was prepared to provide consumer protection in risk and disclosures. It is also aimed at maintaining confidence in Shari’ah-compliance and maintaining fair and healthy competition as well as reducing risk. This will help build a reliable and commercially successful market for Shari’ah -compliant financial products. Al Mamari said that the decisions are completely implemented by the operator, adding, "Our role as a regulator assures that there will be qualified regulation."

Al Mamari also noted that the takaful business constitutes six per cent of the overall gross direct premium of OMR397 million posted in 2014 in Oman. Also, it is 4 per cent of total paid claims in the local insurance market last year. Ever since Oman allowed Islamic finance, the country witnessed formation of two Islamic banks, six conventional banks, three Shari’ah-compliant funds, a new Shari’ah index, a corporate sukuk issue and two takaful firms.