26/12/2024

PR/27/2024

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in the 38^th meeting of its Governance and Ethics Board (AGEB / the board) approved the issuance of the exposure draft of a governance standard (GS) on “Principles of Assessment of Necessity for Obtaining Conventional Reinsurance by Takaful Institutions”.

AGEB considered the fact that there is a dearth of availability of re-Takaful institutions, particularly in certain markets and regions, and accordingly at times resorting to conventional reinsurance on the basis of necessity (in line with Shari’ah principles and rules, particularly AAOIFI Shari’ah Standard 41 “Islamic Reinsurance”) becomes a normal practice. This creates practical challenges and affects the industry’s reputation and enhances the risk of Shari’ah non-compliance. Therefore, the board considered the need for development of this standard to address such risks.

Mr. Farrukh Raza, Chairman of AGEB, stated “we are pleased to announce the issuance of the exposure draft of this governance standard outlining the principles of assessment of necessity for obtaining conventional reinsurance by Takaful institutions. This proposed standard is a reflection of our ongoing commitment to enhancing the framework of Takaful practices, and ensuring they align with both Shari’ah principles and rules, and best practices in risk management.” He added “I would like to thank the board and the Takaful governance committee members for their exceptional efforts and commitment”.

The public hearings for the exposure draft will be held in different parts of the world and / or on virtual basis to obtain industry feedback on the exposure draft in addition to comments in writing.

Further details with respect to dates and venues, will be announced shortly via the AAOIFI website. Comments on the exposure draft are welcomed and should be directed before 1 April 2025 to governance@aaoifi.com. All comments and suggestions of the public hearings and written comments will be presented to AGEB to discuss and to make necessary changes before issuing the final standard.

The exposure draft on “Principles of Assessment of Necessity for Obtaining Conventional Reinsurance by Takaful Institutions” can be accessed by CLICKING HERE