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Sunday, 5 August 2012

Oman: Consultant submits draft law for takaful (Islamic Insurance)

Muscat: The UK-based law firm Clifford Chance, which was appointed by the Sultanate's insurance regulator Capital Market Authority (CMA), has submitted its draft law for forming Sharia-compliant takaful insurance firms and sukuk debt instruments, said a top-level CMA official.

The rules for takaful insurance companies is going to be a new set of law, while amendments will be made in Capital Market Law to accommodate Islamic debt instruments like sukuks, Abdullah bin Salem al Salmi, executive president of CMA, told Times of Oman, in an exclusive interview.

"We are now reviewing this draft and will discuss with the consultants. We have also consulted with other organisations like Islamic Financial Services Board (IFSB) of Malaysia and have received comments on the draft,- added the CMA chief. Oman is also a member of the IFSB. 

"So, we hope we will be able to prepare the final draft within a month or so,- noted Al Salmi.

He said that the draft law will go through the normal procedures of review by the Ministry of Legal Affairs, Majlis Al Shura and state council, before finally enacting into a law. 

Al Salmi said the consultant has suggested for standalone companies for Sharia-compliant takaful business, which is against window operations to be allowed in the banking sector. Further, the minimum capital proposed for a takaful company is envisaged at RO10 million and it needs to have a three-member board.

"It has to be a separate company because of the nature of the business, which is completely different from conventional insurance. So, it can not be accommodated in one legal entity,- noted the CMA chief.

A conventional insurance company planning to enter takaful business has to seek a separate licence and form a separate company. "However, it can be a subsidiary of a conventional insurance firm.-

Al Salmi also said that several parties have approached the CMA for setting up takaful insurance firm in Oman. "We have given 'in principle' approvals for three companies for promoting takaful insurance firms.- Stating that some of these are foreign firms, he noted that Al Madina Insurance Company is planning to convert the company into a takaful company. The group is planning to offer life, medical and non-life takaful products in the country.

CMA appointed Clifford Chance to advise them on framing regulation and licencing requirements for the whole of Islamic capital market and takaful, after the government allowed Islamic banks and other Sharia-compliant financial products. 

The Central Bank of Oman is in an advanced stage to announce a set of regulations for Islamic banks and window operations of conventional institutions. 

Demand for takaful insurance products will be aided by Islamic banks and window operations as they need to go for Sharia-compliant insurance products.

(Times Of Oman / 05 August 2012)

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