IFSB Consults on Disclosures Standard for Islamic Insurance Entities
IFSB published an exposure draft (ED-25) for a standard on disclosures for Takāful/Retakāful undertakings (ED-25). The comment period for this exposure draft ends on May 25, 2020. The proposed disclosures standard covers both public and private disclosures for takāful/retakāful operators. IFSB is inviting comments from regulatory and supervisory authorities, international organizations, institutions offering Islamic financial services, academics, and other interested parties.
The exposure draft addresses the key disclosures that should be made public by takāful/retakāful operators with a view to market discipline. These disclosures are prudential and aim to ensure the soundness and stability of the industry. Public disclosures about environmental, social, and governance (ESG) issues operate in a broadly similar way and, in governance particularly, overlap with the prudential disclosures. The second area involves disclosures to participants and potential participants about the contract they are considering entering. The main objectives of the proposed disclosures standard are to:
- Facilitate access to relevant, reliable, and timely information by takāful market players and market participants, thus enhancing their capacity to monitor and assess the performance of takāful undertakings
- Improve comparability and consistency of all disclosures made by takāful operators
- Support financial consumer protection for current and potential participants by helping takāful operators to offer useful information disclosures on takāful products
- Enable market players to complement and support, through their actions in the market, the implementation of IFSB standards.
To encourage consistency in implementation of IFSB standards across jurisdictions, IFSB recommends that regulatory and supervisory authorities implement the standard in their jurisdictions effective from January 2023 onward, taking into account an adequate pre-implementation period starting from the issuance date of this standard for the standard to be embedded into national regulations and guidelines and, where applicable, implemented into supervisory practices. The level of implementation of the standard in a particular jurisdiction may be dependent upon, and be without prejudice to, the general legal framework of that jurisdiction. The regulatory and supervisory authorities are encouraged to implement the standard earlier than this date where they are able to do so.
IFSB, in line with its mandate, works to complement the prudential and supervisory standards issued IAIS by addressing the specificities of takāful with the aim of contributing to the soundness and stability of the Islamic financial system, particularly the takāful industry. This standard responds to one of the recommendations made in the paper titled “Issues in Regulation and Supervision of Takāful (Islamic Insurance),” which was published by a Joint Working Group of IFSB and IAIS.
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Comment Due Date: May 25, 2020
Keywords: International, Insurance, ESG, Islamic Insurance, Takaful Operators, Disclosures, IFSB
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