, NAIROBI, Kenya, May 6 – The Insurance Regulatory Authority (IRA) has introduced new Takaful (Islamic insurance) rules which will govern all insurers registered under the Insurance Act in transacting Takaful business.
In the new rules, the Takaful operator is expected to report separately assets, liabilities, revenues and expenses relating to conventional business and Takaful business and ensure total separation of the Takaful and conventional business.
The Takaful operator must also ensure that the Takaful operations are ring-fenced to avoid leakage and commingling with non-compliant funds at any point in the life cycle.
The guidelines have also set restrictions on the distribution of surplus and set out how costs can be charged to the fund.
“The Board of Directors of each operator is expected to ensure strong corporate governance processes are in place to enable the Takaful operator to effectively discharge their fiduciary duties towards participants, “the guidelines indicate.
According to the guidelines the Shar’iah Supervisory Council will act as the advisory and supervisory body.
The effective date of these guidelines is June 1, 2015 with all existing registered Takaful operators who are currently not compliant required to regularize their status by December 31, 2015.
“These guidelines ensure Takaful operators are not disadvantaged and are to be read in conjunction with all other relevant legislations, guidelines and circulars,” IRA states.
The Authority has identified Takaful as one of the avenues that can be used to increase insurance penetration in Kenya.
Islamic finance, accounts for roughly two percent of total banking business in Kenya despite Muslims making up about 15 percent of the population.