Standard Re Annual Shari’ah Report of Internal Shari’ah Supervision Committee for Takaful Insurance Companies

CBUAE Classification: Public
STANDARD RE ANNUAL SHARI’AH REPORT OF
INTERNAL SHARI’AH SUPERVISION COMMITTEE FOR TAKAFUL INSURANCECOMPANIES

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CBUAE Classification: Public
TABLE OF CONTENTS
Page Subject
المادة )1( مقدمة 3 Introduction) 1 (Article المادة )2( الهدف 3 Objective) 2 (Article
Article (3) Scope of Applicability 4 التطبيق نطاق( 3 )المادة
General Requirements for
Issuing the Annual Shari’ah
Report
Article (4)
Article (5) Compliance with the Standard 5 المعيار لمتطلبات االمتثال( 5 )المادة
Annual the for Template المادة )6( نموذج التقرير الشرعي السنوي 6 Shari’ah Report Article (6)

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CBUAE Classification: Public
Article (1)
Introduction
1.1 This Standard Re Annual Shari’ah Report
of Internal Shari’ah Supervision Committee for Takaful Insurance Companies (“Standard”) complements the requirements outlined in the Regulation Regarding Takaful Insurance (“Regulation”), and the Standard Re Shari’ah Governance for Takaful Insurance Companies issued by the Central Bank, with the aim to promote development of the insurance system and to ensure its effectiveness and efficiency. 1.1
1.2 Takaful Insurance Companies
(“Company/Companies”) are required to have in place Shari’ah governance policies and mechanisms to ascertain that Annual Shari’ah Report that is issued by the Internal Shari’ah Supervision Committee (“Annual Shari’ah Report”) is compliant with requirements outlined in this Standard, and applicable standards and regulations. 2.1
1.3 Where the Standard requires providing
information, or undertake certain measures, or address particular provisions, as a minimum requirement, the Central Bank may impose (new) requirements additional to those specified in the relevant article (of the Standard). 3.1
Article (2)
Objectives
2.1 This Standard contains requirements and
guidance that facilitate the implementation of the requirements related to the issuance of the Annual Shari’ah Report. 1.2

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CBUAE Classification: Public
2.2 The Standard provides clarity on the
supervisory expectations with respect to the Annual Shari’ah Report. 2.2
Article (3)
Scope of Applicability
3.1 The Standard applies to all Takaful
Insurance Companies licensed by the
Central Bank.
1.3
3.2 The Standard must be read in conjunction
with the standards and resolutions issued by the Higher Shari’ah Authority (“HSA”) and notified to Companies. 2.3
Article (4)
General Requirements for Issuing the
Annual Shari’ah Report
4.1 The Annual Shari’ah Report represents
annual disclosure of the Internal Shari’ah
Supervision Committee (“ISSC”) on the level of Company’s compliance with Islamic Shari’ah Provisions. Accordingly, responsibility for preparing the Annual Shari'ah Report rests with the ISSC, within the mechanisms and requirements stipulated in the Standard. 1.4
4.2 The Annual Shari’ah Report shall be
presented at the general assembly in accordance with the applicable regulatory requirements. 2.4
4.3 The Annual Shari’ah Report shall be
submitted to the HSA for review and approval prior to its submission at the general assembly, no later than one month prior to the date of the general assembly of 3.4

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CBUAE Classification: Public the Company, in order to make any comments.
4.4 The ISSC must verify accuracy and validity
of all information in the Annual Shari’ah
Report before its submission to the HSA.
4.4
4.5 The ISSC must ascertain that all
information required to be stated in the
Annual Shari’ah Report as per the template in Article (6) are included in the designated places of the report before submitting it to HSA. 5.4
4.6 The ISSC must ensure that all duties
fulfilled by the ISSC, as outlined in the
Annual Shari’ah Report, are well documented for audit purposes.
6.4
4.7 The Company shall publish the Annual
Shari’ah Report in the Company’s disclosures of financial statements and other available means. 7.4
Article (5)
Compliance with the Standard
5.1 The template of the Annual Shari’ah Report
as per the Article (6) sets out the minimum requirements as to the principal information and disclosures to be included in the Annual Shari’ah Report. 1.5
5.2 The ISSC may add further information to
the Annual Shari’ah Report, if necessary, according to the template in this Standard. 2.5

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CBUAE Classification: Public
Article (6)
Template for the Annual Shari’ah
Report
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CBUAE Classification: Public

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CBUAE Classification: Public
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CBUAE Classification: Public
Template for the Annual Shari’ah Report (English) Annual Report of the Internal Shari’ah Supervision Committee of (name of the Takaful Insurance Company) Issued on: (issue date) To: Shareholders of (name of the Takaful Insurance Company) (“the Company”) After greetings, Pursuant to requirements stipulated in the relevant laws, regulations and standards (“the Regulatory Requirements”), the Internal Shari’ah Supervision Committee of the Company (“ISSC”) presents to you the ISSC’s Annual Report for the financial year ending on 31 December --------- (“Financial Year”).

1. Responsibility of the ISSC
   In accordance with the Regulatory Requirements and the ISSC’s charter, the ISSC’s responsibility is stipulated as to:
   a. undertake Shari’ah supervision of all businesses, activities, products, services, contracts, documents and business charters of the Company; and the Company’s policies, accounting standards, operations and activities in general, memorandum of association, charter, financial statements, allocation of expenditures and costs, and distribution of profits between participants’ accounts and shareholders’ accounts (“Company’s Activities”) and issue Shari’ah resolutions in this regard, and b. determine Shari’ah parameters necessary for the Company’s Activities, and the Company’s compliance with Islamic Shari’ah Provisions within the framework of the rules, principles, and standards set by the Higher Shari’ah Authority (“HSA”) to ascertain compliance of the Company with Islamic Shari’ah Provisions. The senior management is responsible for compliance of the Company with Islamic Shari’ah Provisions in accordance with the HSA’s resolutions, fatwas, and opinions, and the ISSC’s resolutions within the framework of the rules, principles, and standards set by the HSA (“Compliance with Islamic Shari’ah Provisions”) in all Company’s Activities, and the Board bears the ultimate responsibility in this regard.
2. Shari’ah Standards
   The ISSC shall comply with the Shari’ah standards issued and approved by the HSA.
3. Duties Fulfilled by the ISSC During the Financial Year

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CBUAE Classification: Public
The ISSC conducted Shari’ah supervision of the Company’s Activities by reviewing those Activities, and monitoring them through the internal Shari’ah control division or section, internal Shari’ah audit division or section, and (if applicable) external Shari’ah audit, in accordance with the ISSC’s authorities and responsibilities, and pursuant to the Regulatory Requirements in this regard. The ISSC’s activities included the following:
a. Convening (number) meetings during the year. b. Issuing fatwas, resolutions and opinions on matters presented to the ISSC in relation to the Company’s Activities.
c. Reviewing and monitoring compliance of policies, procedures, accounting standards,
operating model and product structures, contracts, documentation, business charters, and other documentation submitted by the Company to the ISSC for approval. d. Reviewing the Takaful Insurance operating model, underlying contracts and supporting materials (e.g. underwriting and claims settlement manual/guidelines etc.). e. Reviewing and approving the Company’s products, services and marketing materials. f. Reviewing and approving the policy and procedures that govern Takaful Insurance Accounts (e.g. segregation of accounts and transparent financial resources flow between the accounts etc.), surplus distribution, and deficit coverage. g. Ensuring the compliance of the segregation between Takaful Insurance accounts and shareholders accounts, allocation of costs and expenditures on the accounts, and the underwriting surplus policy with Islamic Shari’ah Provisions. h. Reviewing the financial statements of the Company to ensure compliance with Islamic Shari’ah provisions.
i. Reviewing the investment policy and approving the Shari’ah screening criteria to
ensure the investment activities in both shareholders’ accounts and participants’ accounts, are comply with the Provisions of Islamic Shari’ah. j. Reviewing the risk ceding arrangements of the participants’ account with other insurance companies (Retakaful insurance, conventional reinsurance, co-insurance with Takaful insurance/conventional insurance companies) and confirming its compliance with Islamic Shari’ah Provisions. k. Supervision through the internal Shari’ah control division or section, internal Shari’ah audit division or section, and (if applicable) external Shari’ah audit, of the Company’s Activities including supervision of executed transactions and adopted procedures on the basis of samples selected from executed transactions, and reviewing reports submitted in this regard.
l. Providing guidance to relevant parties in the Company – to rectify (where possible)
incidents cited in the reports prepared by internal Shari’ah control division or section, internal Shari’ah audit division or section, and/or (if applicable) external Shari’ah audit – and issuing of resolutions to set aside revenue derived from transactions in which non-compliances were identified for such revenue to be disposed towards charitable purposes. m. Approving corrective and preventive measures related to identified incidents to preclude their reoccurrence in the future. n. Reviewing the Zakat calculation and specifying the amount of Zakat due on each share of the Company.

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CBUAE Classification: Public o. Communicating with the Board and its subcommittees, and the senior management of the Company (as needed) concerning the Company’s compliance with Islamic Shari’ah Provisions. p. (add other works that the ISSC wants to mention in this report). The ISSC sought to obtain all information and interpretations deemed necessary in order to reach a reasonable degree of certainty that the Company is compliant with Islamic Shari’ah Provisions. (the phrase “External Shari’ah audit” is included in the report if applicable, otherwise it should be deleted).
4. Independence of the ISSC
The ISSC acknowledges that it has carried out all of its duties independently and with the support and cooperation of the senior management and the Board of the Company. The ISSC received the required assistance to access all documents and data, and to discuss all amendments and Shari’ah requirements. (Factors that have affected independence, if any, must be mentioned).
5. The ISSC’s Opinion on the Shari’ah Compliance Status of the Company
Premised on information and explanations that were provided to us with the aim of ascertaining compliance with Islamic Shari’ah Provisions, the ISSC has concluded with a reasonable level of confidence, that the Company’s Activities are in compliance with Islamic Shari’ah Provisions, except for the incidents of non-compliance observed, as highlighted in the relevant reports. The ISSC also provided directions to take appropriate measures in this regard. (Add a statement on any other breaches to the Shari’ah provisions, resolutions and controls established by the Higher Shari’ah authority, if applicable). The ISSC formed its opinion, as outlined above, exclusively on the basis of information perused by the ISSC during the financial year. Signatures of members of the Internal Shari’ah Supervision Committee of the Company Type of Signature Membership Member’s Name Type of Signature Membership Member’s Name Type of Signature Membership Member’s Name (End of the Template)