Standard Re Controls and Procedures Establishing Takaful Insurance Fund

CBUAE Classification: Public STANDARD RECONTROLS AND PROCEDURES FOR ESTABLISHING TAKAFUL INSURANCE FUND

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CBUAE Classification: Public
TABLE OF CONTENTS
Page
Subject
مقدمة 3 Introduction) 1 (Article المادة )1( المادة )2( الهدف 4 Objective) 2 (Article
Article (3) Scope of Applicability 4 التطبيق نطاق( 3 )المادة
المادة )4( التعريفات 5 Definitions) 4 (Article Takaful a of Establishment المادة )5( إنشاء صندوق التأمين التكافلي 10 Insurance Fund Article (5) التكافلي 13 Board of Trustees of the Takaful Insurance Fund Article (6) التكافلي 16 Duties of the Board of Trustees of the Takaful Insurance Fund Article (7) التكافلي 18 Legal Representation for the Takaful Insurance Fund Article (8) التكافلي التأمين 18 Terms and Conditions for the Takaful Insurance Fund Article (9) in Accounts of Assignment المادة )10( نقل الحسابات في التأمين التكافلي 21 Takaful Insurance Article (10)
Article (11) Interpretation of Standard 22 المعيار تفسير( 11 )المادة
Article (12) Compliance with the Standard 22 المعيار لمتطلبات االمتثال( 12 )المادة

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Article (1)
Introduction
1.1 The Central Bank seeks to enhance the
development of Takaful Insurance and ensure that its operations are carried out efficiently and effectively. The Standard relates to the controls and procedures for the establishment of Takaful Insurance Fund (“the Standard”) has been issued pursuant to the powers granted to the Central Bank under Federal Decree-Law No. (6) of 2025 regarding Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (“the Central Bank Law”). 1.1
1.2 The Company that is licensed to conduct
Takaful Insurance business and activities in accordance with the principles and provisions of Islamic Shari`ah (“the Company”) must operate in accordance with the controls and procedures stipulated in this Standard, and the Company ensures its compliance with the requirements stipulated in the Central Bank Law, regulations, standards, resolutions and guidelines issued by the Central Bank and the Higher Shari’ah Authority (“the HSA”). 2.1
1.3 Where this Standard includes a
requirement to provide information, to take certain measures, or to address certain items listed as a minimum, the Central Bank may impose further requirements, over and above the requirements provided in the relevant
article.
3.1

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Article (2)
Objective
2.1 The objective of this Standard is to set a
minimum level of controls and procedures for establishing a Takaful Insurance Fund, with an independent legal personality distinct from the Company, for its operations to be conducted in an efficient and effective manner. 1.2
2.2 This Standard elaborates on the Shari’ah
and supervisory expectations of the Central Bank with respect to controls for establishing and managing the Takaful Insurance Fund. 2.2
Article (3)
Scope of Applicability
3.1 This Standard applies to all incorporated
Insurance Companies under the provisions of the laws in force in the United Arab Emirates (“the UAE”) to conduct Takaful Insurance business and applies to foreign Takaful Insurance Companies that have obtained a license to conduct activities in the UAE, including Insurance Companies that house Takaful Insurance Windows in regards to Takaful insurance activities. 1.3
3.2 This Standard must be read in
conjunction with the standards and resolutions issued by the Central Bank and the HSA and notified to Takaful Insurance Companies. 2.3

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Article (4)
Definitions
For the purpose of this Standard, the following words and phrases shall have the meanings stated below:
a. Wakala Fee: A financial amount stipulated or a percentage derived from a known financial amount, which is:
a. paid to the Company in consideration of the management of the Takaful Insurance Fund and investing its assets, or b. paid to the Company in consideration of investing Contributions for the benefit of the Participants in insurance of persons and fund accumulation (family Takaful insurance). ب. االشتراك: هو المبلغ الذي: :that amount the :Contribution .b a. is fully paid by a Participant on the basis of donation (“Tabaru”) to the Takaful Insurance Fund for property and liability insurance, or b. part of it is paid by a Participant to the Takaful Insurance Fund on the basis of donation, and the remaining part is paid to the Participants’ Investment Account on the basis of Wakala Bi Al-Istithmar, for the insurance of persons and fund accumulation.
c. Re-takaful Insurance: An agreement
pursuant to which the Company participates in the Re-takaful Insurance Fund on behalf of the Takaful Insurance Fund by contributing a portion of the Contribution as a donation to the Re -

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CBUAE Classification: Public takaful Insurance Fund to address certain risks. d. Takaful Insurance: A scheme intended to achieve solidarity and cooperation among a group of participants to address certain risks, whereas each participant makes a contribution to the Takaful Insurance Fund, based on the concept of “Tabaru”. Such Fund bears the responsibility of paying compensation to those entitled to it in the event that specific risks materialize. e. Shareholders’ Account: An account that represents the assets and liabilities of the Company. f. The Participants’ Investment Account:
An account in which the portion of the Contribution allocated for investment under insurance for persons and fund accumulation, is invested to generate financial returns. This account is managed in accordance with the investment agency (“Wakala Bi AlIstithmar”) Contract concluded between the Company and the Participant. g. Takaful Insurance Company: An Insurance Company that carries on insurance business and activities in accordance with the rules and principles of Islamic Shari`ah, and the Central Bank Law and the regulations issued in implementation thereof

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CBUAE Classification: Public h. Company: refers to the Takaful Insurance Company, the Re-takaful Insurance Company, the insurance company that houses a Takaful Insurance window, and the reinsurance company that houses a Takaful Insurance window.
i. Takaful Insurance Fund (“the Fund”):
A Fund that is established by a Company. The Fund has a legal personality and financial liability independent from the Company that established it, and owns the paid Contribution donated by Participants with the aim of achieving solidarity among themselves against certain risks. ي. عقد الوكالة :هو العقد الذي من خالله: :whereby contract A :Contract Wakala .j a. Takaful Insurance Fund (“the principal”) appoints the Company (“the Agent”) to manage the Takaful Insurance Fund in accordance with the Fund Charter and relevant regulations and standards, in consideration of a Wakala Fee; and/or b. Participant (“the principal”) appoints the Company (“the Agent”) to manage the Participants’ Investment Account in accordance with the policies and relevant regulations and standards, in consideration of a Wakala Fee. k. Charter of the Takaful Insurance Fund (“the Fund Charter”): A document that governs the duties and responsibilities of the Takaful Insurance Fund in accordance with the Central Bank Law, this Standard, and other

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CBUAE Classification: Public relevant regulations, standards, and resolutions.
l. Insurance Surplus (“Surplus”):
Amounts remaining in the Takaful Insurance Fund at the end of the financial year, from the total Contributions, investment return and any other revenues, after the settlement of all the Fund’s financial obligations. m. Internal Shari’ah Supervision Committee (“ISSC”): A committee formed by the Company, comprising of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products that are offered and managed by the Company and ensure its compliance with Islamic Shari’ah provisions in all its objectives, activities, operations, and code of conduct. ن. مجلس اإلدارة: هو مجلس إدارة الشركة. .directors of board s’Company :Board .n o. Board of Trustees of the Takaful Insurance Fund (“Board of Trustees”): A committee formed by a Company to represent and protect the interests of Takaful Insurance Fund. p. Beneficiary: A natural person or a juridical person who initially acquired the rights stipulated in the Takaful Insurance Policy or to whom these rights were legally transferred in accordance with the terms and conditions of the Takaful Insurance Policy.

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CBUAE Classification: Public q. Participant: A natural person or a juridical person who:
a. donated the Contribution to the Takaful Insurance Fund and as such becomes a beneficiary of the Fund (unless it specifies another beneficiary); or b. invested its money in a Participants’ Investment Account. r. Central Bank: The Central Bank of the United Arab Emirates. s. Takaful Insurance Window (“the Window”): It refers to the licensed Takaful Insurance activities that are conducted by Insurance Companies whether for their account or for the account of others or in partnership with third parties based on the regulatory requirements stated in the regulation regarding Takaful Insurance and other standards issued by the Central Bank. t. Higher Shari’ah Authority (“the HSA”): A body that exercises the mandates and authorities pursuant to the Central Bank Law. u. Participation Membership Policy: A policy containing the key rules and principles of Takaful Insurance that determines the relationship of the Fund with Participants, which should be agreed on by the Participant upon subscription.
v. Takaful Insurance Policy: The contract
concluded between the Company (being

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CBUAE Classification: Public the representative of the Takaful Insurance Fund) and the Participant which contains the insurance terms, and the rights and obligations of the contractual parties or Beneficiaries of the Takaful insurance. The annexes attached to this document are considered part of it.
Article (5)
Establishment of a Takaful Insurance Fund
5.1 The Company must establish a Takaful
Insurance Fund with an independent legal personality and financial liability distinct from the Company and must be registered with the Central Bank. 1.5
5.2 The Company must ensure that there is a
governing document for the Fund, referred to as the “Fund Charter”, specifying its responsibilities, contractual relationships, terms and conditions that govern insurance and investment operations. The Company must manage the Fund in accordance with the Fund Charter and in accordance with applicable regulations, standards and resolutions. The Fund Charter must be approved by the Board and the Internal Shari’ah Supervision Committee (“ISSC”). The Fund Charter and any amendment must be approved by the Central Bank and the HSA prior to their implementation. 2.5

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5.3 The Fund Charter must stipulate that the
purpose of establishing the Fund is to deposit the Contribution in it and to be liable for any compensation or benefits under the provisions of Takaful Insurance Policies. This shall be carried out through the Company that is responsible for procuring, managing, and investing the Contributions, in accordance with the rights and obligations outlined in the terms and conditions of the Takaful insurance policies, the Fund Charter, and the regulations, standards, and resolutions issued by the Central Bank and the HSA. 3.5
5.4 The Fund Charter must be separate from
the Company’s articles of association. 4.5
5.5 The Fund Charter shall state that it owns
its assets and is responsible for its liabilities. The Fund must have an independent financial position that is disclosed in the Company's financial statements. 5.5
5.6 The Fund Charter must stipulate that
Participants, during their subscription period, are Beneficiaries of the Fund according to the rights and obligations stipulated in the Fund Charter and the Takaful Insurance Policy, unless the Participant or applicable laws specify a Beneficiary other than the Participant. The Company should not benefit from the Fund except the Wakala Fee that it is entitled to in accordance with concluded contracts with the Fund, and relevant regulations, standards and resolutions. 6.5

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5.7 The Fund Charter must stipulate the
terms and conditions for participating in the Fund, and further stipulate the criteria that determine the Beneficiaries of the Fund, with reference to the terms and conditions for compensation and/or benefits and other related matters. 7.5
5.8 The Fund Charter must stipulate that the
Fund has the legal capacity to enter into contract with the Company in the interest of the Beneficiaries if required to do so. This arrangement must be in accordance with this Standard, and relevant regulations, standards and resolutions. The Company shall represent the Fund before other relevant stakeholders. 8.5
5.9 The Fund Charter must stipulate that in
the event of liquidation, the Fund’s assets will be distributed to the Beneficiaries at the time of liquidation, after discharging all obligations and paying all expenses in accordance with this Standard, and relevant regulations, standards, and resolutions. 9.5
5.10 The Fund Charter must stipulate that the
specified period for the Takaful Insurance Fund is one hundred years (100) from the date of its establishment, and this period is automatically renewed for similar periods. 10.5

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5.11 As for existing Companies licensed to
conduct two types of Takaful insurance, these Companies must establish a Fund for each type, and ensure complete separation between the first type (insurance of persons and fund accumulation operations) and the second type (property and liability insurance). Companies must completely separate the two types of Takaful insurance, in terms of technical and financial aspects. The funds available in each Takaful Insurance Fund must be allocated to meet the Fund’s liabilities and its management expenses. 11.5
5.12 The Company must update its articles of
association in accordance with the requirements of the Central Bank Law, this Standard, and relevant regulations, standards, and resolutions. 12.5
5.13 The Company's articles of association
must stipulate the contractual relationship between the Company and the Fund, in accordance with the relevant regulations, standards and resolutions issued by the Central Bank and the HSA. 13.5
Article (6)
Board of Trustees of the Takaful Insurance Fund
6.1 The Company may form a Board of
Trustees. The Board must inform the Central Bank of the composition, the names, and qualifications of the Board of Trustees. In the case where the Company offers both types of insurance (insurance of persons and fund accumulation operations and the property and liability 1.6

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CBUAE Classification: Public insurance), each Fund must have a separate Board of Trustees.
6.2 A member of the Board of Trustees may
serve as a member of the Board of Trustees for one Takaful Insurance Fund only. By way of exception, membership in up to two Boards of Trustees; as a maximum, shall be permitted where the company conducts both types of insurance business (insurance of persons and fund accumulation operations and the property and liability insurance), or where the member serves on the Boards of Trustees of two funds affiliated with two companies under the same group. 2.6
6.3 The Board of Trustees must strive to
protect the interests of the Takaful Insurance Fund in accordance with this Standard, and other relevant regulations, standards and resolutions. 3.6
6.4 The number of members of the Board of
Trustees must be five (5) members. The composition of the Board of Trustees must be as follows:
4.6 a. Two independent, non-executive
members of the Board, b. A Member of the ISSC, and
c. Two representatives representing
Participants in accordance with this Standard, and relevant regulations, standards and resolutions. Provisions (a) and (b) of Article (6.4) do not require the appointment of new members to the Board or the ISSC.

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CBUAE Classification: Public Instead, the scope of duties of the relevant members shall be expanded to allow them to serve on the Board of Trustees in addition to their existing responsibilities.
6.5 The Board must appoint the Chairman of
the Board of Trustees from the independent, non-executive members. 5.6
6.6 The Company cannot dismiss a member
of the Board of Trustees without prior approval of the Central Bank. If any member of the Board of Trustees resigns, the Company must notify the Central Bank of such resignation within seven (7) business days, and appoint a replacement member of the Board of Trustees within a period not exceeding thirty (30) days from the date of resignation, taking into consideration
Article )6.4(.
6.6
6.7 The term of office for the members of
Board of Trustees must be specified in an engagement letter, with a minimum period of three years, and may be renewed for a similar period upon the recommendation of the Board. In the case of the reappointment, the Company must notify the Central Bank. 7.6
6.8 The Board of Trustees must hold regular
meetings at least twice in a financial year. The Takaful Insurance Fund shall bear the cost of remuneration of the members of the Board of Trustees and the expenses of their meetings. 8.6

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6.9 The Company shall appoint the members
of the Board of Trustees who represent Participants in accordance with provision (c) of Article (6.4), and ensure they fulfill the following eligibility criteria:
9.6 a. A natural person who is a Participant
or who represents a firm that is participating in the Fund. b. A participant in the Takaful Insurance Fund for at least three (3) years.
c. Not a shareholder in the Company, an
employee of the Company or firstdegree relatives to a member of the Board, a member of the ISSC or an employee of the Company. d. The two members representing the Participants must not hold policies of the same Takaful insurance classes.
6.10 The Central Bank may review Article
)6.1( and require Companies to establish a Board of Trustees, as deemed appropriate. . 10.6
Article (7)
Duties of the Board of Trustees of the Takaful Insurance Fund
7.1 The Board of Trustees are responsible for
the following:
a. Representing the Takaful Insurance Fund in entering into contracts with the Company. In the event that a Board of Trustees is not appointed, the Company must appoint a third party to represent the Fund for signing the main Wakala Contract between the Company and the Fund.

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CBUAE Classification: Public b. Provide approval to update the Fund Charter in a manner that does not violate applicable regulations, standards and resolutions.
c. Approve the Participation
Membership Policy template in a manner that does not violate the applicable regulations, standards and resolutions. d. Representing the Fund during General Assembly meetings, to present the Fund’s perspective on issues presented without the right to vote in such meetings. e. Reviewing the internal records and documents of the Takaful Insurance Fund, as needed. f. Examining cases presented by the Company that may have an impact on the interest of the Beneficiaries in the Fund, and which require a decision by the Board of Trustees. g. Meeting at least twice a year to discuss important matters in respect of the Fund that have an impact on the rights of Participants and Beneficiaries. Board of Trustees meetings to be arranged by the secretariat of the ISSC. h. Preparing an annual report to be presented at the Company’s general assembly, titled “Board of Trustees’ Annual Report”. The report shall state the mandates of the Board of Trustees, its meetings and activities conducted during the financial year, and other matters determined by the Central Bank.
i. Undertake any other tasks that may be
assigned by the Central Bank.

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7.2 In the event that a Board of Trustees
is not established in accordance with
Article (6) of this Standard, the Board
shall prudently manage conflict of interest between the Fund and the Company, and carry out duties (b) and (e) mentioned in this Article. 2.7
Article (8)
Legal representation for the Takaful Insurance Fund
8.1 The Company is the exclusive legal
representative of the Takaful Insurance Fund in its relations with third parties and before judicial authorities. 1.8
8.2 All lawsuits or legal claims related to
rights or obligations arising from Takaful Insurance Policies shall be against the Company, unless otherwise specified by judicial authorities in the event of conflict of interest. 2.8
Article (9)
Terms and Conditions for the Takaful Insurance Fund
9.1 The Takaful Insurance Fund must act in
accordance with what its Charter dictates, and its contractual relations with the Company are governed by terms and conditions that must be based on the Fund Charter in accordance with the applicable regulations, standards and resolutions. 1.9
9.2 In accordance with the contracts
concluded between the Company and the Fund and the governing policies between the relevant parties, the Company acts on 2.9

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CBUAE Classification: Public behalf of the Fund by managing and investing its assets, paying compensation and/or benefits to Beneficiaries from the Fund, and handling other obligations and procedures. The Company conducts business in accordance with applicable regulations, standards and resolutions. In all cases, the Company, in its capacity as the Fund's agent, shall be exclusively responsible before the participants and beneficiaries for the insurance and investment operations. Any breach of its obligations, as set out in the regulations and standards issued by the Central Bank, the Fund Charter, and the Takaful Insurance Policy, shall be considered a violation of the terms, conditions, and regulatory requirements
9.3 Contractual terms and conditions referred
to in the Fund Charter must stipulate the rights and obligations related to insurance and investment operations. Such contractual terms and conditions must include, but not limited to:
3.9 a. Assigning the Company the
responsibility for determining the conditions for participating in Takaful insurance. b. Assigning the Company the responsibility for determining an appropriate Contribution according to technical and actuarial basis.
c. Authorizing the Company to deduct
Wakala Fee and transferring such fee to its account in consideration for managing the Fund. d. Authorizing the Company to receive Contributions and deposit them into ّ

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CBUAE Classification: Public its designated accounts according to the nature of the product. e. Assigning the Company the responsibility for estimating allocations and technical provisions, and retaining them in the Fund. f. Assigning the Company the responsibility for disbursement from the Fund to pay compensation and benefits to Beneficiaries or any other eligible parties. g. Paying expenses incurred by the Fund. h. Authorizing the Company to enter into contracts with Re-takaful Insurance Companies or conventional reinsurance companies (as needed) on behalf of the Fund, paying Contribution that relates to ReTakaful Insurance arrangements, and depositing any amounts to the Fund’s account.
i. Assigning the Company the
responsibility for distributing any insurance surplus to the Fund’s Beneficiaries according to the approved policy in this regard. j. Ensuring, in all cases, there is a segregation between the account of Takaful Insurance Fund and Participants’ Investment Account in insurance of persons and fund accumulation. k. Assigning the Company the responsibility for all the tasks and duties that the Fund is required to conduct.

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Article (10)
Assignment of Accounts in Takaful Insurance
10.1 The Fund Charter must stipulate that the
Company managing the Fund may assign the management of the Fund to another alternative Company that will be the agent of the Fund. This also should allow assigning a specific account or accounts of the Takaful Insurance Fund, including its assets, liabilities, and Beneficiaries, to another Takaful Insurance Fund. In all cases, prior approval of the Central Bank and the HSA must be obtained in this regard. 1.10
10.2 The assignment of an account or accounts
of the Takaful Insurance Fund must not against the interest of the Beneficiaries. The Fund or Company to which the account or accounts will be assigned must be in compliance with the regulations, standards and resolutions issued by the Central Bank, the HSA and the other relevant authorities. 2.10
10.3 The Fund Charter must stipulate that
Beneficiaries have the right to object in the event that the account or accounts of the Takaful Insurance Fund are transferred to another Company, in accordance with the applicable laws, regulations, and standards. 3.10
10.4 All parties must preserve the rights of the
Fund and Participants in Participants’ Investment Account at all times in accordance with this Standard, and other relevant regulations, standards and resolutions. 4.10

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10.5 In case of assigning an account or
accounts of the Takaful Insurance Fund to another Company, it must ensure there is in place a process to perform a separate solvency calculation for the Fund. 5.10
Article (11)
Interpretation of Standard The Regulatory Development Department of the Central Bank shall be the reference for interpretation of the provisions of this Standard.
Article (12)
Compliance with the Standard
12.1 The Company must establish a plan to
comply with this Standard within one hundred and eighty (180) days from the date of its issuance. The plan must be submitted to the Central Bank for approval. 1.12
12.2 The Company must comply fully with the
requirements of this Standard within one year from the date of its issuance. 2.12 Khaled Mohamed Balama Governor of the Central Bank of the UAE