Standard Re the Operational Model of Takaful Insurance

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CBUAE Classification: Public STANDARD RE THE OPERATIONAL MODEL OF TAKAFUL INSURANCE

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CBUAE Classification: Public
TABLE OF CONTENTS
Page Subject
مقدمة 4 Introduction) 1 (Article المادة )1( المادة )2( الهدف 5 Objective) 2 (Article
Article (3) Scope of Applicability 5 التطبيق نطاق( 3 )المادة
المادة )4( التعريفات 6 Definitions) 4 (Article المادة )5( أحكام عامة 11 Provisions General) 5 (Article Takaful of Establishment المادة )6( إنشاء صندوق التأمين التكافلي 12 Insurance Fund Article (6) التكافلي التأمين 12 Setting Takaful Insurance Operational Model Article (7) المادة )8( العالقات التعاقدية 13 Relationship Contractual) 8 (Article Membership Participation المادة )9( وثيقة عضوية االشتراك 16 Policy Article (9) المادة )10( االشتراك 18 Contribution) 10 (Article المادة )11( أجرة الوكالة 20 Fee Wakala) 11 (Article 21 Revenues and Expenses of Takaful Insurance Fund in Property and Liability Insurance
Article (12)
22
Revenues and Expenses of Insurance of Persons and Fund Accumulation
Article (13)
المادة )14( حساب المساهمين 25 Account’ Shareholders) 14 (Article المادة )15( إعادة التأمين التكافلي 26 Insurance takaful-Re) 15 (Article

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CBUAE Classification: Public المادة )16( المشاركة في التأمين 28 insurance-Co) 16 (Article المادة )17( الفائض التأميني 28 Surplus Insurance) 17 (Article المادة )18( القرض الحسن 30 Hasan Qard) 18 (Article
Article (19) Interpretation of Standard 32 المعيار تفسير( 19 )المادة
Article (20) Compliance with the Standard 32 المعيار لمتطلبات االمتثال( 20 )المادة

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CBUAE Classification: Public
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 Takaful Insurance Operational Model Standard (“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 operational model stipulated in this Standard and comply with the requirements stipulated in the Central Bank Law and other relevant 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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CBUAE Classification: Public
Article (2)
Objective
2.1 The objective of this Standard is to set
minimum requirements for the implementation of the operational model for Takaful Insurance business, and conducting the operations of the Company and the Takaful Insurance Fund 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 the operational model for Takaful Insurance business. 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 regard 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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CBUAE Classification: Public
Article (4)
Definitions
For the purposes 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. j. Wakala Contract: A contract whereby the:
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. 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

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CBUAE Classification: Public revenues, after the settlement of all the Fund’s financial obligations.
l. An Interest Free Loan (‘Qard
Hasan’): An interest-free loan provided by the Company to the Takaful Insurance Fund managed by the Company to fund any realized shortfall in the Fund’s accounts related to insurance activities. m. 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 relevant regulations, standards, and resolutions. n. 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 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. 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. ع. مجلس اإلدارة: هو مجلس إدارة الشركة. .directors of board s’Company :Board .p

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CBUAE Classification: Public q. Central Bank: The Central Bank of the United Arab Emirates. r. 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); and/or b. invested its money in the Participants’ Investment Account. s. 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. 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 the representative of the Takaful

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CBUAE Classification: Public 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)
General Provisions
5.1 The Company must establish a
comprehensive operational model based on the requirements stipulated in this Standard. The Company must also develop policies and procedures relating to managing various aspects of its operations, including, but not limited to the following:
1.5 a. The Fund Charter, ،الصندوق الئحة .أ
b. Segregation between the Fund’s accounts and the Shareholders’ Account. ج. االكتتاب، ,Underwriting .c د. االستثمار، ,Investment .d ه. إعادة التأمين التكافلي، ,insurance takaful-Re .e و. المشاركة في التأمين، ,insurance-Co .f ز. إدارة المطالبات، ,management Claims .g ح. الفائض التأميني، ,Surplus .h
i. The deficit in the Takaful Insurance
Fund.
5.2 The Company's governance framework
must reflect the operational model of Takaful insurance, in accordance with this Standard and other relevant standards and resolutions. 2.5

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CBUAE Classification: Public
Article (6)
Establishment of Takaful Insurance Fund The Company must establish the Takaful Insurance Fund in accordance with the requirements stated in the Standard Regarding Controls and Procedures for Establishment of a Takaful Insurance Fund, issued by the Central Bank.
Article (7)
Setting Takaful Insurance Operational Model
7.1 The Company applying for a license to
conduct Takaful Insurance business and activities, must set an operational model as specified in this Standard. 1.7
7.2 The operational model for conducting the
Takaful Insurance business must be based on a Wakala model for both property and liability insurance, and insurance for persons and fund accumulation. 2.7
7.3 The operational model must be approved
in its entirety by the Company’s ISSC, before submitting it to the Central Bank and the HSA for approval. 3.7
7.4 The Takaful Insurance operational model
must be clear and known to all relevant personnel within the Company, and it must be made available on the Company’s website. 4.7
7.5 The operational model shall include, but
not be limited to, the following elements 5.7

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CBUAE Classification: Public a. contracting parties and the contractual relationship as per the approved model. b. financial flows between the Fund, the Company, the Participant and the Beneficiary.
Article (8)
Contractual Relationship
8.1 The contractual relationship between the
Participant/Beneficiary, the Fund, and the Company must be clear in the Takaful Insurance operational model. It must also stipulate in a plain and clear manner in the Fund Charter, the Participation Membership Policy, the Takaful Insurance Policy, and in any other documents where it is necessary to clarify the relationship for contractual purposes, for disclosure purposes, or based on regulatory requirements. 1.8
8.2 The Company licensed to conduct
property and liability Insurance business must adopt the Wakala model as the operational model for its business based on the following contractual relationship:
2.8 a. The relationship between the
Company and the Fund: the relationship between the Company and the Fund is based on Wakala Contract, where the Company acts as Agent for the Fund for managing insurance and investment operations, in accordance with the Fund Charter, the requirements of this Standard and relevant regulations, standards and resolutions.

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CBUAE Classification: Public b. The relationship between the Participant and the Fund: the relationship between the Participant and the Fund is based on Tabaru. The Participant signs the Participation Membership Policy and the Takaful Insurance Policy, and accordingly pays the Contribution to the Fund on the basis of Tabaru. The Participant’s signature on the Participation Membership Policy and the Takaful Insurance Policy constitutes the Participant’s acceptance of the principles, rules and controls stipulated in the Fund Charter which must be made available to the Participant at the execution of the agreement.
8.3 The Participation Membership Policy,
the Takaful Insurance Policy, and the Fund Charter, or the applicable laws and regulations determine the Beneficiary of the Fund. The Participant has the right to act as Beneficiary of the Fund. The Participation Membership Policy, the Takaful Insurance Policy, and the Fund Charter specify the method of benefiting from the Fund. 3.8
8.4 The Company licensed to conduct the
business of Takaful Insurance of persons and fund accumulation must adopt Wakala model as the operational model for its business (depending on the nature of the product offered) based on the following contractual relationship:
4.8 a. Contractual relations in insurance
operations:

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CBUAE Classification: Public

1. The relationship between the
   Company and the Fund: the relationship between the Company and the Fund is based on the Wakala Contract, where the Company is the Fund’s agent in managing Fund’s insurance and investment operations.
2. The relationship between the
   Participant and the Fund: the relationship between the Participant and the Fund is based on Tabaru, when a Participant donates a known portion of Contribution to the Fund. The Participant’s signature on the Participation Membership Policy and the Takaful Insurance Policy constitutes the Participant’s approval of the principles, rules and controls stipulated in the Fund Charter which must be made available to the Participant at the execution of the agreement. The Participant becomes a Beneficiary of the Fund pursuant to
   Article (8.3) of this Standard .
   b. Contractual relations in investment operations of Participants’ Investment Account:
3. The relationship between the
   Participant and the Company: the relationship between the Participant and the Company is based on a Wakala Bi Al-Istithmar Contract, whereby the Participant pays a specified portion of the Contribution allocated to the investment operations within the Participants’ Investment Account, and authorizes the Company to invest this amount in

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CBUAE Classification: Public accordance with the agreed‑upon terms and conditions.
Article (9)
Participation Membership Policy
9.1 The Company must prepare a
Participation Membership Policy template on behalf of the Fund, in order to regulate the contractual relationship between the Participant and the Fund, which must be signed by both parties. 1.9
9.2 The Participation Membership Policy
must be consistent with the nature and type of Takaful insurance. As an agent for the Fund, the Company may prepare more than one Participation Membership Policies, depending on the type and class of Takaful insurance. In all cases, the Participation Membership Policy must be drafted in Arabic, or with an accurate Arabic translation. 2.9
9.3 The Participation Membership Policy
must include, inter alia, the following elements, which must be drafted in clear language (and not be misleading in any way) for the benefit of the relevant parties:
3.9 a. The name and address of a
Participant, together with relevant contact details. ب . مدة العضوية. .term Membership .b
c. Defining the Takaful Insurance Fund
and its Charter, the Participant, the Beneficiary, and the Company in accordance with this Standard, and relevant regulations, standards and resolutions.

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CBUAE Classification: Public d. The rules and underling principles that govern the contractual relationship between the Company and the Takaful Insurance Fund within the operational model that is used to conduct Takaful Insurance business. e. The rules and underling principles that govern the contractual relationship between the Participant and the Fund. f. Providing a detailed cross-reference pertaining to the contractual relationship mentioned in the Fund Charter. In all cases, the Participant must be able to view the Fund Charter. g. The role and responsibility of the Company in conducting the insurance and investment operations of the Fund. h. Stipulating that the compensation and claims paid to the Beneficiaries are from the Takaful Insurance Fund and not from the Company, and that any responsibility for compensation or payment to the Beneficiary mentioned in the relevant documents is under the responsibility of the Fund.
i. The Participant’s obligations to the
Fund. j. Rights of the Beneficiary of the Fund. .الصندوق من المستفيد حقوق .ي k. The Fund’s rights and obligations to the Company.
l. The Wakala Fee that the Company
receives from the Takaful Insurance Fund.

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CBUAE Classification: Public m. The mechanism for allocation of the Contribution in accounts in the insurance of persons and fund accumulation, according to the nature of the product. n. The policy for distributing the Surplus in the Takaful Insurance Fund. o. The policy of dealing with any deficit in the Takaful Insurance Fund. p. Any other information that the Central Bank deems necessary to include in the Policy.
9.4 The ISSC and the Board of Trustees (if
applicable) must approve the Participation Membership Policy template, as stipulated in this Standard and other relevant regulations, standards and resolutions, before the template is presented to the Central Bank and the HSA to obtain a non-objection letter. 4.9
9.5 The Company shall make the template of
Participation Membership Policy – or Participation Membership Policy templates as needed – available after obtaining the necessary approval stated in Article (9.4) on its website and branches. 5.9
Article (10)
Contribution
10.1 Each Participant must pay the
Contribution to the Takaful Insurance Fund upon participation in the Fund, and the same paid on Tabaru basis. The Contribution may be paid in one lump 1.10

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CBUAE Classification: Public sum or installments, depending on the nature of the product.
10.2 The Company must determine the
Contribution in according to technical and actuarial basis, and it must be consistent with the nature and scope of the risk, its duration, and other material factors. 2.10
10.3 In the case of products related to fund
accumulation, the Contribution must be shared between the Takaful Insurance Fund and the Participants’ Investment Account in a transparent manner while providing the Participants with material information regarding their investments. 3.10
10.4 The Contribution may be divided
initially between the Takaful Insurance Fund and the Participants’ Investment Account in the case of products related to fund accumulation. The Contribution may also be paid to the Participants’ Investment Account. A portion of it is subsequently deducted (to be donated to the Takaful Insurance Fund), on behalf of the Participant, for insurance operations. The amount or method of determining this portion must be agreed upon. 4.10
10.5 The amounts invested in products related
to fund accumulation are owned by the Participant, and all the rules related to ownership shall apply, including the rules of inheritance. 5.10

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CBUAE Classification: Public
Article (11)
Wakala Fee
11.1 The Wakala Fee must be pre-determined
in accordance with rules and controls set by the Central Bank, and it must be paid from the Takaful Insurance Fund to the Company in consideration of the management of the Fund in accordance with the Fund Charter. 1.11
11.2 The Company must adhere, inter alia, to
the following rules and controls in determining the Wakala Fee:
2.11 a. The Wakala Fee must be clearly
defined and stipulated for the benefit of all related parties. It must be calculated according to a predetermined mechanism and based on a technical study (either a lump sum of the Contribution, or a percentage of the Contribution), and it shall be stipulated in the Participation Membership Policy. b. The interests of the Company, the Takaful Insurance Fund, the Participants and the Beneficiaries should all be balanced when determining the Wakala Fee.
c. The Wakala Fee must be approved on
an annual basis by the ISSC. d. The Wakala Fee shall not exceed the maximum limit stipulated in the regulations, standards and instructions of the Central Bank.
11.3 In Takaful insurance for property and
liabilities, the Company may deduct the Wakala Fee for insurance and investment operations from the Fund. As for Takaful 3.11

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CBUAE Classification: Public insurance for persons and fund accumulation, the Company must determine the Wakala Fee for insurance and investment operations, which is deducted from the Fund, and the Wakala Bi Al-Istithmar fee for investment operations, which is deducted from the Contribution allocated for investment.
Article (12)
Revenues and Expenses of Takaful Insurance Fund in Property and Liability Insurance
12.1 The Company’s management of the Fund
and insurance and investment activities and operations may generate the following revenues to the Fund, including:
1.12
أ. االشتراكات التي تُدفع من قبل .Participants by paid Contributions .a b. Net investment returns resulting from investment operations in the Fund.
c. Deductions and commissions
obtained from reinsurance arrangements from Re-takaful insurance/conventional reinsurance companies, in accordance with the controls stated in Article (15) of this Standard. d. Surplus from reinsurance arrangements from Re-takaful insurance/conventional reinsurance companies, in accordance with the controls stated in Article (15) of this Standard.
12.2 The Takaful Insurance Fund must fulfill
financial obligations and expenses owed 2.12

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CBUAE Classification: Public to relevant parties and bear the cost of the following elements:
a. Wakala Fee (including the intermediary commission, the costs of issuing a Takaful Insurance Policy, including government fees). b. Claims and compensation and/or benefits due upon the occurrence of the risk, in addition to the related provisions or reserves.
c. Contribution paid for reinsurance
arrangements to Re-takaful insurance/conventional reinsurance companies. d. Distributing the Surplus to the Fund’s Beneficiaries according to the approved policy in this regard. The Fund may grant 10% of the Surplus to the Company in accordance with this Standard and standards issued by the Central Bank. e. Repayment of the Qard Hasan due to the Company.
Article (13)
Revenues and Expenses of Insurance of Persons and Fund Accumulation
13.1 A Company licensed to conduct the
business of Takaful insurance of persons and fund accumulation, must have a separate Participants’ Investment Account from the Takaful Insurance Fund account. 1.13
13.2 The Company’s management of the
Participants’ Investment Account and investment activities and operations may 2.13

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CBUAE Classification: Public generate revenues for the account, including:
a. Contribution deducted from the portion allocated to insurance operations in the Takaful Insurance Fund. b. Net investment returns resulting from investment operations in the Participants’ Investment Account.
13.3 The Company’s management of the
Takaful Insurance Fund and insurance and/or investment activities and operations may generate income for the Fund:
3.13 a. The Contribution deducted from the
portion allocated to investment operations in the Participants’ Investment Account. b. Net investment returns resulting from investment operations in the Fund.
c. Deductions and commissions
obtained from reinsurance arrangements from Re-takaful insurance /conventional reinsurance companies, in accordance with the controls stated in Article (15) of this Standard. d. Surplus from reinsurance arrangements from Re-takaful insurance/conventional reinsurance companies, in accordance with the controls stated in Article (15) of this Standard.
13.4 The Company must manage the
Participants’ Investment Account and ensure that the Participants’ Investment Account fulfills all financial obligations 4.13

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CBUAE Classification: Public and expenses that must be paid to the relevant parties, in accordance with the terms and conditions of the Takaful Insurance Policy. The following are among the financial obligations and expenses that must be borne by the account:
a. The Wakala Bi Al-Istithmar fee, which is deducted from the Contribution that is paid by the Participant. b. The benefits accrued, including the related provisions or reserves.
c. Early liquidation charges, other
related fees and commissions, provided that the fees and expenses deducted from the account do not exceed the maximum limit stipulated in the regulations, standards, and instructions of the Central Bank.
13.5 The Company must manage the Fund and
fulfill the financial obligations and expenses that must be paid to the relevant parties. The Fund shall bear the following:
5.13 a. Wakala Fee (including the
intermediary commission, the costs of issuing a Takaful Insurance Policy, including government fees). b. Claims and compensation and/or benefits due upon the occurrence of the risk, including the related provisions or reserves.
c. Contribution paid for reinsurance
arrangements to Re-takaful insurance/conventional reinsurance companies.

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CBUAE Classification: Public d. Distributing the Surplus to the Fund’s Beneficiaries according to the approved policy in this regard. The Fund may grant 10% of the Surplus to the Company in accordance with this Standard and standards issued by the Central Bank. e. Repayment of the Qard Hasan due to the Company.
Article (14)
Shareholders’ Account
14.1 The Shareholders’ Account may receive
financial revenues in consideration of conducting Takaful Insurance business and activities. The Company can receive any of the following elements that relate to Takaful insurance business, in addition to the Company’s paid-up capital from shareholders:
1.14 a. The Wakala Fee deducted from the
Takaful Insurance Fund. b. The Wakala Bi Al-Istithmar fee deducted from the Contribution specified for the Participants’ Investment Account.
c. Investment returns resulting from
investment operations for the Shareholders’ Account. d. Performance incentive for the Company for achieving a Surplus in the Takaful Insurance Fund as stated in this Standard. e. Repayment of the Qard Hasan by the Takaful Insurance Fund.
14.2 The Shareholders’ Account must fulfill
the financial obligations and expenses 2.14

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CBUAE Classification: Public that must be paid to related parties, including the following elements:
a. General and administrative expenses; and b. The Qard Hasan provided to the Takaful Insurance Fund in the event of any deficit.
Article (15)
Re-takaful Insurance
15.1 The Takaful Insurance Fund must have
an approved Re-takaful insurance policy. This policy must be consistent with the nature of the business of the Company and the Fund. The policy shall be prepared by the Company, as agent to the Fund, and approved by the Board, and the ISSC. 1.15
15.2 The Company may cover some risks of
the Takaful Insurance Fund by Retakaful Insurance Companies. In this case, the Fund must be the party to that contractual relationship. 2.15
15.3 The Company may cover some of the
risks of the Takaful Insurance Fund to conventional reinsurance companies according to specific controls:
3.15 a. The Company should prioritize Retakaful insurance companies before
approaching conventional reinsurance. b. There are no Takaful Insurance Companies or Re-takaful insurance companies capable of sharing responsibility for risks with, or when deemed necessary with conventional

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CBUAE Classification: Public insurance companies, within and outside the UAE.
c. There are no Re-takaful insurance
companies that have the capacity or professional experience in providing coverage for a specific risk. d. The term of the agreements between the Company and conventional reinsurance companies must be limited to the required period only. e. The Company must obtain an approval from the ISSC for reinsurance agreements before entering into any relevant agreement f. To limit the dependency on reinsurance from conventional reinsurance companies.
15.4 The Company and the Fund must have
special rules in place, approved by the ISSC, regarding any financial flows resulting from their relationship with conventional reinsurance companies, including but not limited to the following:
4.15 a. The Company may take coverage
amounts from conventional reinsurance companies. b. The Company must not take reinsurance commission and place it into the Shareholders’ Account. However, the amounts can be deposited into the Takaful Insurance Fund.
c. The Company must not accept any
revenues from conventional reinsurance companies. However, the amounts can be deposited into the Takaful Insurance Fund.

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CBUAE Classification: Public
15.5 The Company must submit to the ISSC
an annual study regarding the possibility of dealing with conventional reinsurance arrangements, and the study must include a plan to reduce reliance on conventional reinsurance companies to cover risks. 5.15
Article (16)
Co-insurance
16.1 The Fund Charter must stipulate that the
Company has the right to participate in co-insurance agreements on behalf of the Fund. 1.16
16.2 The Company may participate in coinsurance agreements with conventional
insurance companies subject to the following conditions:
2.16 a. The risks covered must be in
compliance with Islamic Shari’ah. b. The terms and conditions regulating the agreement that apply to the Company and the Fund must be in compliance with the provisions of Islamic Shari’ah.
c. The Company must obtain the
approval of the ISSC before signing the co-insurance agreement.
Article (17)
Insurance Surplus
17.1 The Takaful Insurance Fund must have
an approved policy regarding Surplus, including determination of the Surplus for its insurance business in the Fund, the criteria for entitlement to the Surplus, and the basis and method of distributing the 1.17

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CBUAE Classification: Public Surplus in the Fund among the Beneficiaries. This policy must be prepared by the Company, being the agent of the Fund and approved by the Board, the Board of Trustees (if applicable), and the ISSC.
17.2 The distribution of the Surplus must be in
accordance with the Surplus policy approved by the Board, the Board of Trustees (if applicable), the ISSC and the appointed actuary. The approval of the Central Bank in this regard must also be obtained. 2.17
17.3 The Fund Charter must determine the
distribution method to be adopted when calculating the Surplus as per the regulations and standards issued by the Central Bank. 3.17
17.4 If the Beneficiary has more than one
Takaful Insurance Policy in the Fund, this must be considered when calculating the Beneficiaries’ entitlements. 4.17
17.5 The Surplus may be distributed directly
to the Beneficiary according to one of the methods approved by this Standard, or by reducing Contribution for the following year if the Beneficiary wishes to renew. 5.17
17.6 The Fund may grant 10% of the Surplus
to the Company in consideration for its sound management, as stipulated in the Participation Membership Policy and in accordance with the standards issued by the Central Bank, provided that the same (if occurred) is decided at the time the Surplus is achieved. 6.17

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CBUAE Classification: Public
Article (18)
Qard Hasan
18.1 Each Company must establish a policy
for managing financial deficit in the Company and the Fund. This policy must be approved by the Board, and the ISSC must approve the treatments stated in the policy from Shari’ah perspective. If the Company is licensed to manage both types of Takaful Insurance, it must develop a policy for each type. 1.18
18.2 The Company must, through the
Shareholders' Account, provide a Qard Hasan (or any other Shariah compliant financial instrument) to the Takaful Insurance Fund, specifically for the accounts related to insurance activities, if the Takaful Insurance Fund faces a deficit in meeting its financial obligations. The Fund Charter and related documentations must state that the Company's obligation to provide the Qard Hasan to the Takaful Insurance Fund is not a contractual obligation, but rather a compliance with the regulatory requirements. ISSC must ensure that this obligation is not taken into account when determining Wakala Fees. 2.18
18.3 If the Company provides the Qard Hasan
to the Fund, the Company must, being the agent of the Fund, present a comprehensive plan to address the financial deficit in the Fund. The plan 3.18

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CBUAE Classification: Public must explain the reasons for the deficit and the process that must be followed to repay the Qard Hasan, and the plan must be supported by evidence.
18.4 The Company must not bear financial
losses and obligations of the Fund unless the Company has been negligent in managing the Fund. 4.18
18.5 The Company has the right to recover the
Qard Hasan from the Surplus that may be realized in the Fund during subsequent periods, whether in one payment or in several payments, as long as this does not breach the solvency requirements and adherence to the Takaful Insurance Regulation and the regulations and standards issued by the Central Bank. 5.18
18.6 In the event that the Company is unable
to recover the Qard Hasan, it must consider it as an unsecured and noncovered loan, and it must be written off in full three (3) years after its maturity. Each Qard Hasan shall be assessed independently and reviewed annually. For the avoidance of doubt, this is a regulatory commitment and not a contractual commitment with the Fund itself. 6.18
18.7 The Company while managing the Fund
must not provide any Qard Hasan from the Takaful Insurance Fund to any person or entity that is not entitled to it, including, but not limited to - the following persons and entities:
7.18

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CBUAE Classification: Public a. Company (i.e., Shareholders’ Account); ّ b. Members of the Board or senior management;
c. Participant and Beneficiary; and . والمستفيد المشترك .ج
d. owners or shareholders of the Company.
Article (19)
Interpretation of Standard The Regulatory Development Division of the Central Bank shall be the reference for the interpretation of the provisions of this Standard.
Article (20)
Compliance with the Standard
20.1 The Company must prepare a plan in
accordance to this Standard within 180 days from the date of its issuance. The same must be submitted to the Central Bank for approval. 1.20
20.2 The Company must comply fully with
the requirements of this Standard within one year from the date of its issuance. 2.20 Khaled Mohamed Balama Governor of the Central Bank of the UAE