The views expressed in this presentation are those of the presenter, not necessarily those of the International Accounting Standards Board or IFRS Foundation. Copyright © 2018 IFRS Foundation. All rights reserved World Standard-setters Conference 2019 #WSS_2019 Faiz Azmi Chair IFRS Islamic Finance Consultative Group Peter Casey Consultant to the Islamic Financial Services Board Mohammad Khan Head of General Insurance, PwC UK and Appointed Actuary in Saudi Arabia IFRS 17 and its impact on Takaful Introduction Faiz Azmi Chair IFRS Islamic Finance Consultative Group & Executive Chairman of PwC Malaysia 1 2
Takaful and IFRS 17 Peter Casey Structures of modern takaful 4 3 4
5 Why takaful? • Shari’ah issues around trading in risk • Good Shari’ah basis for mutual guarantee and mutual assistance • Most straightforward version of takaful would be pure mutual (as in Sudan) – but very difficult to found a new mutual • So most modern takaful companies have one or more policyholder funds embedded in a shareholder company • No standard model - and different approaches in Saudi Arabia and Iran 5 6 A general takaful model (hybrid) Shareholders’ fund Policyholders’ risk fund Policyholders Investment profits Investment profit mudarib’s share Wakalah success fee? Qard?? Retakaful undertakings Retakaful premiums Retakaful recoveries 5 6
7 A life (family) takaful model (hybrid, simplified) Shareholders’ fund Policyholders’ risk fund Policyholders Investment profits Investment profit mudarib’s share Qard?? Retakaful undertakings Retakaful premiums Retakaful recoveries Policyholders’ investment fund 8 Policyholders’ Investment Fund • Generally functions rather like unit-linked policies • No bonuses or similar discretionary elements • But may “drip feed” Policyholders’ Risk Fund 8 7 8
Takaful and IFRS 17 – some issues 9 10 Is takaful insurance? • Argument against is “risk sharing versus risk transfer” But … • AAOIFI Shari’ah standards and OIC Fiqh Academy both refer to “Islamic insurance” • A takaful contract does transfer risk between two legal persons • Purest form of takaful would be a mutual, and no doubt that conventional mutual is undertaking insurance • If not insurance, then would not be eligible for compulsory covers 10 9 10
11 Takaful and IFRS 17: the good news • Relatively simple products • Very limited use of derivatives/hedging features •
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- Spring '19