Supervisory Issues in Takaful: An Overview
The International Association of Insurance Supervisors in its 2005 paper “A New Framework for Insurance Supervision”1 sets out an overarching framework for supervision, which articulates the relationship between the different elements of supervision. It says:
… the Framework for insurance supervision consists of three groups of issues: financial issues, governance issues, and market conduct issues. It also encapsulates three levels or aspects in relation to these issues, reflecting three different responsibilities: preconditions for effective insurance supervision, regulatory requirements, and supervisory action.
The preconditions for effective insurance supervision cover such issues as an institutional and legal framework for the financial sector, efficient financial markets, and the existence of a supervisory authority with operational independence and adequate powers and resources.
“Supported by these preconditions, the Framework consists of three broadly defined categories or ‘blocks’ of issues, which relate to:
- the financial aspects of an insurer's operations
- how an insurer is governed
- how an insurer conducts its business and presents itself in the market.
Each of these blocks may be viewed from two main standpoints or aspects:
- regulatory requirements, which are addressed to the operations of the insurer
- supervisory action, which has regard to the responsibilities and activities of the supervisory ...