Pakistan approves first Islamic reinsurance service

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has granted approval to the country’s sole reinsurer to offer sharia-compliant reinsurance, part of efforts to boost the fledgling Islamic insurance (takaful) sector.

The SECP said it had authorised Pakistan Reinsurance Co to open a takaful window, which would help boost new business opportunities for the state-owned firm.

The move would enable local takaful companies to obtain retakaful cover within Pakistan, avoiding outflow of premiums to reinsurance markets overseas, the SECP said.

Takaful is seen as an important bellwether of consumer appetite for Islamic financial products. It is based on the concept of mutuality, where a takaful company oversees a pool of funds contributed by policyholders from which claims are paid.

Pakistan introduced new takaful rules in 2012 which allowed the use of takaful windows, a practice that allows insurers to offer sharia-compliant and conventional products side by side, provided that client money is segregated.