Abu Dhabi: The Ministry of Economy issued a law on the Islamic insurance system (Takaful) to regulate the work of Islamic insurance companies in the country.

Sultan Bin Saeed Al Mansouri, Minister of Economy and Chairman of the UAE Insurance Authority, issued the new system yesterday.

This insurance system, which is the first of its kind to be approved in the Arab region, gives Islamic insurance and reinsurance companies a grace period of one year to adjust their status in line with the provisions of the Islamic insurance law.

Fatima Mohammad Al Awadi, Deputy Director General of the Insurance Authority, said that the introduction of the new law is aimed at regulating the operations of Islamic insurance companies, many of which were established in the past few years as per Law No. 9 for 1984 on insurance agencies and Federal Law No. 6 of 2007 regarding the establishment of the insurance authority.

"The importance of the new law is represented in giving the solidarity insurance its cooperative Islamic concept in terms of specifying the Sharia and legal framework of companies' operations which practices this kind of insurance," Fatima said.

The law emphasises on the necessity of companies' compliance with Sharia.

Fatima said the new law determines the jurisdictions of the Sharia Control Committee (SCC) in Islamic insurance companies accurately and clearly, as well as its relation with company boards and the insurance authority.

Under the new law, each insurance company should set up a Zakat fund in which zakat money would be deposited.

Islamic insurance companies should abide by Sharia and those found to be violating these rules would be given a 30 day notice to re-adjust their status, otherwise they will be suspended.

Takaful or Islamic insurance is founded on the cooperative principle and on the principle of separation between the funds and operations of shareholders, thus passing the ownership of the Takaful and operations to the policyholders.

The premiums collected from the policyholders are considered as donations and they constitute the Takaful fund from which all claims are reimbursed.

Team reviews changes

Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, has chaired the inaugural meeting of the committee tasked with the preparation of two amendments to two federal laws concerning the UAE Central Bank.

The committee reviewed the main reason why the federal cabinet had requested the amendments to Federal Law 10/1980 regarding the Central Bank, the monetary system and organisation of banking and Federal Law 6/1985 regarding Islamic banks, financial institutions and investment companies.