Focus will be on captive insurance, re-insurance centre takaful & re-takaful
BY THE consent of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam, the Ministry of Finance recently introduced the Islamic Banking Order 2008, aimed at expanding the Islamic banking sector in Brunei at the same time increasing the competitiveness among players by creating a level playing field as well as strengthening the supervision and regulation of Islamic banking activities.
This was announced by Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim, Minister of Finance II, during his keynote address for the Sixth Brunei Roundtable held at the Empire Hotel and Country Club, yesterday.
"This new legislation also aims to attract foreign participants to strengthen the industry as a whole and to nurture local knowledge and expertise," he said.
Additionally, in September 2008, the minister said that His Majesty had given his consent to the new Takaful Order 2008.
The Order is a new comprehensive legislation to govern the activities of the domestic takaful industry and provide the legal platform for a level playing field between conventional insurers and takaful operators.
Under auspices of the Brunei International Financial Centre (BIFC) the focus will be on three categories of insurance namely: captive insurance, re-insurance centre and takaful and re-takaful.
The financial crisis has highlighted some of the irrationalities and the follies of our past action, the minister said.
The minister said the reason why Islamic Finance has been less affected by the current global meltdown is that it is based on the philosophy of upholding of ethics and integrity in all its business dealings.
According to Standard and Poor's, more than US$5.6 trillion ($8.4 trillion) has been wiped out of Syariah-compliant equities worldwide during the third quarter of 2008, indicating that the Islamic finance as it is currently practised is not so straightforward as it should have been, said the minister.
"I am absolutely confident that as practical Islamic finance progresses and improves, it would only be a matter of time before it will be able to fulfil the expectation and prove the perception, that it is a less risky alternative to conventional finance," he said.
The minister said although the domestic insurance industry is small, it is an integral part of the financial system which underwent reforms with the introduction of the Insurance Order, 2006.
As of 2007 insurance takaful assets stood at $1 billion with gross premiums of $175 million. Thee three local takaful operators command approximately one-third share of the country's overall gross premiums, he said.
"With the introduction of the Order, insurance companies had to be better capitalised, well structured and properly governed to remain operational in the Brunei market," said the minister.
As a result of the Order, only 10 out of the 18 then existing conventional insurers were awarded licences continue operations in Brunei, of which seven were non-life insurers and three were life insurers, he added.
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