ISLAMABAD: Securities and Exchange Commission (SECP) has directed life insurers to provide details of their Family Takaful operations.
The SECP issued Circular No. 15 dated November 18, 2019 and amended rules for financial reporting of family window Takaful operations by life insurers.
The regulator amended the rules and directed to insurance companies having window Takaful operations to:
— report its assets, liabilities, revenues and expenses separately for each segment of its conventional business and Takaful business;
— to comply with the provisions of these rules or such other conditions as may be imposed by the Commission from time to time.
The SECP under Takaful Rules 2012 also imposed following conditions on life insurers related to financial reporting of their window Takaful operations:
1. Life insurers authorized to carry on window takaful operations shall include the Family Takaful results in their published financial statements as follow:
a. The assets and liabilities of the window family takaful operations shall be consolidated with the assets and liabilities of the conventional operations in the statement of financial position of the life insurer.
b. The incomes and expenses of the window family takaful operations shall be consolidated with the incomes and expenses of the conventional operations in the profit and loss account of the life insurer.
c. Supporting notes where considered necessary for understanding of the users of financial statements shall be included as part of the notes to the financial statements; and
d. The segment disclosure for Family Takaful Operations in accordance with the requirements of IFRS 8- Operating Segments shall be included in the financial statements.
The SECP further directed that in the financial statements the retained earnings of the Participant Takaful Fund (PTF) shall be classified as insurance liability and included in the total liabilities of the Window Family Takaful Operations. Balance of the Operator Sub-Funds under the Window Family Takaful operations, shall be classified as part of shareholders’ equity of the life insurer presented separately into (i) retained earnings attributable to shareholders – ledger account D; and (ii) other components.
The regulator further directed that life insurers shall separately prepare financial statements for Family Takaful operations as if these are carried out by a standalone Takaful Operator and shall be annexed with the insurer’s annual/interim report (as applicable). Supporting notes where considered necessary for understanding of the users of separate financial statements shall be included as part of the notes to the separate financial statements.
“Accordingly, all life insurers undertaking Family Takaful business through window operations are directed to ensure that the financial statements for the periods commencing January 01, 2020 with the SECP under the provisions of applicable laws are in compliance with the conditions placed above.”
