Fola Daniel, Commissioner for Insurance
AM Best Co, a news credit ratings and financial data services provider for the insurance industry, has observed that the level of policyholders’ protection with regard to takaful insurance differs from one country to another.
It said the variation, which stems from the fact that while the takaful industry has been developing rapidly in the countries of the Gulf Cooperation Council (GCC), the development of takaful regulation varies significantly from one country to another and has created opportunities for takaful operators to pursue regulatory arbitrage.
The above, according to the firm, is the outcome of its special report on the provisions for takaful regulation in the GCC. The report identified the implications for policyholders’ protection and its impact on A.M. Best ratings.
There is significant debate as to the right level of regulation. Market participants in some of the more demanding regimes consider the regulations to be stifling their companies, the firm noted. A.M. Best believes the solution is not less regulation but more consistent application of regulation throughout the region, which has the potential to provide sufficient policyholder protection, and thus safeguard the long-term viability of the Takaful industry.