The Securities and Exchange Commission of Pakistan (SECP) has imposed new conditions on life insurers related to financial reporting of their Window Takaful operations.
The SECP has issued circular number 15 of 2019 here on Wednesday. The SECP has further directed all Life insurers undertaking Family Takaful business through window operations to ensure that the financial statements from January 1, 2020 submitted with the SECP are in compliance with the new conditions imposed by the commission. According to the SECP, attention is invited towards Rule 11(l)(b) and 11(l)(c) of the Takaful Rules, 2012. The rule (Further Conditions applicable to Window Takaful Operator) said that in addition to the conditions under Rule 10, a Window Takaful Operator shall report its assets, liabilities, revenues and expenses separately for each segment of its conventional business and Takaful business and shall comply with the provisions of these Rules or such other conditions as may be imposed by the Commission from time to time.
The Commission hereby imposes the following conditions on life insurers related to financial reporting of their Window Takaful operations:
The life insurers authorized to carryon Window Takaful operations shall include the Family Takaful results in their published financial statements as follows:
(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 & 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.
d) The segment disclosures for Family Takaful Operations in accordance with the requirements of IFRS8 - Operating Segments shall be included in the financial statements.
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.
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, the SECP maintained.
Accordingly, all Life insurers undertaking Family Takaful business through window operations are directed to ensure that the financial statements for the periods commencing January 1, 2020 submitted with the SECP under the provisions of applicable laws are in compliance with the conditions placed, the SECP added.