الهيئة العامة للرقابة المالية

• For the first time, the new rules create a hybrid Wakala-Mudaraba model to manage Takaful accounts and investments.

Islam Azzam, FRA Chairman:

•  FRA aims to expand the sector and enhance corporate performance through a new regulatory framework designed to accelerate growth.

FRA Board of Directors chaired by Dr. Islam Azzam, has issued Resolution No. 70 of 2026, establishing a landmark regulatory framework for Takaful insurance companies in Egypt. This directive aligns the sector with the Unified Insurance Law No. 155 of 2024, aiming to modernize operational efficiency and unlock new avenues for market expansion.

The new Resolution applies to all licensed Takaful entities, which are defined by their commitment to manage insurance operations and invest policyholders’ funds in exchange for a fee or a share of returns or both, while ensuring the financial solvency of policyholders’ fund.

Dr. Islam Azzam, FRA Chairman, stated that the said Resolution introduces an advanced model for managing Takaful and investment accounts, integrating Wakala and Mudarabah systems. This provides companies with greater operational flexibility while ensuring a fair balance between the interests of shareholders and policyholders.

He further noted that the Resolution outlines three distinct operational frameworks for the Takaful account (Policyholders’ Fund): Wakala, Mudarabah and a Hybrid model. These frameworks authorize companies to manage insurance operations as agents for a defined fee, while overseeing investment portfolios as managers entitled to a share of returns, all within strict rules.

He emphasized that the issuance of these rules is part of the Authority’s strategy to revitalize Takaful insurance market and enhance its ability to attract new segments of investors and participants. He further noted that the new model strikes a balance between development requirements and Sharia compliance, thereby supporting the long-term sustainability of the market.

The Resolution establishes a comprehensive framework for Takaful insurance policies, clarifying the nature of the contractual relationship, mechanisms for distributing insurance surpluses, and Sharia-compliant investment policies. Also, it regulates cases of fund deficits and defines specific protocols for settlement.

Additionally, the Resolution includes controls for the formation of reserves to bolster the financial stability of both the companies and the industry. These include Deficit Coverage Reserves and Claims Fluctuation Reserves, aimed at enhancing the stability of the Policyholders’ Fund against unforeseen contingencies, alongside regulating mechanisms for insurance surplus distribution.

Insurance surpluses are to be distributed by the end of the fiscal year through several approved methods: proportional distribution based on contributions for all participants, limiting distribution to those without claims during the year, or distributing shares based on contributions net of paid claims. The Resolution further provides a specific mathematical formula to ensure equitable distribution among participants and strictly prohibits the distribution of any insurance surplus to shareholders.

The framework outlines clear methods for covering deficits within the Policyholders’ Fund. These include utilizing established reserves, obtaining interest-free loan from shareholders, or charging the deficit to participants. Notably, companies bear full liability for any deficit resulting from negligence.

Furthermore, it obligates companies to form an independent Sharia Supervisory Committee consisting of at least three members. It sets rigorous standards to ensure their independence and defines their mandate to include reviewing contracts, issuing binding Sharia rulings, and monitoring the company’s total compliance with Sharia principles.

In a move to enhance transparency, the Resolution requires the appointment of a Sharia Auditor and enforces the total separation of shareholder and policyholder accounts. Companies must disclose their accounting policies, the basis for surplus distribution or deficit treatment, and any Sharia non-compliance. It also regulates the handling and disposal of non-Sharia-compliant earnings and permits the establishment of Zakat Funds.

The Resolution requires Takaful companies to conduct their reinsurance business with Takaful Reinsurance firms. However, if sufficient capacity or specific coverage is unavailable in the Takaful market, companies may resort to conventional reinsurers after obtaining approval from the Authority.

This new Resolution supersedes the previous regulatory framework issued under Board Resolution No. 23 of 2019. The provisions will come into effect the day following its publication in the Official Gazette (Al-Waqa’i’ Al-Misriyya).