Bank Negara Malaysia had recently introduced Islamic Finance Services Act which replaces all relevant Acts for Islamic Financial Institutions. Under Part III Div 2 Sec 16 of IFSA, it prohibits any takaful operator to transact both family and general business under one entity. Consequently, existing 8 composite TOs are given 5 years to restructure their organisation and capital to comply with the provision. Frankly speaking, it is rather complicated matter and challenges are different from one to the other. My personal opinion is that few shareholders will give up their general licenses and retain solely their family business only. Reason is simply because of family takaful generally contributes higher profit margin as compared to general takaful and furthermore it is a long term in nature thus kind of guarantees future profit for shareholders. Comparatively, general takaful is usually short term contract with normal one year tenure. There are few composite TOs are not developing their general business significant enough as their resources are fully utilized for family business. We would expect to see some M&A to happen in the next 2-3 years arising from the above argument.
For those which decide to retain both family and general business, they will need to setup a separate entity for family and general with definitely separate resources. However, BNM may allow some shared services for a certain period of time after which there might be a requirement to split 100%. The challenge now is to look for the right talent to lead and manage those 2 separate entities from CEO, senior mgmt team, heads of divisions etc. Moreover, BNM had also required general takaful to engage a qualified Actuary to supervise their fund accordingly as required under family. Again, whether the industry is ready to supply sufficient actuaries qualified in property and casualty which is totally different than the currently widespread actuaries in Malaysia. As an interim measures, partly qualified Actuaries who had attained Associateship should be given certain authorities to certify.
I believe setting up a holding company to manage both subsidiaries in family and general will create more problem as the holding company must employ the right talents which is scarce and the new IFSA requires such holding company to be registered as a financial institution within 12 months (if ownership > 50%). As a result, the current shareholding structure will remain as long as possible.
If you are interested to learn further on this matter, you can study the takaful or insurance industry in Indonesia where their law does not allow any composite business. In particular, you can study Syarikat Takaful Indonesia which is merely a holding company with 2 subsidiaries ie. PT Asuransi Takaful Keluarga (family) and PT Asuransi Takaful Umum (general).
professional retakaful operator, shall not carry on both family takaful
business and general takaful business.
(2) Notwithstanding subsection (1), a licensed family takaful
operator may carry on the general takaful business relating to
medical by reason of disease or sickness or medical expenses subject
to such requirements and conditions as may be specified by the
Bank.
(3) Any licensed takaful operator who contravenes subsection (1)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding eight years or to a fine not
exceeding twenty-five million ringgit or to both."
