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2016, which is relevant for the TOs in Malaysia because all the TOs must be established as public
companies under the Companies Act 2016.
The TOs are required to hold separate capital requirements for the General and Family Takaful
businesses. Before IFSA 2013, the Takaful business was required to have a minimum capital
requirement of MYR 100 million for both the General and Family Takaful business combined
under the composite structure. However, from July 2018 onwards, a separate capital
requirement for each entity (Family and General Takaful) became mandatory, where a
composite company would need MYR 200 million capital to support its General and Family
Takaful businesses.
TOs need to have good corporate governance under IFSA 2013. They need to appoint an actuary
to the Board of Directors. This implied a potential increase of responsibility for the Board of
Directors. The new requirement under IFSA 2013 forced the TOs to increase the number of
independent directors to address the additional responsibility so that the Board has a higher
proportion of technical board members such as accountants, actuaries, and so forth. This new
requirement for TOs to set up a Financial Holding company also affect subsidiary TOs in
Malaysia; which is subjected to minimum capital requirements. The reason behind the new
requirement is to put an independent status in terms of financial liability. Further advancement
was made in terms of the effectuation of the Basel III reformpackages in order to improve Bank's
regulatory and supervisory activity. The reform concentrates on enhancing risk management
practices in the banking and insurance sectors, especially the risk that arises from the hasty
technological development.
The Islamic Financial Services Board (IFSB) and the Malaysian Takaful Association (MTA) are
the private regulatory authorities that issue guidelines, best practices, and regulations for the
Takaful industry in Malaysia. The IFSB, as an international standard-setting organization,
advocates and improves the robustness and stability of the IFIs. It is situated in Kuala Lumpur,
Malaysia and officially commenced its operations on March 10, 2003. The MTA founded in
October 1982 is dedicated to promoting the interests of its members and supervise self-
regulation within the Takaful industry. Accordingly, the Inter-Takaful Operator Agreement
(ITA) was officially signed on 22nd May 2008 among all TOs in Malaysia. The ITA provides a
common standard among all operators to regulate and control matters relating to pre-contract
examination for agents, agency registration system and code of ethics in streamlining markets
practices among TOs.
Meanwhile BNM is the main regulatory authority with statutory powers provided by the Central
Bank of Malaysia Act 2009. BNM started operation on 26th January 1959 according to the
Central Bank of Malaysia Act 1958, which was repealed and later replaced by the Central Bank
of Malaysia Act 2009. The BNM as the regulator for Islamic finance in Malaysia has a statutory
duty to promote financial stability and Shari'ah compliance for the Takaful industry in the
country. BNM also ensures the safety and soundness of TOs in Malaysia and protects the rights