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Inside a UAE takaful company, Shariah compliance is run by a dedicated Central Bank standard, and it sits under the Higher Shariah Authority.
Inside a UAE takaful company, Shariah compliance is run by a dedicated Central Bank standard, and it sits under the Higher Shariah Authority. The Standard on Shariah Governance for Takaful Insurance Companies (In-Force, effective 8 September 2023) requires every takaful company to build a Shariah governance framework on the three-lines-of-defence model, with an Internal Shariah Supervision Committee at its centre whose fatwas bind the company, subject always to the Authority above (Articles 6.1, 8.15 and 8.36). Compliance means the same two things it means across the sector: conformity with the Authority’s resolutions, and with the committee’s own resolutions so far as they do not contradict the Authority’s (Article 4(e)).
What makes this a distinct regime, rather than the banking rules applied to insurers, is that the committee’s remit is written for takaful. The committee must review and approve the policy that governs the takaful accounts, the distribution of surplus, and the coverage of deficit; it must approve the retakaful arrangements; and it holds a narrow, exceptional power to permit ceding to conventional reinsurance and to allow that revenue into the participants’ account (Article 8.18). This is the governance machinery that enforces the fund economics set out in the companion article on takaful funds and surplus.
One currency point frames the rest. This standard is a Central-Bank-era instrument: it cancelled and superseded the old Insurance Authority decision on the Shariah controller’s role (Article 13), so on the Shariah-governance layer the Central Bank has reissued under its own regime. But the standard was itself made under the 2007 insurance law and the 2018 Central Bank law, both since repealed (Article 1.2), and it remains in force only through the transition provision that preserves prior regulations until replaced (Federal Decree-Law No. 6 of 2025, Article 183). The governance layer is current; its stated foundation is not.
The skeleton is the sector-wide one. Compliance is defined in two tiers, the Authority’s resolutions and the committee’s resolutions consistent with them (Article 4(e)), the identical definition used in the banking Shariah Governance Standard. The framework must run on three lines of defence, the business line, an Internal Shariah Control Division, and an Internal Shariah Audit Division (Articles 6.1 and 9.1). The Board is ultimately responsible for the company’s Shariah compliance (Article 6.1), and the committee’s annual Shariah report must go to the Authority for review and approval before it reaches the general assembly (Article 6.6). A reader who knows the banking standard will recognise all of this.
The difference is in what the skeleton carries. The banking standard governs an institution whose Shariah question is its contracts and its income; the takaful standard governs an institution whose Shariah question is also the architecture of two funds, the flow between them, and the treatment of surplus and deficit. That is why the committee’s duties, examined in Section IV, extend into the fund mechanics in a way the banking standard has no occasion to. The governance is the same shape; the subject matter is takaful-specific, and the standard is built around that difference.
The committee is appointed through the Authority and constrained in its composition. The Board nominates members, whose appointment must go to the Authority for approval before it is put to the general assembly, and the assembly appoints only after the Authority’s and the Central Bank’s approval (Articles 8.1 and 8.2). The committee must have at least three members meeting the fit-and-proper criteria (Article 8.3), at least a third of them Emirati (Article 8.4), subject to membership caps of three takaful committees inside the UAE and fifteen in total, with only one member permitted to exceed the total (Article 8.5). A member may not serve the same company for more than twelve consecutive years (Article 8.10), and the fit-and-proper conditions require, among other things, a Shariah qualification or ten years of fatwa experience and a working comprehension of insurance and takaful (Article 8.11).
Independence is prescribed rather than assumed. A committee member may not be an employee of the company or its affiliates, may not provide it services outside the committee’s scope, and may not, with first or second-degree relatives, hold five percent or more of the company (Article 8.29). And the hierarchy is closed at the top: where a Shariah disagreement arises within the committee, or between the committee and the Board, it is referred to the Authority, whose opinion is final (Article 8.36). The committee governs the company; the Authority governs the committee.
The heart of this standard, and the reason it is a separate instrument, is the list of matters the committee must decide (Article 8.18). Several are the ordinary Shariah-supervision items: the operating model and its contracts, the products and marketing, the financial statements, the annual report. But four are specific to the takaful structure and connect this article directly to the fund economics.
First, the committee must review and approve the policy and procedures that govern the takaful accounts, including the segregation of accounts and the flow of resources between them, the distribution of surplus, and the coverage of deficit (Article 8.18(b)). The surplus and the Qard Hasan mechanics examined in the companion article are, in governance terms, matters the committee must approve, not merely observe. Second, the committee must approve the investment policy and the Shariah screening for both the shareholders’ accounts and the participants’ accounts (Article 8.18(d)), so the screen runs across both funds. Third, it must approve the retakaful agreements the company concludes (Article 8.18(e)). Fourth, it reviews the Zakat calculation and the charity account before any disposal (Articles 8.18(h) and 8.18(i)). The committee is not an advisory presence over these; its approval is the condition of their Shariah validity.
Beneath the committee the standard requires two independent divisions, kept organisationally apart from the business they oversee (Articles 9.1 and 9.3). The Internal Shariah Control Division is the second line and supports the committee; within it sits a Shariah Compliance Function that may not be outsourced and that carries a task list which, again, reaches into the fund mechanics: it must ensure that the first line maintains the segregation between the participants’ accounts and the shareholders’ accounts, that a documented and approved mechanism exists for distributing surplus to participants, that any deficit in the participants’ account is covered by Shariah-compliant means, and that the company establishes a Zakat fund (Article 10.4, Shariah Compliance Function, items (b) and (c)). The Internal Shariah Audit Division is the third line, reporting to the Board through the Audit Committee and submitting its reports to the committee for resolution (Articles 11.1 and 11.8).
The consequence is that the fund economics are policed continuously, not certified once. The surplus mechanism and the Shariah-compliant deficit coverage are things the compliance function is required to keep verifying, and the audit division is required to test. A takaful structure that is sound on paper but drifts in operation, for instance by blurring the wall between the two funds or by covering a deficit through a non-compliant route, is precisely what this machinery is built to catch. The company may also appoint an approved external Shariah auditor to assess compliance against the Central Bank’s regulations and the Authority’s and committee’s resolutions (Article 12).
One provision rewards the structural reading, because the operative content sits in the exception rather than the rule. The default is that a takaful company’s risk transfer must itself be Shariah-compliant, which points to retakaful. But the standard empowers the committee to set controls for ceding to conventional reinsurance on an exceptional basis, and to permit adding the revenues from that conventional reinsurance to the participants’ account (Article 8.18(f)); a parallel power covers co-insurance with conventional insurers (Article 8.18(g)). The accommodation is real, and it is bounded: it is available on an exceptional basis, it is exercised through committee-set controls rather than at management’s discretion, and the revenue treatment is a permission the committee grants, not an entitlement the company holds.
For a takaful company operating where Shariah-compliant retakaful capacity is thin, this carve-out is the provision that makes the model workable, and it is the one to get right at the outset. The reliance is on a committee-approved control framework for the exceptional cession and for the revenue treatment; a company that cedes to conventional reinsurance without that framework is outside the permission, not inside it. The carve-out is the rule for that company, and it is gated by the committee.
The Shariah-governance layer is the part of the takaful stack where the Central Bank has most clearly reissued under its own regime. This standard cancelled and superseded the Insurance Authority’s 2019 decision on the Shariah controller’s role (Article 13), and the wider suite around it is Central-Bank-era: the standards on the annual Shariah report, on the committee charter and its template (the template issued as an instrument effective 9 February 2024), and on external Shariah audit for takaful companies, each identified on the Central Bank’s rulebook and reserved here for a dedicated reading rather than set out in full. So on governance, unlike on the fund financial regulations discussed in the companion article, the answer to the currency question is that a current Central-Bank instrument governs.
The qualification is the same one that runs through the whole insurance stack. This standard was issued under the 2007 insurance law and the 2018 Central Bank law (Article 1.2), both of which have been repealed, and it complements a 2022 takaful regulation that rests on the same repealed foundation. It remains in force through the transition provision (Federal Decree-Law No. 6 of 2025, Article 183). The instrument is current and is the one to apply; its cited parent laws are not, and a reader tracing its authority must read those citations as pointing to the current federal law that replaced them.
What is settled is the governance architecture. The committee-centred, three-lines-of-defence framework is settled (Articles 6, 9 to 11). The committee’s appointment through the Authority, its composition constraints, and the Authority’s final say on disagreements are settled (Articles 8.1 to 8.5 and 8.36). The takaful-specific remit over the accounts, surplus and deficit, the investment screen across both funds, retakaful, and the conventional-reinsurance carve-out is settled (Article 8.18). And the standard’s status as the current Central-Bank instrument, superseding the 2019 Insurance Authority decision, is settled (Article 13).
What is open is the fit between this standard and the 2025 federal law. The standard was written in 2023, when the takaful fund was a financially independent account within the company; the 2025 law makes the fund a separate legal person (Article 105), and how the committee’s remit over “the takaful accounts” and “deficit coverage” maps onto a separately incorporated fund is not addressed on the face of either instrument. That reconciliation waits on the Central Bank Board controls the law calls for (Article 105(5)). The detailed contents of the annual-report, charter and external-audit standards in the suite are also open pending a dedicated reading of each.
What is moving is, once again, the layer between the 2025 law and the operational detail. The reissuance of the takaful governance suite under the new law, and the Board controls for the separate-legal-personality fund, are the triggers that will re-anchor this article. Until then the settled position holds and is usable: a takaful company’s Shariah compliance is governed by the 2023 standard, run by a committee the Authority approves and can overrule, and reaching into the fund segregation, the surplus and the deficit that the companion article sets out. This analysis rests on the Standard on Shariah Governance for Takaful Insurance Companies and on Federal Decree-Law No. 6 of 2025, each as it stands on the Central Bank’s live rulebook and each in force on the date of this article. Where the position turns on the other standards in the suite, or on the Board controls awaited under Article 105(5), those instruments govern and are read in the pieces that follow.
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