Osman Jair, Managing Director, Insurans Islam TAIB; and Chairman, Brunei Insurance and Takaful Association (BITA): Interview

Interview: Osman Jair

How have standardisation efforts affected the industry, including for takaful (Islamic insurance)?

OSMAN JAIR: One of the primary objectives is to implement equal high-level standards across the ASEAN countries, taking as examples the most modern and sophisticated markets such as Singapore and Malaysia. BITA and the Monetary Authority of Brunei Darussalam (Autoriti Monetari Brunei Darussalam, AMBD) are working together not only to raise standards but also to bring deeper standardisation at local and regional levels. BITA is a member of the ASEAN Insurance Council and works with the ASEAN secretariat to ensure standardisation is happening across member countries. In terms of accounting standards that we have to follow, namely the International Financial Reporting Standard (IFRS) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), it has been challenging, especially for the takaful operators. In compliance with the Brunei Takaful Order 2008, our Takaful operators in Insurans Islam TAIB will harmonise both AAOIFI and IFRS together to give the highest-level accounting standards. We have had to deal with various international compliance rules, which represents in effect a lot of disclosure for the industry. For instance, we have to comply with the new Foreign Account Tax Compliance Act (FATCA) from the US. It has to be introduced into our regulatory framework and fund managers need to work according to FATCA standards. Additionally, AMBD has set up the national risk assessment standard. In 2014 we established the General Agency Handbook in order to have guidelines for general insurance agents. The next step is to have a guideline for life insurance and takaful agents ready for 2016.

To what extent have general insurance guidelines reshaped the market structure?

JAIR: Prior to implementing the insurance guidelines, general agents only had to pass the pre-contract examination for insurance agents. Today, agents have to take and pass the qualifying examination for insurance or takaful agents, which is a licensing programme organised by the Centre For Islamic Banking, Finance and Management with the support and guidance of AMBD and BITA. This exam is based on Brunei Darussalam’s syllabus, and the questions are tailored for the country. Upon passing this exam, each agent needs to register with the registrar of companies, and then with BITA. The licence itself is then delivered by AMBD and must be renewed every year.

At first, it was a bit of a challenge for general insurance agents, as they had to undertake the new step, which they never dealt with before. In the past, there were around 400 of them, but thanks to the guidelines this figure has declined to a little bit more than 200. Standards have increased, and only qualified agents can operate in the market.

We are aiming to develop courses that will enhance agents’ skills. Together with AMBD, a technical review committee will be formed to further raise the standards and the syllabus.

What are your expectations for the growth of gross written premiums in the short term?

JAIR: The gross written premiums were valued at BN$493m ($350.8m). While we may except a slight increase in premiums collected for 2015, the growth of the market for 2016 is going to be on a downward trend, simply because there is less economic activity to be observed. Most industry players perceive the year 2016 as a “compliance year”.

Everyone is going to be working on complying with the local and international standards cited above. As the regulator, AMBD has to protect the policyholders and participants; it has to make sure that companies behave well. To assess whether insurance companies can pay future claims, one has to look closely at the solvency margin of each firm.