Global:IFSB issues exposure draft on risk management in takaful undertakings

By MEIR team | 11 Oct 2026

The Islamic Financial Services Board (IFSB) has released an exposure draft to revise its standard on risk management in takaful.

The document, titled “Revised Standard on Risk Management for Takaful Undertakings Exposure Draft”, states, “The IFSB issued IFSB-14: "Standard on Risk Management for Takaful (Islamic Insurance) Undertakings" in December 2013. Since then, international standards and best practices for insurance risk management have advanced significantly. The International Association of Insurance Supervisors (IAIS) adopted the revised Insurance Core Principles (ICPs) in 2019 and has issued several supervisory documents to support supervisors on risk management in the insurance sector. The IFSB also issued IFSB-27: "Core Principles for Islamic Finance Regulation [Takaful Segment]" in 2022.

"The revision of IFSB-14 is intended to align the Standard with IFSB-27 and reflect these developments, while complementing the relevant guidance issued by the IAIS.

"This Standard provides guidance to Regulatory and Supervisory Authorities (RSAs) in developing supervisory expectations and risk management requirements that appropriately reflect the nature, scale, and complexity of Takaful operations, while promoting sound and effective risk management practices within the sector.

"The Standard provides additional guidance complementing the Takaful Core Principles (TCPs) with particular attention to TCP 9: “Risk Management and Internal Controls” and TCP 16: “Enterprise Risk Management for Solvency Purposes”.

This Standard applies to all takaful undertakings (TUs) licensed to conduct family takaful, general takaful or composite takaful business. The Standard is also applied to takaful windows and subsidiaries, with such modifications as may be necessary to reflect differences in their operational frameworks. Such modifications should not compromise the segregation of takaful funds or the protection of participants.

Retakaful undertakings are excluded from the scope due to their distinct operational characteristics and risk profiles. Retakaful operations involve larger scale and more complex risk portfolios, often with cross-border elements, requiring sophisticated risk management frameworks that differ from those of primary TUs.

The exposure draft also says, “Effective implementation of this Standard requires supportive legal and regulatory foundations that recognise fund segregation. Supervisors should identify any legal barriers to fund segregation, particularly uncertainty regarding whether segregated funds constitute distinct legal entities with clear ownership and rights. Where legal uncertainty exists regarding the status of segregated funds, supervisors should work with relevant authorities to establish appropriate legal clarity on the ownership of the funds and the rights attaching to them, advocating legislative or regulatory reform where needed.”

The exposure draft covers several areas, namely:

Specific risks and considerations relevant to risk management of takaful undertakings	Fund segregation Fiduciary responsibilities Financial soundness of the fund Level of development of Islamic financial markets ReTakaful capacity Group structure and window operation considerations Participants' expectations Shariah non-compliance risk
Risk management and internal controls	Systems for risk management and internal controls Internal control system Outsourcing of material activities
Risk-based supervision	Risk assessment Supervisory response and intervention Supervisory expertise and resources

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