The Insurance Commission ("IC") recently issued the first takaful operator’s licenses to Pru Life Insurance Corporation of U.K. ("Pru Life") and Etiqa Life and General Assurance Philippines, Inc. ("Etiqa"), respectively.

The authorities granted Pru Life and Etiqa the right to transact in Takaful, the first under Circular Letter No. 2024-13 on the Consolidated Guidelines for Takaful Window Operation issued by the IC on 28 May 2024.

Takaful is a type of Islamic insurance based on Sharia law wherein members contribute money into a pool system to guarantee each other against loss or damage. However, instead of paying premiums, parties or policyholders in a takaful arrangement agree to make contributions to a pool or mutual fund from which claims are paid. A takaful contract specifies the risks covered and the length of coverage, like an insurance contract.

Takaful funds are managed and administered by a takaful operator that charges fees for sales, marketing, underwriting, and claims management.

"The IC believes that the issuance of these takaful operator’s licenses constitutes a trailblazing step towards financial inclusivity. While Takaful is often associated with Islamic finance, it does not mean that only our Muslim brothers and sisters can avail of it. With these takaful operators’ licenses issued, all those who want to participate in the system, regardless of faith, can be assured that the operations of these companies are prudent and compliant not only with Sharia law but also with international standards," said Insurance Commissioner Reynaldo A. Regalado.

"The IC is also set to introduce microtakaful, akin to microinsurance. The introduction of microtakaful will further promote financial inclusivity, as the public will have a more affordable, Sharia-compliant option for financial coverage if regular takaful products are inaccessible to them," he added.