INSURANCE AND TAKAFUL
1. Are insurance companies in Brunei Darussalam regulated?
Yes, insurance companies are regulated by Financial Institutions Division (FID), Ministry of Finance.
2. Is there a legislation governing insurance companies?
Yes, namely the Insurance Order, 2006 (IO) and Insurance Regulations, 2006 (IR) introduced on 4 March 2006.
3. If yes, what are the licensing requirements?
An insurance company shall carry on life insurance business or general insurance business when:-
a) it has been registered under the Order in respect of that class of business;
b) it maintains a surplus of assets over liabilities of not less that such amount as may be prescribed;
c) it has the deposit by this Order in respect of it; and
d) it is a member of an association of insurers approved by the Authority.
4. How much is the paid up capital for establishing an insurance company?
For insurers incorporated in Brunei Darussalam, under IR:
· an insurer carrying on life business shall maintain a minimum paid up capital of not less that BND8 million - Section 11(1)(a).
· an insurer carrying on general business, an amount not less than BND8 million – Section 11(1)(b).
For an insurer established or incorporated outside Brunei Darussalam who does not have a share capital, shall maintain in Brunei Darussalam, a surplus of assets over liabilities of an amount not less than the requirement for the minimum paid-up share capital of an insurer incorporated in Brunei Darussalam – Section 11(2).
5. Do you control insurance products sold by the insurance company?
Depending on what products are sold.
For instance prior approval is required for investment-linked life insurance products.
However, under Section 18 of the IO, any insurance product of policy must be a product or policy which:-
(a) is approved by the Authority or
(b) is issued by an insurer and registered by the Authority.
6. Do you control insurance premium rate?
At the moment, the industry is following insurance premium rate with neighbouring countries either Malaysia or Singapore.
7. Why is motor insurance expensive?
The criteria for accepting risks pertaining to motor insurance, currently practiced by insurance company, derive from the make, age and cubic capacity of the motor vehicle.
For example, if the car is more than 7 years, loading will be enforced to reflect the age of the car thus “an increase” in premium.
There has been no increase in the basic premium rate for motor vehicle insurance since 1984.
8. What is/are the compulsory insurance in Brunei Darussalam?
Third Party Motor Vehicle Insurance as required under Motor Vehicles (Third Party Risks) Insurance Act and Workmens’ Compensation Insurance.
9. Do you control insurance agents?
Yes, agents are required to be registered with the Authority in accordance with Section 48 of the IO.
10. What are the requirements to be an insurance agent?
The requirements are stipulated under Section 48 and Section 50 of the Insurance Order (IO).
The summary is as follows:-
a) An insurance agent can be either life insurance agent or general insurance agent;
b) The insurance agent shall be registered with the Authority;
c) Acquire minimum qualification;
d) Tenure of registration is for 1 year and is renewable every year;
e) Impose annual licence fees i.e. BND2,000 for a corporate agent and BND300 for individual agent;
f) Directors or other management staff, or any member of his immediate family, or a company carrying on business as an insurance agent are barred from holding any shares in any insurance company;
g) An individual agent who carries on life insurance business shall remit the moneys collected to the insurer within 7 days from the date of receipt; and
h) A corporate insurance agent, who carries on general insurance business, shall remit the moneys to the insurer within 30 days from the date of receipt.
11. If insurance agents default the requirement, what are the sanctions/penalties?
They may be sanctioned under Section 48 (9) of Insurance Order (IO)
“…to a fine not exceeding $10,000, increased by a fine not exceeding BND2,000 for each day on which he is proved to have done so, imprisonment for a term not exceeding 6 months or both.”
Or under Section 50 (3)
“…on conviction to a fine not exceeding BND10,000, imprisonment for a term not exceeding 6 months or both.”
12. Are insurance brokers required to apply for a licence?
Yes in accordance to Sections 53, 54 and 55 of the Insurance Order (IO).
13. Do you have measures in place to prevent an insurance company from defaulting?
As a regulator, we cannot guarantee that an insurance company will not default. However, in the Insurance Order, 2006 (IO), certain measures have been accorded for as follows:-
a) Submission of financial returns - Sections 59, 60, 61 and 62;
b) The Authority has the power to conduct inspections from time to time on the books, accounts and transactions of a registered insurer and institute an investigation into the whole or any part of the insurance business carried on in Brunei Darussalam by the insurer - Section 64;
c) The Authority has the power to issue directions to the insurers if it is satisfied the affairs of any insurer are being conducted in a manner likely to be detrimental to the public interest or the interests of the policy owners or prejudicial to the interests of the insurer - Section 65; and
d) Under Section 21, every registered insurer shall maintain:-
· a fund margin of solvency in respect of each of the insurance funds established by the insurer [in the case of an insurance fund established in respect of general business, not less than 20 per cent of net premium income of the fund in the last accounting period and in the case of an insurance fund established in respect of life business, not less than 20 per cent of net premium income of the fund in the last accounting period] and
· a margin of solvency to be maintain by an insurer at all times is prescribed as 20 per cent of assets over liabilities.
14. Is there any guarantee in the form of fund, provided for policyholders in case the insurance company defaults?
Under Section 69 of the IO,
“The Minister shall establish and maintain in accordance with this section and regulations, a Policy Owners’ Protection Fund for the purposes of indemnifying in whole or in part, or otherwise assisting or protecting, policy owners and others who have been or may be prejudiced in consequence of the inability of registered insurers to meet their liabilities under life policies and compulsory insurance policies issued by them”;
The deposits may be in the form of cash or in Government Securities or such other securities as may be prescribed.
15. Does FID receive and handle any policyholders/public complaints pertaining to insurance products/insurance companies?
Yes.
16. What is takaful?
Takaful is the Islamic counterpart of conventional insurance, and exists in both life (family) and general forms.
It is based on the concept of mutual solidarity and the functions of a takaful undertaking should conform fully to Islamic Law (Shari’a).
17. What are the differences between an insurance company and a takaful operator?
Some of the key differences are as follows:-
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Conventional Insurance |
Takaful |
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Contract
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A policy in the form of an exchange contract (sale and purchase) between the insured (policyholder) and the insurance company. |
Takaful is a combination of tabarru’ contract (donation) and agency and/or profit sharing contract between the individual insured and the pool of insured as represented by the Takaful.
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Responsibility of policyholders/
participants
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Policyholders pay premium to the insurer. |
· Participants make contributions to the scheme, any underwriting surplus belongs to the policyholders, who are also liable for and deficit.
· Practices regarding disposition of annual underwriting surpluses or deficits vary, in some takaful, operator manages underwriting under a Mudaraba contract and shares in underwriting surplus as a Mudarib fee.
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Investment of Fund
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There are no restrictions apart from those imposed for prudential reasons. |
Assets of takaful fund are invested in Shari’a-compliant instruments.
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