Kampala — The Insurance Regulatory Authority (IRA) is now awaiting Parliament to pass the Bill that proposes to amend the Insurance Act (2011), in order to cater for Islamic Insurance.
Early this year, President Museveni assented to the amendment of the Financial Institutions Act (2014) that caters for Islamic Banking.
The Islamic banking products will now also require some sort of insurance cover that is compliant with Shari'ah law.
"We're in the process of overhauling the Insurance Act so that Islamic Insurance (Takaful) can be operationalised.
Currently, it is at the committee stage in parliament and we believe that the Bill will be important for the sector in opening up opportunities within the Shari'ah compliant insurance avenue," said Mr Sande Protazio, the assistant director research at the IRA recently.
Commonly known as Takaful, Islamic insurance is where both the policyholder and insurance company pool money together to guarantee against loss or damage. In Uganda, it is not yet possible for companies to do this because there is no law allowing such to happen.
Because conventional insurance operates interest bearing packages, it is considered to be non-complaint with Shari'ah law.
"There are certain elements multinational insurance companies operate that are not compliant with Shari'ah law. These companies often operate what is called Gharar - uncertainty or speculation - and Maysir - gambling. All these are not operated under Islamic insurance," explains Mr Mohammed Zubair Mughal, the managing director, Centre for Islamic Banking and Economics (AlHuda).
He further adds that conventional insurance also has interest bearing products and transfers risk, which is not allowed in Islam.
"These contradictions require a clear definition within the law to cater for the interests of those interested in taking Islamic insurance and conventional insurance," he adds.
In the proposed amendments to the Insurance Act, insurance companies intending to offer Islamic insurance have to separate their assets, liabilities and expenses among others.
Operational. In East Africa, Kenya has been operating Islamic Insurance since 2011.