Indonesia aims for insurance, takaful legislation in 2014

Indonesia plans a new law that will require the spin-off of the sharia-compliant units of insurance companies. The move could reshape Indonesia's takaful market by spurring mergers as firms try to meet capital requirements for their full-fledged Islamic units. A draft law is now with parliament but won't be enacted this year as previously anticipated. It covers all areas - licensing, market conduct, corporate governance, consumer protection - for both takaful and non-takaful firms. The law is expected to give three years for insurers to comply with requirements to spin-off their Islamic units. Minimum capital requirements for full-fledged takaful firms would be set at 50 billion rupiah , compared with 100 billion rupiah for conventional insurers. Passing Indonesia's insurance law would close the last market that allows takaful windows to operate, helping develop the country's nascent Islamic finance market.