Separación de Poderes

Takaful and conventional insurance policies work on the same basic system, which is the pooling of funds to manage the risk of a group of people. Having said that, there are major differences in the workings of the two systems, stemming from the fact that Takaful adheres strictly to the Islamic principles it was developed upon.

The strong growth of Islamic capital markets internationally has seen the corresponding development of regulatory frameworks incorporating Shariah law. Malaysia has been at the forefront of Islamic capital market regulatory development, merging corporate law drawn from its common-law heritage with Shariah principles.215

The next chapter presents the historical background of Insurance in South Africa and analyses the development of the Insurance law system. In addition, the chapter analyses the role of insurable interest in terms of English law, Dutch law, Roman Dutch law as well as South African law.

The South African collective investment schemes which are fairly new in the market utilise Islamic financial products. These financial products include

214 _{Marimuthu M Islamic Banking Selection Criteria and Implications (2010) Volume 5 Issue 4}

68 Mudaraba, Murabaha, and diminishing Musharaka. Diminishing Musharaka, Mudaraba, and Murabaha became the operative transactional instruments for Islamic financial institutions in South Africa. For example, Absa Bank offers various financial products including Islamic Value Bundle, Islamic Cheque Account, Islamic Vehicle and Asset Finance, Takaful Motor and Household and Business Insurance, Islamic International Banking, Islamic Savings Islamic Term Deposit, and Islamic Youth Account. The next chapter offers a descriptive analogy of the conventional products offered in South Africa.

69

CHAPTER FOUR: DEFINITIONS AND KEY ASPECTS OF THE SOUTH AFRICAN LAW OF INSURANCE AND FINANCE

4.1 INTRODUCTION

The Islamic legal regime is not catered for by South African law. The available framework which may be applicable to this type of insurance is presumed to be the same law which applied on conventional insurance. This means that the precepts of the Long-term Insurance Act 52 of 1998, the Short-term Insurance Act 58 of 1998, the Banks Act 94 of 1990, the Mutual Banks Act 124 of 1990, South African Reserve Bank Act 90 of 1989, and the Co- operative Banks 40 of 2007 are the guiding principles of Takaful. The next chapter analyses the legal framework governing South African law and includes a descriptive analysis of the above mentioned pieces of legislation. The country’s legal system is based on Roman-Dutch law, influenced by English law, and is subject to the Constitution, as the supreme law. South African insurance law has its roots in Europe’s commercial law and due to its history, both Roman-Dutch and English law are considered to be the primary common law sources of South African Insurance law.216_{Various Acts of}

Parliament apply specifically to the insurance industry. The most important of these is the Long-term Insurance Act, No. 52 of 1998 (LTI Act), and the Short- term Insurance Act, No. 53 of 1998 (STI Act). The description of the Acts as well as the products will be discussed in this chapter.

This chapter presents the historical background of the South African legal system. This chapter elaborates on the historical reasons behind insurance law in South Africa. Insurance as we know it has had an interesting development in South Africa and many legal systems influenced the insurance contract as we know it.217 _{Therefore the influence of English Law,}

216 _{Davies E Foundations of Law}

https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/courseoutlines2016/Fou ndations%20of%20Law%20Course%20Outline%202016.pdf (accessed 24 January 2019)

217 _{The History of South African Law https://showme.co.za/facts-about-south-africa/history-of-} south-africa/the-history-of-south-africa (accessed 24 January 2019)

70 Roman Dutch law and Dutch law on the South African regime are also discussed. This chapter examines how South African Insurance law stems from wagers and bets which are in contravention to Islamic law principles.The chapter commences with an examination of the origins of the concept of insurable interest, and noted that its genesis is not in common law but rather in English statute, commencing with the Marine Insurance Act of 1745 and in subsequent English legislation pertaining to insurance and gaming. The commonly understood requirement that an insured must have an insurable interest in the subject matter of the insurance for a contract of insurance to be valid was recently placed under the judicial spotlight in the matter of Lorcom Thirteen (Pty) Ltd v Zurich Insurance Company of South Africa Limited.218 _The judgment raises some pertinent issues for underwriters.219 _{The reason for the} discussion of case law in this chapter is to prove that a contract of Insurance is a form of betting, wagers or gambling therefore against Islamic law principles.

The role of insurance in the South African context and the manner in which insurance contracts come into existence will be discussed. Furthermore the long-term insurance and short-term insurance detailed principles pertaining to each will be explained. We will examine English law, Roman Dutch law, and South African law on Insurable law in this chapter.

In addition, it is incomprehensible that any attorney or compliance officer who practices commercial law should not have a reasonable knowledge of insurance law. Recent developments such as the introduction of the Financial Advisory and Intermediary Services Act 37 of 2002, The Financial Intelligence Centre Act, Protection of the Constitutional Democracy against Terrorism and Related Activities Act 33 of 2004 created an intricate framework for Insurance and this has led to rigidity in the industry. In order to identify the challenges

218 _{2013 (5) SA 42 (WCC)}

219 _{Bowley A ‘Insurable interest, the indemnity principle and an unenforceable gamble} ‘http://www.polity.org.za/article/insurable-interest-the-indemnity-principle-and-an-

71 faced by consumers, it is important to consider, compliance governance and risk management in South Africa. This will be examined in this chapter.