Islamic finance in Europe (73)

Continuation

However, the possible adoption of the Solvency II Directive (essentially a capital adequacy regime for insurance firms) by:

-      the European Parliament

-      and the Council of the European Union

could also challenge the ability of Islamic insurers to meet:

-      solvency

-      and risk management

guidelines.

The regulation’s concern about “concentration risks” may require Islamic insurance providers to have a portfolio that is sufficiently diversified across and within different asset classes.

This would be difficult to achieve, given the scarcity of Shari’ah-compliant solutions in specific jurisdictions.

Nonetheless, this scarcity should subside as Islamic finance gains momentum in Europe.

From the research paper of European Central Bank

(Authors: F.Mauro, P.Caristi, S.Couderc, A.D.Maria, L.Ho, B.K.Grewal, S.Masciantonio, S. Ongena and S.Zaher)