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  • Bahrain Insurance Law 1987

    • Legislative Decree No. 17 of 1987 With Respect to Insurance Companies and Organisations

      WE, lsa Bin Sulman Al Khalifa, Amir of the State of Bahrain,
      having perused the Constitution,
      and Legislative Decree No. 23 of 1975 with respect to Commercial Agencies
      and their Organisation as amended by Legislative Decree No.10 of 1985,
      and Legislative Decree No. 28 of 1975 with respect to the Promulgation of
      the Commercial Companies Law and laws in amendment thereof,
      and Legislative Decree No. 11 of 1982 with respect to the Establishment of
      the Vehicle Insurance Fund,
      and upon the submission of the Minister for Commerce and Agriculture,
      and with the consent of the Council of Ministers,
      DO HEREBY ENACT THE FOLLOWING LAW.

    • Chapter One — General Provisions

      • Article 1

        Insurance companies and organisations which are subject to the provisions of this law shall be defined as the following:

        1. Bahrain Insurance & Reinsurance companies carrying on business in Bahrain.
        2. The Vehicle Insurance Fund incorporated as per Legislative Decree No. 11 of 1982.
        3. Branches of foreign insurance companies existing in Bahrain but having their registered principal offices outside Bahrain.
        4. Any other insurance organisations existing in Bahrain whether taking the form of insurance groups, co-operative or mutual societies or such other organisation.
        5. Exempt joint stock insurance companies and exempt joint stock reinsurance companies. However, the Minister for Commerce and Agriculture may by an order resolve to exempt such companies from certain provisions of this Law.
        6. Representative offices of foreign insurance companies and organisations the principal offices of which are abroad and are specifically dealt with in Article 3 (3) of this law.

      • Article 2

        The Ministry of Commerce and Agriculture shall be vested with the authority to maintain supervision and control over the insurance companies and organisations referred to in the preceding Article and engaged in the insurance business in pursuance of the provisions of this Law.

      • Article 3

        With effect from the date of enforcing this Law, insurance operations provided for in Article 4 of this law may not be carried on except by firms having the form of a Bahraini joint stock company.

        The provisions of this Article shall not be applicable to companies and organisations engaged in insurance activities and existing in Bahrain on the effective date of this Law.

        However, the Minister for Commerce and Agriculture may by a resolution authorise foreign insurance companies and organisations to open representative offices in Bahrain subject to the terms and conditions set forth in the said resolution.

      • Article 4

        For the purpose of enforcing the provisions of this Law, insurance operations shall be divided into the following classes:

        1. Life insurance.
        2. Savings and fund accumulation insurance.
        3. Fire insurance and the customary types of insurance normally attached thereto.
        4. Insurance against the hazards of land, river, sea and air transport including insurance covers for ship hulls, aircraft, their engines and supplies.
        5. Insurance against accidents and liabilities including insurance against damages arising from all accidents including motor accidents, industrial accidents, personal accidents, accidents arising from breach of trust and all damages arising from civil liability.
        6. Motor insurance.
        7. Reinsurance operations.
        8. Other insurances.

      • Article 5

        There shall be maintained at the Ministry of Commerce and Agriculture a Register of Insurance Companies and Organisations in which shall be recorded the particulars defined in an order to be issued by the Minister for Commerce and Agriculture.

        The insurance companies and organisations which are subject to the provisions of this Law shall give notice to the Ministry of Commerce and Agriculture of every change of alteration occurring to the said particulars. Such alterations and particulars shall not come into effect except after the approval thereof by the Ministry.

        In addition, insurance companies and organisations which are subject to the provisions of this Law shall prepare insurance documents in the Arabic language which may be accompanied by a translation into another language, unless the two parties agree to the contrary.

      • Article 6

        No direct insurance transactions shall be entered into except with the companies and organisations subject to the provisions of this Law.

        However, the Minister for Commerce and Agriculture may subject to the rules laid down by an order to be issued by him and by a special permission in each individual case authorise that such insurance transaction be effected with other than these companies and organisations.

      • Article 7

        No insurance company or organisation operating in Bahrain shall carry on business in any of the insurance branches set forth in Article 4 save after obtaining a licence for this purpose from the Minister for Commerce and Agriculture.

        Subject to the provisions contained in this Law, the Minister for Commerce and Agriculture may by an order to be issued in this respect lay down general rules comprising the conditions for engaging in the business of any branch of insurance or issue a licence in every individual case.

        Nevertheless, existing insurance companies and organisations in Bahrain on the effective date of this Law shall continue to carry on their business for a maximum period of two years commencing from the effective date thereof. During this period, they shall modify their business affairs in compliance with the provisions of this Law and shall file an application for a licence with the Minister for Commerce and Agriculture, otherwise they shall be deemed to have been wound upon accordance with the Law or their licence for the branch of insurance rejected by the Minister shall be revoked.

      • Article 8

        Any insurance company or organisation for which the Minister for Commerce and Agriculture has refused to grant a licence for engaging in any branch of the insurance branches provided for in Article 4 of this Law, may file an appeal with the Minister against such refusal within a time limit of 60 days from the date of notifying it of such refusal by a registered letter. Further, an insurance company may in the event of dismissing its appeal expressly or implicitly by not replying thereto within sixty days from the date of filing it refer the matter to the High Civil Court seeking the revocation of the refusal decision within a period of sixty days commencing from the date of receiving an express notification to this effect or from the date of expiry of the sixty days without receiving a reply to the appeal.

        An application for revocation shall be filed with the court by the usual methods set forth in the Civil and Commercial Procedures Act.

        In case of filing an appeal and bringing legal action before the Court, the insurance company or organisation concerned shall, in case it exists in Bahrain on the effective date of this Law, continue to carry on business pending the final resolution of the appeal or legal action.

      • Article 9

        Transfer of policies issued by insurance companies and organisations together with the obligations arising therefrom shall take place with the consent of the Minister for Commerce and Agriculture, provided that in the case of long-term business particularly life insurance business they shall be accompanied by a detailed report prepared by an independent actuary.

        In such case, the funds corresponding to the concerned companies obligations shall be transferred to the company to which the policies have been transferred without prejudice to the provisions relating to ownership and assignment of properties.

      • Article 10

        Insurance companies and organisations subject to the provisions of this Law shall supply the concerned authority at the Ministry of Commerce and Agriculture with statistical information and financial and annual reports or any studies which such authority deems necessary to be conducted, and the Ministry may publish such information.

        The Ministry of Commerce and Agriculture shall prepare an annual report about the activities of insurance companies and organisation.

    • Chapter Two — Obligations Of Insurance Companies and Organisations

      • Article 11

        The Minister for Commerce and Agriculture shall be empowered to oblige insurance companies and organisations subject to the provisions of this Law to reinsure a certain proportion of direct insurance transactions concluded in Bahrain with a national reinsurance company or companies which he determines. The order of the Minister shall specify the said proportion of direct insurance business and the applicable date thereof.

        The Minister may by a resolution determine the reinsurance commission and the profit commission paid by a reinsurance company to an insurance company for reinsurance transactions if the interest of the public so requires.

        The provisions of this Article shall not apply to reinsurance transactions concluded by a reinsurance company beyond the scope of the instances provided for therein.

      • Article 12

        Bahraini insurance companies and organisation shall set aside a proportion of their annual profits being no less than 10 per cent as a compulsory reserve until the total of such compulsory reserve equals a sum of 100% of the paid-up capital.

      • Article 13

        Insurance companies and organisations subject to the provisions of this Law shall maintain reserve funds for meeting compensations under settlement. Funds equalling the value of transactions which have been voluntarily reinsured shall be exempted from the above.

      • Article 14

        Insurance companies and organisations subject to the provisions of this Law and carrying of life insurance business shall allocate and maintain funds equalling the accounting reserve for all life insurance transactions that they have concluded.

      • Article 15

        Apart from life insurance transactions, all insurance companies and organisations shall set aside and maintain funds the value of which equals 40% of the total premiums underwritten during the year for the purpose of covering the prevailing risks. Such percentage shall be 25% with respect to cargo insurance.

      • Article 16

        Insurance companies and organisations subject to the provisions of this Law shall appoint one auditor or more from amongst the chartered accountants licensed to practise to audit the accounts of the company or organisation.

        An auditor and the reports submitted by him shall be subject to the provisions of Articles 166(2), 185, 186 and 187 of the Commercial Companies Law promulgated by Legislative Decree No. 28 of 1975.

      • Article 17

        Insurance companies and organisations subject to the provisions of this Law shall maintain a separate account for each of the insurance branches set forth in Article 4 of this Law.

      • Article 18

        The Minister for Commerce and Agriculture shall have the authority to exercise supervision and control over insurance companies and organisations subject to the provisions of this Law, and such exercise shall take place through the officers of his Ministry designated for this specific purpose. The said officers shall have the authority to ascertain compliance by insurance companies and organisations with the provisions of this Law and the orders issued for the implementation thereof. For this purpose, they may have access to the offices of such companies and organisation, examine the relevant books, approach banks and any other agency/institution wherein are maintained funds or investments for these companies and organisations. The officers of the Ministry shall submit their report to this respect to the Minister to the Minister to take the appropriate action according to the provisions of the Law and its Implementing Orders.

      • Article 19

        The Minister for Commerce and Agriculture shall be empowered to direct insurance companies and organisations to the areas where the reserves provided for in Articles 12, 13, 14 and 15 of this Law shall be invested.

      • Article 20

        Insurance companies and organisations subject to the provisions of this Law shall maintain books and records wherein shall be entered the insurance policies issued by the Company together with the details of the names and addresses of policy holder, date of concluding each policy and the applicable rates and terms. There shall be recorded in these books and records every alteration or amendment occurring to the aforesaid policies.

        The Minister for Commerce and Agriculture may issue an order compelling insurance companies and organisations to enter in the said books and records any particulars he deems fit for the proper exercise of his authority relating to control and supervision.

        In addition, the Minister for Commerce and Agriculture may by an order exempt any company or organisation having computerised operations from maintaining the books and records hereinabove referred to.

      • Article 21

        Insurance companies and organisations subject to the provisions of this Law shall maintain with a national bank a cash deposit to the order of the Minister for Commerce and Agriculture. Such deposit shall not be disposed of except by an order of the Minister.

        An order to be issued by the Minister for Commerce and Agriculture shall determine the amount of such deposit and the national banks wherein it may be deposited.

      • Article 22

        Each insurance company or organisation wishing to terminate its business activities in Bahrain in one branch or more of the insurance branches, shall file an application with the Minister for Commerce and Agriculture and the said application shall be accompanied by the following statements:

        (a) A statement proving that the relevant insurance company or organisation has fully been discharged with respect to its obligations arising from the insurance policies concluded in Bahrain or that it has transferred its policies in accordance with Article 9 of this Law to another insurance company licensed to operate in Bahrain.
        (b) A statement proving that the relevant insurance company or organisation has published advertisement in two daily newspaper of which one is published in English in Bahrain. This advertisement shall state that the insurance company or organisation intends to submit an application for the termination of its business activities in one branch or several insurance branches and that policy holders, beneficiaries and concerned parties may lodge their objections to its application with the Minister within a maximum period of three months from the date of publishing the most recent advertisement.

      • Article 23

        In case of lodging an objection to the application filled by an insurance company or organisation within the time limit indicated in the preceding Article 22, a decision shall not be adopted with respect to the application for termination of business activities except after reaching an agreement for passing a final judgement with respect to the objection.

      • Article 24

        The Minister for Commerce and Agriculture may withdraw the licence of any insurance company or organisation for engaging in any branch of insurance in the following events :

        (a) If the company or organisation ceases to carry on its business activities in accordance with the provisions of Article 22 and 23 of this Law or if the insurance activities in any insurance branch falls below the limit determined by an order of the Minister for Commerce and Agriculture or if the business activities in any insurance branch does not reach such limit.
        (b) If a court judgement has been passed adjudicating the company's bankruptcy.
        (c) If an insurance company or organisation fails to set aside the reserves provided for in this Law or if it abstains from investing them in the areas directed by the Minister for Commerce and Agriculture in accordance with Article 19 of this Law.
        (d) If a company abstains from implementing a final court judgement passed by one of the Bahrain Law courts.
        (e) If the paid-up capital falls below the minimum prescribed in accordance with the Law.
        (f) If a company or organisation prevents the officers of the Ministry of Commerce and Agriculture designated by the Minister in accordance with Article 18 of this Law from carrying out their duties.
        (g) If a company or organisation abstains from implementing the provisions of Articles 10 or 20 of this Law.
        (h) If it is proved from the result of inspection and examination that the rights of the insured, beneficiaries or third parties are likely to be lost or that the company or organisation concerned is in a state of insolvency rendering it unable to fulfil its obligations.

      • Article 25

        An insurance company or organisation shall be given notice of the Minister's decision for the withdrawal of its business or licence for the branch of insurance by a registered letter, and it shall implement the Minister's decision, otherwise a liquidator shall be appointed to whom shall be sent all legal claims.

        An insurance company or organisation may file an appeal with the Minister against his decision with respect to withdrawal of the licence. Such appeal shall be subject to the provisions of Article 8 of this Law with respect to the time limits thereof as well as the time limit and manner of contesting the Minister's decision for rejection of the appeal before the High Civil Court in addition to the provisions of this Article concerning the continuation of the concerned insurance company or organisation to carry on the business pending the resolution of the appeal or the final contestation.

    • Chapter Three — Insurance Brokers, Experts and Consultants

      • Article 26

        For the purpose of applying the provisions of this Law, an insurance broker means every person who mediates against a certain commission specified in a direct insurance contract for the account of an insurance company or organisation subject to the provisions of this law should be a person other than its employees or a person not concerned with insurance affairs at the Ministry of Commerce and Agriculture.

      • Article 27

        Any person acting as an insurance broker shall be registered in the Register intended for this purpose at the Ministry of Commerce and Agriculture.

        An order issued by the Ministry for Commerce and Agriculture shall determine the terms and conditions to be fulfilled by those to be registered in this Register, whether they are natural or corporate persons, and conditions for renewal of registration. The said order shall regulate the other conditions for the business of insurance brokers.

        Insurance companies and organisation shall not accept a local insurance transaction from any person unless he is one of the brokers registered in the Register intended for this purpose.

      • Article 28

        Persons carrying on the business of actuaries in firms other than the government, public organisations and institutions and companies fully owned by the State, shall be registered in the Register intended for this purpose at the Ministry of Commerce and Agriculture.

        An order of the Minister for Commerce and Agriculture shall lay down the terms and conditions to be fulfilled by the persons to be registered in this Register, whether they are natural or corporate persons, and conditions for renewal of registration. The said order shall regulate the other conditions governing the business of actuaries.

      • Article 29

        For the purpose of enforcing the provisions of this law, inspection and loss adjusters shall be defined as every person who carries on the business of inspecting damages, adjusting them, investigating the cause thereof, extent of coverage by the policy of such damages, submitting proposals with respect to improving methods of protection against risks and preserving the items subject to insurance, if so requested.

      • Article 30

        Persons carrying on the business of inspection and loss adjusters shall be registered in the Register intended for this purpose at the Ministry of Commerce and Agriculture.

        An order of the Minister for Commerce and Agriculture shall lay down the terms and conditions to be fulfilled by the persons to be registered in this Register, whether they are natural or corporate persons, and conditions for renewal or registration. The said order shall regulate the other conditions governing the business of inspection and loss adjusters.

      • Article 31

        For the application of the provisions of this law, insurance consultants shall be defined as every person who studies insurance requirements of his customers, gives advice and guidance to them as to the best methods for underwriting, compensation and the appropriate insurance cover and assists in preparing insurance requirements without undertaking any insurance business or acting as a broker in such business. He shall receive his fees from his customers.

      • Article 32

        Persons participating as insurance consultants shall be registered in the Register intended for this purpose at the Ministry of Commerce and Agriculture.

        An order of the Minister for Commerce and Agriculture shall lay down the terms and conditions to be fulfilled by the persons to be registered in this Register, whether they are natural or corporate persons, and conditions for renewal of registration. The said order shall regulate the other conditions governing the business of insurance consultants.

      • Article 33

        Pending the issue by the Minister for Commerce and Agriculture of the orders provided for in this Chapter with respect to insurance brokers, actuaries, inspection and loss adjusters and insurance consultants, the currently applicable rules, regulations and conditions with respect to insurance brokers, actuaries, inspection and loss adjusters and insurance consultants shall continue to be in force.

    • Chapter Four — Fees, Penalties and Final Provisions

      • Article 34

        Subject to the approval of the Council of Ministers, the Minister for Commerce and Agriculture shall be empowered to impose a fee to be determined by him for:

        First: every licence issued to any insurance company or organisation for engaging in the business of one of the insurance branches set forth in Article 4 of this law.
        Second: every insurance policy issued by the insurance companies and organisations subject to the provisions of this Law and every renewal of such policy.
        Third: registration in the Registers of insurance brokers, actuaries, inspection and loss adjusters and insurance consultants and for every renewal of such registration.

      • Article 35

        Without prejudice to any severer penalty provided for in the Penal Code or in any other Law, a penalty of imprisonment for a period of no more than three months and a fine of no less than BD. 100 and no more than BD.500, or either penalty, shall be inflicted upon every person who carries on the business of insurance broker, actuary, inspection and loss adjuster or insurance consultant without being registered in the Register kept for this purpose at the Ministry of Commerce and Agriculture or without renewing his registration within the time limit stipulated by the Law.

        The penalty shall be doubled in case of recurrence of the offence.

      • Article 36

        The Minister for Commerce and Agriculture shall issue the necessary orders for the implementation of this law.

      • Article 37

        The Ministers, each in his respective capacity, shall implement this Law which shall come into effect six months after the date of its publication in the official Gazette.

        Signed: Isa bin Sulman Al Khalifa
        Amir of the State of Bahrain
        Issued: at Riffa Palace on
        5 Jumada Al Awwal, 1408 Hijra
        Corresponding to 26 December 1987.