Part A
Table of Contents Module Title Module
CodeDate last
changedIntroduction Users Guide UG Apr 20 PDF Version Executive Summary ES Apr 14 PDF Version High Level Standards Authorisation AU Jul 23 PDF Version Principles of Business PB Jan 11 PDF Version High Level Controls HC Apr 21 PDF Version Auditors and Actuaries AA Jul 21 PDF Version General Requirements GR Jan 24 PDF Version Business Standards Capital Adequacy CA Apr 23 PDF Version Business and Market Conduct BC Oct 20 PDF Version Client Money CL Jul 23 PDF Version Risk Management RM Oct 22 PDF Version Financial Crime FC Jan 24 PDF Version Training and Competency TC Oct 20 PDF Version Insurance Aggregators IA Oct 19 PDF Version Reporting Requirements CBB Reporting BR Oct 23 PDF Version Public Disclosure PD Jul 23 PDF Version Enforcement & Redress Enforcement EN Apr 21 PDF Version Compensation CP Oct 07 PDF Version Sector Guides Captive Insurance CI Apr 11 PDF Version Insurance Intermediaries and Managers IM Apr 12 PDF Version Takaful / Retakaful TA Apr 14 PDF Version Introduction
UG UG Users Guide
UG-A UG-A Introduction
UG-A.1 UG-A.1 Purpose
UG-A.1.1
The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook’s substantive content was previously issued by the Bahrain Monetary Agency (‘the BMA’), and was carried forward when the CBB replaced the BMA in September 2006.
Amended: January 2007UG-A.1.2
The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional and Islamic bank licensees respectively, were issued in July 2004 and January 2005. This Volume (Volume 3), was issued in April 2005. Volume 4, covering investment business, was issued in April 2006. Volumes 5 (covering specialised licensees), and Volume 6 (capital markets) are being issued gradually. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.
Amended: October 2012
Amended: October 2007
Amended: January 2007UG-A.1.3
This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 3 (Insurance); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.
Amended: January 2007UG-A.1.4
Volume 3 (Insurance) covers
insurance licensees , i.e. those CBB licensees that solely undertakeregulated insurance services . It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on providing insurance services and the treatment ofpolicyholders ). Collectively, these requirements are aimed at ensuring the safety and soundness of the CBB, and providing an appropriate level of protection forpolicyholders .Added: January 2007
Amended: October 2007Legal Basis
UG-A.1.5
This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 3 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the of the Central Bank of Bahrain and Financial Institutions Law 2006 ("CBB Law"). The Directive in this Module is applicable to all
insurance licensees (including theirapproved persons ), and toregistered actuaries andloss adjusters .Amended: January 2011
Added: January 2007UG-A.1.6
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007UG-A.2 UG-A.2 Module History
UG-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007UG-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to the actual requirements.
Added: January 2007UG-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes UG-A.1 01/2007 Updated to reflect new CBB Law, various references changed and new Rule UG-A.1.6 introduced categorising this Module as a Directive. UG-1.2 01/2007 New Rules UG-1.2.6 and UG-1.2.7 to reflect the CBB Law, other material reorderd as a consequence. UG-3.2.1 10/2007 Updated CBB policy re distribution of hard copies of Volumes of Rulebook. Order Form 10/2007 Amended Order Form to reflect new policy re hard copy availability. UG-A.1.5 01/2011 Clarified legal basis UG-2.1.2 01/2011 Updated to reflect structure of Volume 5. UG-A.1.2, UG-1.2.1, UG-1.2.2, UG-1.2.7, UG-2.1.1, UG-2.1.2, UG-2.1.3, and UG-2.2.2 10/2012 Various minor amendments to reflect the structure of the Rulebook, including the issuance of Volume 7. UG-3.2 and Annex 01/2013 Amended as CBB Rulebook only now available on CBB Website. UG-1.3.4 10/2016 Added Section to clarify reference to 'he' 'his' 'she' 'her'. UG-3.2.2 04/2020 Amended Paragraph. UG-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Superseded Requirements
Deleted: January 2007UG-A.2.3
Deleted: January 2007UG-1 UG-1 Rulebook Status and Application
UG-1.1 UG-1.1 Legal Basis
UG-1.1.1
Volume 3 (Insurance) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Artilces 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).
Amended: January 2007UG-1.1.2
The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.
Amended: January 2007UG-1.1.3
The requirements for
representative offices will be covered as part of Volume 5 (Specialised activities) of the Rulebook and will be issued at a later date.Amended: January 2007
Amended: October 2007CBB's Rulemaking Instruments
UG-1.1.4
Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).
Added: January 2007UG-1.1.5
Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.
Added: January 2007UG-1.1.6
Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific
licensees (or categories oflicensees ),approved persons orregistered persons . Directives are binding to whom they are addressed.Added: January 2007UG-1.1.7
Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.
Added: January 2007UG-1.1.8
All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. When this is the case, then the Rulebook crossrefers to the Regulation in question and specifies the requirements concerned.
Adopted: July 2007UG-1.1.9
In keeping with the nature of these regulatory requirements, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licensees,
approved persons , or registered persons.Adopted: July 2007
Amended: October 2007UG-1.2 UG-1.2 Status of Provisions
UG-1.2.1
The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. If a licensee breaches a Rule to which it is subject, it is liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.
Amended: October 2012
Amended: January 2007UG-1.2.2
Guidance is not binding; rather, it is material that helps inform a particular Rule or sets of Rules, or provides other general information. Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.
Amended: October 2012
Amended: January 2007UG-1.2.3
The status of each Paragraph within the Rulebook is identified by its text format, as follows:
• Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.• Guidance is in normal type, font size 11.
Amended: January 2007UG-1.2.4
Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.
Amended: January 2007UG-1.2.5 [Deleted]
Deleted: January 2007UG-1.2.6 [Deleted]
Deleted: January 2007UG-1.2.7 [Deleted]
Deleted: January 2007UG-1.2.5
Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.
Amended: January 2007UG-1.2.6
All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.
Added: January 2007UG-1.2.7
[This Paragraph was deleted in October 2012].
Deleted: October 2012
Added: January 2007UG-1.2.8
The CBB’s enforcement processes are set out in Module EN.
Added: January 2007UG-1.3 UG-1.3 Application
UG-1.3.1
Volume 3 of the CBB Rulebook for the most part applies to all
insurance licensees ; to individuals undertaking key functions in those licensees (so-called “approved persons”); and to certain support services (actuaries andloss adjusters ). (Representative offices are subject to the relevant requirements in Volume 5 of the CBB Rulebook). Further information and relevant definitions are provided in Module AU (Authorisation). Most of the content of Volume 3 only has the formal status of a Directive.Amended: January 2007
Amended: October 2007UG-1.3.2 [Deleted]
Deleted: January 2007UG-1.3.2
A few Rules and Guidance have general applicability (and thus also have the formal status of a Regulation); for instance, no one may carry on an insurance business within or from Bahrain without the appropriate license, and
controllers ofinsurance licensees are also subject to various requirements.Amended: January 2007
Amended: October 2007UG-1.3.3
Each Module in Volume 3 (except those listed under the 'Introduction' and 'Sector Guides' headings) contains a Scope of Application Chapter, setting out which Rules and Guidance apply to which particular type of
insurance licensee or person, for the Module concerned. In addition, each Rule, (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.Amended: January 2007UG-1.3.4
All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.
Added: October 2016UG-1.4 UG-1.4 Effective Date
UG-1.4.1
Volume 3 (Insurance) of the CBB Rulebook was first issued in April 2005. Its contents have immediate effect, subject to transition arrangements that may be specified.
Amended: January 2007UG-1.4.2
Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 3 (Insurance).
UG-2 UG-2 Rulebook Structure and Format
UG-2.1 UG-2.1 Rulebook Structure
Rulebook Volumes
UG-2.1.1
The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:
Volume 1 Conventional Banks Volume 2 Islamic Banks Volume 3 Insurance Volume 4 Investment Business Volume 5 Specialised Activities Volume 6 Capital Markets Volume 7 Collective Investment Undertakings Amended: October 2012
Amended: January 2007UG-2.1.2
Volume 5 (Specialised Activities), covers money changers; financing companies;
representative offices ; administrators; trust service providers, micro-finance institutions and ancillary services providers.Amended: October 2012
Amended: January 2011
Amended: October 2007
Amended: January 2007Rulebook Contents (Overview)
UG-2.1.3
Except for Volumes 5, 6 and 7, the basic structure of each Rulebook is the same. Each Volume starts with a contents page and an introduction containing a User's Guide and Executive Summary. Subsequent material is organised underneath the following headings:
(a) High Level Standards;(b) Business Standards;(c) Reporting Requirements;(d) Enforcement and Redress; and, where appropriate,(e) Sector Guides.Amended: October 2012
Amended: January 2007
Amended: October 2007UG-2.1.4
Volume 5 is organised by the category of specialised firm concerned, whilst Volume 6 by subject area (authorised exchanges; issuers of securities, etc).
Amended: January 2007UG-2.1.5
The material in Volumes 1–4 is contained in Modules, each covering a specific area of requirements (e.g. capital). In turn, each Module is divided into Chapters, Sections and Paragraphs, as detailed below.
UG-2.1.6
Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called "Part A" and the appendix Volume is called "Part B".
UG-2.2 UG-2.2 Volume Structure
Modules
UG-2.2.1
Rulebook Volumes are subdivided into Modules, arranged in groups according to their subject matter, underneath the headings listed in Paragraph UG-2.1.3 above.
UG-2.2.2
Each Module in a Volume is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. These codes are used for cross-referencing within the text.
Amended: October 2012Chapters
UG-2.2.3
Each Module consists of Chapters, categorised into two types:
• A standard introductory Chapter (referenced with a letter: e.g. UG-A); andUG-2.2.4
The introductory Chapters summarise the purpose of the Module and its history (in terms of changes made to its contents). A separate introductory Chapter also prescribes the scope of application of the Module’s requirements.
Amended: January 2007Sections and Paragraphs
UG-2.2.5
Chapters are further sub-divided into Sections; these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-section headings may be used, to guide the reader through a Section; sub-section headings are italicised and unnumbered, and act purely as an indicator (without limitation), as to the status of the Paragraphs that follow.
Amended: January 2007Table of Contents
UG-2.2.6
Each Volume's contents page lists all the Modules contained within it (Part A), and the information contained in the relevant appendix Volume (Part B).
UG-2.2.7
The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.
Amended: January 2007UG-2.3 UG-2.3 Format and Page Layout
Headers
UG-2.3.1
The top of each page in the Rulebook identifies the Volume, Module and Chapter in question.
Footers
UG-2.3.2
The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.
Amended: January 2007Defined Terms
UG-2.3.3
Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.
Amended: January 2007Cross-references
UG-2.3.4
Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the First Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.
Amended: July 2007Text format
UG-2.3.5
Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.
Amended: July 2007UG-2.3.6
When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, the words ‘Rule’ or ‘Guidance’ may be used instead of ‘Paragraph’, followed by the reference number (e.g. “As required by Rule FC-1.1.1, licensees must …”).
Amended: January 2007UG-3 UG-3 Rulebook Maintenance and Access
UG-3.1 UG-3.1 Rulebook Maintenance
Quarterly Updates
UG-3.1.1
Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required) in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.
Amended: January 2007UG-3.1.2
The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the “date Last Changed” column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.
Amended: January 2007UG-3.1.3
A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change and, the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.
Amended: July 2007UG-3.1.4
Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module’s contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module’s contents page.
Amended: January 2007UG-3.1.5
The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter , to notify them of changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.
Amended: January 2007Changes to Numbering
UG-3.1.6
In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:
(a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an "A"; a second inserted Paragraph that follows immediately afterwards would be numbered with a "B", and so on.
For example, if a new Paragraph needs to inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter).(b) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: "(This Paragraph was deleted in April 2006.)" ( The date given being the actual end-calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.Amended: January 2007UG-3.1.7
Where many such changes have built up over time, then the CBB may reissue the whole section, Paragraph, Chapter or even Module concerned, consolidating all these changes into a renumbered version.
Amended: January 2007UG-3.2 UG-3.2 Rulebook Access
Availability
UG-3.2.1
The Rulebook is available on the CBB website.
Amended: January 2013
Amended: January 2007
Amended: October 2007Queries
UG-3.2.2
Questions regarding the administration of the Rulebook (e.g. ordering additional copies, website availability, the updating of material etc) should be addressed to the Rulebook Section of the Regulatory Policy Unit
Rulebook Section
Regulatory Policy Unit
Central Bank of Bahrain
PO Box 27
Manama
Kingdom of Bahrain
Tel: +973 - 17 54 7413
Fax: +973 - 17 53 0228
E-mail: rulebook@cbb.gov.bh
Web: www.cbb.gov.bhQuestions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.
Amended: April 2020
Amended: January 2013
Amended: January 2007CBB Rulebook Order Form [This form was deleted in January 2013]
Deleted: January 2013ES ES Executive Summary
ES-A ES-A Introduction
ES-A.1 ES-A.1 Purpose
Executive Summary
ES-A.1.1
The purpose of this Module is to:
(a) Provide an overview of the structure of Volume 3 (Insurance);(b) Provide a summary of each Module; and(c) Outline the transition rules for the implementation of the Volume 3.Amended: January 2007ES-A.1.2
The Central Bank of Bahrain ('CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, has as its mission:
(a) To ensure monetary and financial stability in the Kingdom of Bahrain; and(b) To regulate, develop and maintain confidence in the financial sector.Amended: January 2007ES-A.1.3
As the single regulator, the CBB ensures the consistent application of regulatory standards in banking, insurance and capital markets, as well as encourages an open and cooperative approach in dealing with financial institutions.
Amended: January 2007ES-A.1.4
The supervision of the insurance sector in the Kingdom pays particular regard to the standards set by the International Association of Insurance Supervisors (IAIS). The CBB plays an important role in meeting stakeholders' expectations — the principal stakeholders of the CBB are the Government of the Kingdom of Bahrain, the regulated financial institutions, the consumers, the IAIS and several other international organizations.
Amended: January 2007ES-A.1.5
To carry out its responsibilities in relation to the insurance sector, the CBB has four supervisory objectives, namely to:
(a) Promote the stability and soundness in the insurance system;(b) Provide an appropriate degree of protection to insurance companypolicyholders ;(c) Promote transparency and market discipline; and(d) Reduce the likelihood ofinsurance licensees being used for financial crime (including money laundering activities).Amended: January 2007Legal Basis
ES-A.1.6
This Module contains the CBB's (as amended from time to time) Directive relating to transition rules and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all
insurance licensees (including theirapproved persons ).Amended: January 2011
Amended: January 2007ES-A.1.7
For an explanation of the CBB's rule-making power and different regulatory instruments, see Section UG-1.1.
Amended: January 2007ES-A.2 ES-A.2 Module History
ES-A.2.1
This Module was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes to that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007ES-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Adopted: January 2007ES-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes ES-1.1 01/07/05 Module BR: Corrected first quarterly return due for the period ending 31 March 2006. ES-1.1 01/10/05 Clarified application of Module FC to insurance managers. ES-1.10 01/10/05 Corrected cross-reference referring to examples of suspicious transactions. ES-2.4 01/10/05 Added transition period for actuarial requirements for insurance firms whose long term insurance business is restricted to group life policies having a maturity of less than or equal to 1 year. ES-2.5 01/10/05 Corrected cross-reference. ES-2.6 01/10/05 Updated transition rules for minimum Tier 1 capital. ES-1.1 01/01/06 Transition rules for reporting by insurance firms updated. ES-2.7 01/01/06 A Section on transition rules for reporting by insurance firms was added. ES-1.1.5 01/07/06 Transition rule for Modules RM and PD has been added. ES-2.6A 01/07/06 Added transition rules for physical security measures and third party insurance. ES-2.8 01/07/06 Transition rules in respect of semi-annual disclosure requirements have been added. ES-A.1.6 01/2007 New Rule introduced, categorising this Module as a Directive. ES-1.1.9 and ES-2.4.2 01/2007 Clarified the first period for which a report from the Signing Actuary is required.ES-1.1.9 and ES-2.6B.1 01/2007 Allowed for a transition period for the external auditor's report required under Subparagraph FC-3.3.1(d). ES-1.1.9 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firms .ES-1.2.2 10/2007 Pure reinsurers can undertake both general insurance business andlong-term insurance business within the same entity.ES-2.4.3 10/2007 Clarified the transition period for the rotation of audit partner. ES-2.6.2 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firms .ES-1.1, ES-1.2, ES-1.11, ES-1.14 10/2009 Reference added to appointed representatives as per Resolution (11) of 2009. ES-1.2.3 10/2009 Amended list of controlled functions to be consistent with Module AU. ES-1.5.4 10/2009 Amended to be consistent with Section AA-4.2. ES-2.5.4 10/2009 Introduced transition rule for new requirements for appointed representatives as per Resolution (11) of 2009. ES-A.1.6 01/2011 Clarified legal basis ES1.1.9, ES-1.4, ES-1.17.3 and ES-2.3 04/2011 Amended to reflect changes to Module HC. ES-1.1.9, ES-1.8A and ES-2.6AA2 04/2012 Amendments made to reflect the issuance of Module CL (Client Money). ES-2.6AA1 04/2012 Added transition period to have in place customer complaints procedures as outlined in Chapter BC-4. ES-2.7.4 and ES-2.7.5 04/2012 Added transition period for filing of IBR and IBRS. ES-1.1.9
ES-1.1510/2012 The reference to Module DP was deleted as customer complaints procedures are included in Chapter BC-4. ES-1.1.9 04/2014 Updated transition period to repay/write of Qard Hassan granted for solvency purposes. ES-1.2.3 04/2014 Updated list of approved persons to be in line with AU-1.2.2. ES-1.7.5, ES-1.19.3, ES-2.4 and ES-2.6 04/2014 Updated to reflect the consultation on the enhanced operational and solvency framework for Takaful firms. ES-1 ES-1 Structure and Summary of Insurance Modules
ES-1.1 ES-1.1 Structure of Volume 3 (Insurance)
ES-1.1.1
Volume 3 (Insurance) of the Rulebook covers insurance activities, i.e. the provision of
regulated insurance services byinsurance licensees . It also includes requirements regardingapproved persons ; and the registration requirements foractuaries ,loss adjusters andappointed representatives .Amended: October 2009
Amended: January 2007ES-1.1.2
Volume 3 excludes
representative offices ofinsurance firms , andancillary services providers . These Regulations will later be incorporated into Volume 5 (Specialised Activities) of the CBB Rulebook, to be released at a later date.Adopted: January 2007
Amended: October 2007ES-1.1.3
Volume 3 (Insurance) is made up of two volumes: Part A is the main Volume containing detailed Modules containing the Rules and Guidance and Part B is an appendix Volume containing a glossary of defined terms, CBB authorisation forms, CBB reporting forms and any supplementary information.
Amended: January 2007ES-1.1.4
Part A of Volume 3 (Insurance) is organized under the following headings:
• Introduction;• High Level Standards;• Business Standards;• Reporting Requirements;• Enforcement and Redress; and• Sector Guides.Amended: January 2007
Amended: October 2007ES-1.1.5
Including this Executive Summary Module, there are 20 Modules that make up Part A of Volume 3 (Insurance). The requirements for the various insurance license categories are embedded throughout Part A. In addition, for some specialised licenses (
captive insurers ,insurance intermediaries andtakaful /retakaful ) there are sector guides summarizing the key requirements, specifically applicable to these categories.Amended: January 2007ES-1.1.6
Part B of Volume 3 is organized under the following headings:
• Glossary;• Reporting Forms; andAdopted: January 2007
Amended: October 2007ES-1.1.7
Defined terms used in the Rulebook are underlined; their definition can be found in the Glossary. Each volume has its own Glossary, as definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different volume with a different meaning.
Adopted: January 2007ES-1.1.8
There are four authorisation forms, comprising (i) Form 1 (application for a license); (ii) Form 2 (application for the authorisation of a
controller ); (iii) Form 3 (application forapproved person status); and (iv) Form 4 (application for registration).Adopted: January 2007
Amended: October 2007ES-1.1.9
A summary of the Modules, their application and implementation is given in the table below:
Module Application Transition Rules Module AU All new applicants for licenses, approved persons and registration ofactuaries ,loss adjusters andappointed representatives .Effective 1 June 2005. AU-1.1.11 where an insurance licensee carries on a prohibited commercial business, the licensee must notify the CBB and establish the transitional rules. Module PB All insurance licensees andapproved persons .None.
Effective 1 June 2005.Module HC 1. Applies to allBahraini insurance licensees except for Bahraini single person companies.2. Insurance consultants, insurance managers and captive insurers are subject to Guidance under HC-10.3. Exemption possible from the requirement to have 2independent non-executive Directors forBahraini insurance licensees that are part of an overseas group and exemption to have Board Committees (HC-1.5.2).4. Where an insurance broker's Board does not consider it necessary to create an audit committee, it must be prepared to give reasons for its decision to the CBB (HC-B.1.2).The updated Module is effective on 1st January 2011. All insurance licensees to which Module HC applies must be in full compliance by the financial year end 2011.Module AA All insurance licensees —auditors
Allinsurance firms —actuaries For insurance firms whose business is restricted to group life policies, having a maturity of less than or equal to 1 year, actuarial requirements must be met by December 31, 2007.
The first period for which a report is required by aSigning Actuary is for the period ending December 31, 2008.
All other requirements are effective 1 July 2005.Module GR Refer to chart in GR-B.1.1 for application All insurance licensees must comply with the requirements for books and records within Bahrain, effective 1 July 2005.
Professional indemnity coverage must be met by allinsurance brokers andinsurance consultants by 31 Dec. 2005.
For unincorporated brokers licensed prior to 1 June 2005, professional indemnity coverage must be met by 31 Dec 2006.
All other provisions of Module GR are to be applied effective 1 June 2005.
Compliance with Resolution (11) of 2009 dealing withappointed representatives is effective 1st January 2010.Module CA All insurance licensees , with specific requirements applicable to different types of licensees.
Also special rules in place fortakaful firms .Minimum Tier 1 capital for Bahraini insurance firms to be met by December 31, 2007.
Forinsurance brokers licensed prior to 1 June 2005, implementation effective 31 Dec. 2006.
For Qard Hassan granted for solvency purposes, repayment or write off over a period of 5 years from April 2014.
For otherinsurance licensees licensed prior to 1 June 2005, implementation effective 31 Dec. 2005.Module BC Applicable to direct domestic business . Reinsurance business is exempted. Also special rules in place fortakaful firms .None.
Effective 1 July 2005.Module CL Applies to all insurance brokers and appointed representatives licensed by the CBB that undertake the broking of insurance contracts (see Rule AU-1.4.10) and hold client money. Effective 1 July 2012. Module RM Only applies to insurance firms andinsurance brokers .Physical Security Measures and Third Party Insurance are effective December 31, 2006. Module FC Measures for the prevention of money laundering and terrorism financing apply to insurance firms andinsurance brokers , with some exemptions forcaptive insurers managed by aninsurance manager . Wherecaptive insurers are managed by aninsurance manager , this Module also applies to theinsurance manager .
Some exemption possible for reinsurers (FC-B.1.2).
Measures dealing with fraud (FC-8) apply to allinsurance licensees .Effective 1 July 2005. For long-term insurance contracts, the CBB expects the Module to be applied to current clients gradually on a case by case basis. Module TC To be developed in the future. Module BR All insurance licensees , with specific requirements applicable to different types of licensees.For insurance firms , first annual and group reporting due for the period ending 31 December 2006 and first quarterly report due for the quarter ending 31 March 2007. Notification and approval requirements effective 1 June 2005.Module PD Only applies to insurance firms .First disclosure requirements required for the period ending 31 December 2005.
First semi-annual disclosure requirements required for the period ending 30 June 2008.Module EN All insurance licensees ,approved persons and registered persons.None.
Effective 1 June 2005.Module DP [Deleted as included in Chapter BC-4] Module CP To be developed in the future. Module CI Captive insurers Transition rules as per those stated in main Modules. Module IM Insurance intermediaries Transition rules as per those stated in main Modules. Module TA Takaful /retakaful Transition rules as per those stated in main Modules. Amended: April 2014
Amended: October 2012
Amended: April 2012
Amended: April 2011
Amended: October 2009
Amended: October 2007
Amended: January 2007ES-1.2 ES-1.2 Module AU — Authorisation
ES-1.2.1
Module AU covers the licensing requirements for
insurance licensees ; registration requirements foractuaries ,loss adjusters andappointed representatives ; and authorisation requirements forapproved persons . The Module defines what is included as part ofregulated services , specifically providing definitions for:(a) Carrying on of insurance business (insurance firms );(b) The broking of insurance contracts (insurance brokers );(c) The offering of insurance advice (insurance consultants );(d) The provision of insurance management services (insurance managers ); and(e) Operators of an insurance exchange (insurance exchange operators ).Amended: October 2009
Amended: October 2007
Amended: January 2007ES-1.2.2
With the exception of
captive insurers andpure reinsurers , aninsurance firm cannot undertake bothlong-term insurance business andgeneral insurance business .Insurance firms (includingcaptive insurers ), must operate on either conventional insurance principles or ontakaful principles: they cannot combine the two. Grandfathering provisions apply for those companies whose past license granted them the right to undertake bothlong-term insurance business and general business.Amended: January 2007
Amended: October 2007ES-1.2.3
Module AU deals with the requirements and conditions for
approved persons , i.e. those wishing to undertake acontrolled function in aninsurance licensee .Controlled functions are those of:(a)Director ;(b)Chief executive orgeneral manager ;(c)Head of function ;(d) Head of risk management;(e) Compliance officer;(f) Money Laundering Reporting Officer;(g) Member ofShari'a Supervisory Board ;(h) Internal Shari'a reviewer;(i)Unit-linked investment adviser ; and(j)Signing Actuary (where the function is undertaken by aDirector or anemployee of theinsurance firm ).Amended: April 2014
Amended: October 2009
Amended: January 2007ES-1.2.4
The licensing conditions that must be abided by all
insurance licensees are outlined as part of Chapter AU-2 of the Module.Amended: January 2007ES-1.2.5
The Module outlines the information requirements and procedures that must be followed as part of the process for:
(a) Licensing;(b)Approved persons ; and(c) Registration ofactuaries ,loss adjusters andappointed representatives .Amended: October 2009
Amended: January 2007ES-1.3 ES-1.3 Module PB — Principles of Business
ES-1.3.1
The 10 Principles of Business covered in Module PB are a general statement of the fundamental obligations of all CBB
insurance licensees andapproved persons . They have the status of Rules and provide a basis for other more detailed Rules elsewhere in Volume 3.Amended: January 2007ES-1.3.2
All Principles of Business apply to activities carried out by the licensees, including activities carried out through overseas branches. Principles 1 to 8 also apply to
approved persons , in respect ofcontrolled functions for which they have been approved. Principles 9 (Adequate Resources) and Principles 10 (Management, Systems and Controls) also take into account any activities of other members of the group of which the licensee is a member.Amended: January 2007ES-1.3.3
The Principles of Business are:
Principle 1 — Integrity
Principle 2 — Conflicts of Interest
Principle 3 — Due Skill, Care and Diligence
Principle 4 — Confidentiality
Principle 5 — Market Conduct
Principle 6 — Customer Assets
Principle 7 — Customer Interests
Principle 8 — Relations with Regulators/Supervisors
Principle 9 — Adequate Resources
Principle 10 — Management, Systems and Controls
ES-1.4 ES-1.4 Module HC — High-Level Controls
ES-1.4.1
Module HC outlines the requirements that must be met by
insurance licensees with respect to:(a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code; and(b) Related high-level controls and policies.Amended: April 2011
Amended: January 2007ES-1.4.1A
The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.
Added: April 2011ES-1.4.1B
The requirements distinguish between different types of
insurance licensees . Forinsurance brokers , Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply forinsurance brokers . Because of their limited business activities, and consequent lesser risk to customers,insurance consultants ,insurance managers andcaptive insurance firms are subject to applicable Guidance Paragraphs included in Chapter HC-10.Added: April 2011ES-1.4.2
The high-level controls covered by this Module deal with:
(a) The function ofchief executive officer andgeneral manager ;(b) The mapping of risks and responsibilities;(c) Internal audit;(d) Compliance;(e) Remuneration policies forapproved persons ;(f) Corporate ethics; and(g) Transparency and disclosure.(h) Committees of the Board;(i) Financial statements certification;(j) Appointment, training and evaluation of the Board;(k) Management structure;(l) Communication between the Board and shareholders; and(m) Governance and disclosure per Shari'a principles.Amended: April 2011
Amended: January 2007ES-1.4.3
Module HC also includes requirements for an annual Board review and certification, on the implementation of internal governance processes and their effectiveness in achieving the Board's objectives, and whether the Board can attest that it has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.
ES-1.5 ES-1.5 Module AA — Auditors and Actuaries
ES-1.5.1
Module AA deals with requirements on the appointment and functions of
auditors andactuaries ofinsurance licensees . Requirements dealing withactuaries only apply toinsurance firms and are not applicable toinsurance intermediaries andinsurance managers .Amended: January 2007ES-1.5.2
The auditor requirements deal with:
(a) The appointment ofauditors ;(b) The removal and resignation ofauditors ;(c) Audit partner rotation;(d)Auditor independence; and(e) Restrictions on the relationship between theinsurance licensee and theauditor .Amended: January 2007ES-1.5.3
The Module covers the CBB's requirements regarding access to
auditors andactuaries as well as theauditors' access tooutsourcing providers . In addition, the Module outlines the requirement forinsurance licensees to arrange for theirauditors to review the licensee's annual return submitted to the CBB.Amended: January 2007ES-1.5.4
Module AA provides requirements for both
Registered Actuaries andSigning Actuaries .Amended: October 2009
Amended: January 2007ES-1.6 ES-1.6 Module GR — General Requirements
ES-1.6.1
Module GR covers requirements dealing with areas not covered in other Modules. The areas covered are:
(a) Books and records;(b) Corporate and trade names;(c) Dividends;(d) Business transfers;(e)Controllers ;(f) Close links;(g) Statutory deposits and compulsory reserve;(h) Cessation of business;(i)Appointed representatives ; and(j) Professional indemnity coverage.Amended: January 2007
Amended: October 2007ES-1.6.2
Item (i) applies only to
insurance firms ; item (g) applies toinsurance firms andinsurance brokers , whereas item (j) only applies toinsurance brokers andinsurance consultants .Amended: January 2007
Amended: October 2007ES-1.7 ES-1.7 Module CA — Capital Adequacy
ES-1.7.1
Module CA covers requirements governing the minimum capital and solvency requirements as well as the valuation of assets and liabilities.
Amended: January 2007ES-1.7.2
Considering the nature of their business, the requirements regarding capital and solvency for
insurance firms are far more detailed than forinsurance intermediaries andinsurance managers .Amended: January 2007ES-1.7.3
Similarly the rules dealing with the valuation of assets and valuation of liabilities are only applicable to
insurance firms .Amended: January 2007ES-1.7.4
For
insurance firms , Module CA outlines various currency matching and localisation requirements as well as whole firm and group solvency requirements.Amended: January 2007ES-1.7.5
The Module provides detailed rules for requirements dealing with
takaful andretakaful specifically addressing:(a) General capital requirements;(b) The basis of operating atakaful business;(c) The segregation of funds;(d) The capital adequacy and solvency requirements forboththeTakaful firm ; and(e) The distribution of surplus.Amended: April 2014
Amended: January 2007ES-1.8 ES-1.8 Module BC — Business Conduct
ES-1.8.1
This Module presents under the form of an Insurance Code of Practice the minimum standards of good practice for market conduct in relation to direct insurance activities. This Module applies to
domestic business .Reinsurance business is exempted from the requirements of this Module.Amended: January 2007ES-1.8.2
The Insurance Code of Practice is made up of overarching principles applied throughout the customer relationship. These principles cover:
(a) Marketing and promotion;(b) Initial customer information service;(c) Identification of customer requirements;(d) Advice and recommendation;(e) Customer identification before commitment to contract;(f) Confirmation of cover and policy documentation;(g) Service after the point of sale;(h) Claims;(i) Renewal, expiry and cancellation;(j) Complaints;(k) Information conditions applying to all customer information;(l) Fair treatment; and(m) Confidentiality and security of customer assets.Amended: January 2007ES-1.8.3
Module BC has additional requirements dealing specifically with requirements unique to
takaful andretakaful , including the requirement to clearly disclose to participants the calculation of wakala and mudaraba fees paid by thetakaful fund(s) to thetakaful operator.Amended: January 2007ES-1.8A ES-1.8A Module CL – Client Money
ES-1.8A.1
This Module provides detailed Rules and Guidance with respect to the holding of
client money byinsurance brokers andappointed representatives . They are aimed at ensuring proper protection ofclient money to minimise the risk ofclient money being used byinsurance brokers andappointed representatives and to prevent the commingling ofclient money with theinsurance brokers' andappointed representatives' assets.Added: April 2012ES-1.8A.2
As a general rule,
client monies are required to be segregated from a firm's own assets, andclient money must be held in aclient money account . Various other restrictions and protections apply toclient money , whilst the rules also apply certain reconciliation and reporting requirements.Added: April 2012ES-1.8A.3
Rules applying to
appointed representatives are applicable based on the type ofappointed representatives . The Module deals with:(a) Individualappointed representatives ;(b) Corporateappointed representatives that are financial institutions; and(c) Corporateappointed representatives , other than financial institutions.Added: April 2012ES-1.9 ES-1.9 Module RM — Risk Management
ES-1.9.1
This Module provides detailed Rules and Guidance on risk management systems and controls required for
insurance firms andinsurance brokers . The Module imposes on these licensees the obligation to identify the range of risks that they face and to effectively manage these through the implementation of risk management systems that monitor and control all material risks.Amended: January 2007ES-1.9.2
Module RM specifically addresses certain risk categories. However,
insurance firms andinsurance brokers must determine any additional risk categories relevant to their business and how these are addressed.Amended: January 2007ES-1.9.3
The risk management standards addressed in Module RM are:
(a)Credit risk ;(b)Liquidity risk ;(c)Market risk ;(d)Insurance technical risk ;(e)Operational risk ;(f)Outsourcing risk ; and(g) Group risk.Amended: January 2007
Amended: October 2007ES-1.10 ES-1.10 Module FC — Financial Crime
ES-1.10.1
Module FC implements the Financial Action Task Force (FATF) recommendations on money laundering and special recommendations on terrorism financing that are relevant to the insurance sector in Bahrain.
ES-1.10.2
The Module covers the detailed procedures required for:
(a) Customer identification;(b) Reporting;(c) Staff awareness and training;(d) The appointment of a money laundering reporting officer;(e) Compliance monitoring;(f) Record keeping arrangements;(g) Segregation of duties;(h) Special measures for non-cooperative countries; and(i) Contact with relevant authorities.Amended: January 2007ES-1.10.3
Item FC (iv) in Part B of Volume 3 (Insurance) provides further examples of transactions that may be suspicious or unusual.
ES-1.10.4
In addition, Module FC has a chapter dealing with the area of insurance fraud and steps that must be taken by
insurance licensees to address this area.Amended: January 2007ES-1.11 ES-1.11 Module TC — Training and Competency
ES-1.11.1
This Module is to be issued at a later date.
Amended: January 2007
Amended: October 2007ES-1.11.2
When finalised, the Module will provide detailed Rules and Guidance on training and competency requirements for employees of
insurance licensees as well as foractuaries ,loss adjusters andappointed representatives .Amended: October 2009
Amended: January 2007ES-1.12 ES-1.12 Module BR — BMA Reporting
ES-1.12.1
Module BR outlines the CBB's reporting requirements. The reporting requirements are broken down into three main categories:
(a) Financial reporting;(b) Notifications; and(c) Approvals.Amended: January 2007ES-1.12.2
Annual financial reporting is required for all
insurance licensees . Group and quarterly reporting are required only forinsurance firms . The financial reporting Chapter contains various Rules, Directives and Guidance which underpin the reporting forms included in Part B of Volume 3 (Insurance).Amended: January 2007
Amended: October 2007ES-1.12.3
The Module outlines instances and procedures to be followed where
insurance licensees must submit written notifications to the CBB. These include matters having a serious supervisory impact, breaches of Regulations and Directives and other requirements and the removal or resignation ofauditors orReporting Actuaries .Amended: January 2007ES-1.12.4
The Module also outlines where
insurance licensees must seek the CBB's prior approval for changes in their operations, such as change in legal status, mergers, acquisitions, disposals and establishment of new subsidiaries. The CBB's prior approval is also required forinsurance licensees undertaking business transfers and forrelated party transactions above a specified threshold.Amended: January 2007
Amended: October 2007ES-1.12.5
Finally, the Module outlines the various ways in which the CBB gathers its information from
insurance licensees including onsite visits by the CBB, and where deemed necessary the use ofAppointed Experts .Amended: January 2007ES-1.13 ES-1.13 Module PD — Public Disclosure
ES-1.13.1
Module PD governs the minimum requirements to be followed by
insurance firms with respect to corporate and financial transparency through meaningful public disclosures. Public disclosures help protectcustomers ofinsurance firms and facilitate market discipline.Amended: October 2007ES-1.13.2
The disclosure requirements for
insurance firms cover both annual and semi-annual disclosure requirements.ES-1.13.3
Module PD outlines what information and by what means this information must be disclosed, distinguishing the type of information to be disclosed by the
insurance firm subject to these requirements.ES-1.13.4
To assist those
insurance firms subject to this Module wishing to go further than the CBB's minimum requirements, further guidance and best practice are set out in Chapter PD-3.Amended: January 2007ES-1.14 ES-1.14 Module EN — Enforcement
ES-1.14.1
This Module outlines enforcement powers and processes that may be applied by the CBB to address failures by
insurance licensees ,approved persons or registered persons. The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk topolicyholders and the financial system.Amended: January 2007ES-1.14.2
The enforcement measures contained in the Module are of varying severity and will be used in keeping with the CBB's assessment of the contravention, reserving the most serious enforcement measures for the most serious of contraventions.
Amended: January 2007ES-1.14.3
The CBB follows a proportionality principle in its enforcement measures, and will usually opt for the least severe of appropriate enforcement measures, consistent with the desired outcome. The CBB's enforcement approach includes:
(a) Formal requests for information;(b) Investigations;(c) Formal warnings;(d) Directions;(e) Financial penalties;(f) Administration;(g) Cancellation of license;(h) Cancellation of "fit and proper" approval; and(i) Cancellation of registration (foractuaries ,loss adjusters andappointed representatives only).Amended: October 2009
Amended: January 2007ES-1.14.4
A reminder of criminal sanctions in the CBB Law and other legislation is set out in Chapter EN-10.
Amended: January 2007ES-1.15 ES-1.15 [This Section was deleted in October 2012 as it is included in Chapter BC-4]
ES-1.15.1
[This Paragraph was deleted in October 2012].
Deleted: October 2012
Amended: January 2007
Amended: October 2007ES-1.15.2
[This Paragraph was deleted in October 2012].
Deleted: October 2012
Adopted: January 2007ES-1.16 ES-1.16 Module CP — Compensation
ES-1.16.1
This Module provides space, for possible inclusion at a later date, for a description of a
policyholder protection scheme, should such a scheme be developed in cooperation with the industry.Amended: January 2007ES-1.17 ES-1.17 Module CI — Captive Insurers
ES-1.17.1
This Module provides a summary of Rules and Guidance applicable to
captive insurance firms , that are contained in the main subject Modules of Volume 3 (Insurance). Module CI (Captive Insurers) only contains Guidance material.Amended: January 2007ES-1.17.2
While Module CI is primarily focused for
captive insurers , it contains the requirements that would need to be fulfilled by captive management firms (insurance managers ), in meeting the regulatory obligations ofcaptive insurers .Amended: January 2007ES-1.17.3
The Module extracts several of the rules applicable to
captive insurers , and tailored to meet the unique nature ofcaptive insurers , including:(a) The option to be licensed as a special purpose vehicle (SPV), specifically established to carry out the activities of acaptive insurer (Module AU);(b) Lighter requirements with respect to high-level controls (Module HC);(c) Exemptions to rules in respect of due diligence requirement for client records, approval for corporate and trade names and pre-approval for distribution of dividends toshareholders (Module GR);(d) Capital requirements based on the type (Category C1 orCategory C2 firm) ofcaptive insurers (Module CA);(e) Exemptions from quarterly and group financial reporting (Module BR); and(f) The non-application of public disclosure requirements forcaptive insurers (Module PD).Amended: April 2011
Amended: January 2007
Amended: October 2007ES-1.18 ES-1.18 Module IM — Insurance Intermediaries and Managers
ES-1.18.1
This Module provides a summary of Rules and Guidance applicable to
insurance intermediaries (insurance brokers andinsurance consultants ) andinsurance managers , that are contained in the main subject Modules of Volume 3 (Insurance). Module IM (Insurance Intermediaries and Managers) only contains Guidance material.Amended: January 2007ES-1.18.2
The
regulated insurance services ofinsurance consultants andinsurance managers are defined in Section AU-1.4, detailing the type of services that can be offered by these intermediaries.Amended: January 2007ES-1.18.3
The category of
insurance manager is being introduced in the Rulebook, as the CBB has also introduced a regulatory framework to cater to the unique nature ofcaptive insurers . The CBB recognises that, in most cases, the operations ofcaptive insurers are sub-contracted toinsurance managers . To simplify the approval of the management subcontracted by acaptive insurer , the licensing ofinsurance managers will have been considered by the CBB in detail as part of its licensing process.Amended: January 2007ES-1.18.4
The Module extracts the rules applicable to
insurance intermediaries andinsurance managers , including:(a) The requirements to have in place professional indemnity coverage forinsurance brokers andinsurance consultants . (Module GR);(c) Exemptions from quarterly and group financial reporting (Module BR).Amended: January 2007
Amended: October 2007ES-1.19 ES-1.19 Module TA — Takaful/retakaful
ES-1.19.1
This Module provides a summary of Rules and Guidance applicable to
takaful andretakaful business that are contained in the main subject Modules of Volume 3 (Insurance). Module TA (Takaful/retakaful) only contains Guidance material.Amended: January 2007ES-1.19.2
Module TA recognises the unique nature of the
takaful /retakaful business and has carved out Rules in instances where conventional Rules could not be applied to atakaful entity.Amended: January 2007ES-1.19.3
Included in the Rules tailored to meet the requirements of the
takaful industry are:(a) The requirement fortakaful firms to have aShari'a Supervisory Board in addition to a Board of Directors (Module HC); and(b) Capital and solvency Rules taking into account the participants' funds and the possibility of Qard Hassan from the shareholder fund in instances where thetakaful fund does not fully meet the liquidity requirements (Module CA).Amended: April 2014
Amended: January 2007ES-2 ES-2 Transition Rules
ES-2.1 ES-2.1 General Requirements
ES-2.1.1
Insurance licensees who were licensed prior to the publication of Volume 3 (Insurance), do not need to resubmit an application for a license.ES-2.1.2
Insurance licensees licensed prior to 1 June 2005 will have their license category, and the scope of their authorisation, confirmed in an exchange of letters.Amended: January 2007ES-2.1.3
Insurance licensees licensed prior to 1 June 2005, must comply with all other requirements of the Rulebook, when these take effect on 1 June 2005, unless different transition arrangements have been agreed in writing with the CBB beforehand or in accordance with the transition rules incorporated throughout in this Module.Amended: January 2007ES-2.2 ES-2.2 Module AU — Authorisation
ES-2.2.1
In instances where an
insurance licensee carries on a commercial business, at the time where the Insurance Rulebook becomes effective, theinsurance licensee must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to AU-1.1.11).Amended: January 2007ES-2.3 ES-2.3 Module HC — High-Level Controls
ES-2.3.1
Insurance brokers who were licensed prior to the introduction of Volume 3 (Insurance), and who were unincorporated entities or natural persons at that time, may continue as such until 31 December 2006.ES-2.3.2
[This Paragraph was deleted in April 2011].
Deleted: April 2011
Amended: January 2007ES-2.3.3
The updated Module is effective on 1st January 2011. All
insurance licensees to which Module HC applies must be in full compliance by the financial year end 2011.Added: April 2011ES-2.4 ES-2.4 Module AA — Auditors and Actuaries
ES-2.4.1
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: July 2007ES-2.4.2
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: April 2008
Adopted: January 2007ES-2.4.3
The first five year-period where the requirement for the rotation of audit partner referred to in Paragraph AA-1.3.1 takes effect, ends 31 December 2010. Therefore, unless there has been a change in the partner appointed since the Rulebook was issued in May 2005, or if a company has been licensed since the Rulebook has been issued, insurance licensees will need to have a new partner responsible for the audit engagement for the year 2011.
Adopted: October 2007ES-2.5 ES-2.5 Module GR — General Requirements
Books and Records (GR-1)
ES-2.5.1
All
insurance licensees must comply with the requirements for books and records outlined in Chapter GR-1, effective 1 July 2005.Professional Indemnity Coverage (GR-10)
ES-2.5.2
Except as provided for by Paragraph ES-2.5.3, professional indemnity coverage requirements must be met by
insurance brokers andinsurance consultants by 31 December 2005.ES-2.5.3
Unincorporated
Bahraini insurance brokers licensed prior to 1 June 2005 must meet the professional indemnity coverage requirements by 31 December 2006.Appointed Representatives (GR-9)
ES-2.5.4
Requirements for the registration of appointed representatives and minimum qualifications as outlined in Chapter GR-9 are effective 1st January 2010.
Adopted: October 2009ES-2.6 ES-2.6 Module CA — Capital Adequacy
ES-2.6.1
Except as otherwise noted below, the requirements of Module CA are to be implemented, effective 31 December 2005.
Insurance Firm
ES-2.6.2
Bahraini insurance firms licensed prior to 1 April 2005 that do not meet the requirements of Paragraph CA-1.2.1, will be required to meet the requirements for minimum Tier 1 capital by 31 December 2007. In addition, the requirements to maintain a capital available in excess of the greater of the Required Solvency Margin and minimum fund must be met byinsurance firms by 31 December 2005.Insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.8, are grandfathered and not required to apply the requirements of Paragraph CA-1.2.1.Amended: January 2007
Amended: October 2007Insurance Broker
ES-2.6.3
In respect of licensees who were carrying out activities that fall within the definition of the regulated activity of
insurance broker prior to 1 April 2005, the requirements of Paragraph CA-1.3.1 (capital requirements) will apply from 1 January 2007.Amended: January 2007Takaful Firms
ES-2.6.4
Where a
takaful firm was licensed prior to the Rulebook coming into force, Section ES-2.6.5 applies.Amended: April 2014
Amended: October 2007
Amended: January 2007ES-2.6.5
A
takaful firm operating on a basis other than that prescribed by Paragraph CA-8.2.1 at the date the Rulebook comes into force, must in respect of alltakaful contracts written after this date, manage those contracts in accordance with Paragraph CA-8.2.1.Takaful contracts written before this date hereafter referred to as pre-existing contracts, must continue to be managed in accordance with thetakaful model or models operated by thetakaful firm prior to Paragraph CA-8.2.1 coming into force, until such time as all obligations of thetakaful fund or funds under those pre-existing contracts have been discharged in full.Amended: April 2014
Amended: October 2007
Amended: January 2007ES-2.6.6
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: January 2007ES-2.6.7
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: January 2007ES-2.6.8
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: January 2007ES-2.6AA1 ES-2.6AA1 Module BC – Business Conduct
ES-2.6AA1.1
All
insurance licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31st March 2012.Added: April 2012ES-2.6AA2 ES-2.6AA2 Module CL – Client Money
ES-2.6A ES-2.6A Module RM — Risk Management
ES-2.6B ES-2.6B Module FC — Financial Crime
ES-2.6B.1
For the year ending 31 December 2006,
insurance licensees must submit the report required as per Paragraph FC-3.3.1 (d), no later than 30 June 2007.Adopted: January 2007ES-2.7 ES-2.7 Module BR — CBB Reporting
ES-2.7.1
The first Insurance Firm Return (IFR) for both
conventional insurance firms andtakaful firms , required under Section BR-1.1, must be submitted to the CBB for the financial year ending 31 December 2006.Amended: January 2007ES-2.7.2
The first Group Insurance Firm Return (GIFR) for
insurance firms , required under Section BR-1.3, must be submitted to the CBB for the financial year ending 31 December 2006.Amended: January 2007ES-2.7.3
The first quarterly return (IFRQ) for insurance firms, required under Section BR-1.4, must be submitted to the CBB for the quarter ending 31 March 2007.
Amended: January 2007ES-2.7.4
The first annual return (IBR) for
insurance brokers , required under Section BR-1.2A, must be submitted to the CBB for the semi-annual period ending 31 December 2012.Added: April 2012ES-2.7.5
The first semi-annual return (IBRS) for
insurance brokers , required under Section BR-1.4A, must be submitted to the CBB for the semi-annual period ending 30 June 2012.Added: April 2012ES-2.8 ES-2.8 Module PD — Public Disclosure
ES-2.8.1
For purposes of Chapter PD-2, semi-annual disclosure requirements are effective for the period ending 30 June 2008.
Amended: January 2007High Level Standards
AU AU Authorisation
AU-A AU-A Introduction
AU-A.1 AU-A.1 Purpose
Executive Summary
AU-A.1.1
The Authorisation Module sets out the Central Bank of Bahrain's (CBB) approach to licensing providers of
regulated insurance services in the Kingdom of Bahrain. It also sets out CBB requirements for approving persons undertaking key functions in those providers. Finally, it sets out requirements for registering certain support services (actuaries ,loss adjusters andappointed representatives ).Amended: October 2011
Amended: October 2009
Amended: July 2007AU-A.1.2 [Deleted]
Deleted July 2007AU-A.1.2
Persons who provide any of the following
regulated insurance services within or from the Kingdom of Bahrain require a license:(a) The carrying on of insurance business;(b) The broking of insurance contracts;(c) The offering of advice to third parties regarding individual insurance requirements and products;(d) The provision of insurance management services (such as captive managers); and(e) The operating of a recognised insurance exchange.Amended: July 2007AU-A.1.3
The categories of
regulated insurance services listed in AU-A.1.2 in turn determine the license category of the provider. The requirements in Volume 3 (Insurance) are tailored in certain respects, according to the license category concerned, in order to address the specific features and risks associated with each type ofregulated insurance services .Amended: July 2007AU-A.1.4
For the purposes of Volume 3 (Insurance), providers licensed to undertake activities falling under AU-A.1.2 (a) are categorised as '
insurance firms '; those under (b), as 'insurance brokers '; those under (c), as 'insurance consultants '; those under (d), as 'insurance managers '; and those under (e), as 'insurance exchange operators '. A provider ofregulated insurance services can only hold one of the above license categories; different categories may not be combined.Amended: July 2007AU-A.1.5
Collectively, licensed providers of
regulated insurance services are calledinsurance licensees . Bahrain-incorporatedinsurance licensees are calledBahraini insurance licensees .Insurance licensees that are incorporated in an overseas jurisdiction and operate via a branch presence in the Kingdom of Bahrain are calledoverseas insurance licensees . The same naming convention applies to the various categories of license holders: for example,Bahraini insurance brokers are incorporated in Bahrain andoverseas insurance brokers operate via a branch presence.Amended: July 2007Licensing
Approved Persons
AU-A.1.6
Persons undertaking certain functions in relation to CBB
insurance licensees require prior CBB approval. These functions (called 'controlled functions ') includeDirectors and members of senior management. Thecontrolled functions regime supplements the licensing regime by ensuring that key persons involved in the running ofinsurance licensees are fit and proper. Those authorised by the CBB to undertakecontrolled functions are calledapproved persons .Amended: July 2007Registration
AU-A.1.7
Persons wishing to carry on the business of an
actuary ,loss adjuster orlicensed principal wishing to appointappointed representative within the Kingdom of Bahrain are required to register with the CBB. Registrants are subject to basic screening to verify their expertise and general suitability, at the point of application. Unlikeinsurance licensees , they are not subject to detailed Directives and Regulations and continuous, risk-based supervision.Amended: October 2009
Amended: July 2007Retaining Authorised Status
Ancillary Services Providers
AU-A.1.9
Ancillary services providers are not covered in Volume 3 (Insurance) of the Rulebook. Requirements covering these types of activities will instead be included in Volume 5.Amended: October 2011
Amended: July 2007AU-A.1.10
Until such time as Volume 5 (Specialised Activities) of the CBB Rulebook is issued,
ancillary services providers remain subject to the requirements contained in the CBB's 'Standard Conditions and Licensing Criteria', a copy of which is available from the CBB Licensing Directorate.Amended: April 2018
Amended: October 2011
Amended: July 2007AU-A.1.11
[This Paragraph was merged with Paragraph AU-A.1.9 above, in January 2007].
Amended: July 2007AU-A.1.12
[This Paragraph was merged with Paragraph AU-A.1.10 above, in January 2007]
Amended: July 2007Legal Basis
AU-A.1.13
This Module contains the CBB's Regulations, Resolutions and Directive (as amended from time to time) regarding authorisation requirements applicable to
insurance licensees ,approved persons and registered bodies and is issued under the powers available to the CBB under Articles 37 to 42, 44 to 48 and 180 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding regulated insurance services as per Article 39 (see Chapter AU-1), licensing conditions and processes as per Articles 44 to 48 (see Chapters AU-2 and AU-5) and licensing and registrations fees as per Article 180 (see Chapter AU-6) are also included in Resolutions and included in this Module. Module AU includes the requirements contained in Resolution No (1) of 2007 with respect to determining fees categories due for licensees and services provided by the CBB. Module AU also contains the minimum qualifications and fit and proper requirements forappointed representatives issued in 2009 under Resolution 11 in accordance with Article 74 of the CBB Law. The Module contains requirements governing the conditions of granting a license for the provision of regulated services as prescribed under Resolution No (43) of 2011 and issued under the powers available to the CBB under Article 44(c). Finally, the Module contains requirements under Resolution No.(16) for the year 2012 including the prohibition of marketing financial services pursuant to Article 42 of the CBB Law. This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.Amended: July 2015
Amended: January 2013
Amended: October 2011
Amended: January 2011
Amended: October 2009
Added: July 2007AU-A.1.14
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: July 2007AU-A.2 AU-A.2 Module History
AU-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made. UG-3 provides further details on Rulebook maintenance and version control.
Amended: July 2007AU-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where these involved changes in the substance of Rules.
Added: July 2007AU-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes AU-1.1 01/07/05 Corrections made to cross references. AU-1.2 01/07/05 Correction to typo and clarification to AU-1.2.4. AU-1.4 01/07/05 Clarified possible exclusion to regulated insurance services. AU-5.1 01/07/05 Clarified AU-5.1.2 and amended AU-5.1.8(e) to reflect that the cash deposit to be held with a commercial bank also applies to insurance brokers. AU-5.2 01/07/05 Correction made to cross reference. AU-5.3 01/07/05 Corrected reference to Form 4 (Application for Registration). AU-1.1 01/10/05 Clarified application of grandfathering provisions for composite companies. AU-2.1 01/10/05 Clarified legal status for E.C. companies and added the option for insurance manager to operate as a branch resident in Bahrain of a company incorporated in another jurisdiction. AU-2.2 01/10/05 Clarified guidance on mind and management for insurance licensees originally licensed as exempt companies. AU-2.8 01/10/05 Clarified the application of IFRS and AAOIFI standards. AU-2.1 01/01/06 Clarified legal status for EC companies that are insurance brokers and insurance consultants. AU-2.1.6 01/04/06 Guidance Paragraph deleted in October 2005. AU-1.2.2 01/01/07 Added Signing Actuary (where the Signing Actuary is an employee of the insurance firm) to the list of controlled functions for which an application for approved person must be submitted. AU-A.1.13 01/2007 New Rule introduced, categorising this Module as a Directive. AU-1.1.24 01/2007 Added Rule pertaining to suitability of applicants for authorisation. AU-2.1.11 01/2007 Corrected legal status requirements for insurance consultants. AU-2.6.1A 01/2007 Added a Rule dealing with the segregation of staff responsibilities. AU-5.1. 01/2007 Section amended to reflect new procedures reflecting CBB Law. AU-5.4 01/2007 Amended to reflect new CBB Law procedures. AU-5.5 01/2007 Amended to reflect new CBB Law procedures. AU-6 01/2007 New Chapter on Licensing and Registration Fees added. AU-1.1.14 10/2007 Pure reinsurers can undertake both general insurance business andlong-term insurance business within the same entity.AU-1.2.3 and 1.2.4 10/2007 Clarified the controlled functions for which CBB prior approval is required. AU-2.5.4 10/2007 Clarified that insurance brokers must also maintain a cash deposit as per Section GR-7.1.AU-5.1.5 and 5.1.5A 01/2008 Clarified CBB's requirements for letters of comfort and/or letters of guarantee. AU-5.1.13 01/2008 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued. AU-5.2.2 04/2008 Clarified to whom Form 3 should be sent to if dealing with a request for an appointment of MLRO from an existing investment firm licensee. AU-5.5.6 04/2008 Outlined CBB's requirements in instances where a controlled function becomes vacant. AU-6.3 04/2008 Clarified the payment of annual fees for new insurance licensees and registered persons. AU-5.2.5 07/2008 Clarified that the refusal decision by the CBB to grant a person 'approved person' status is issued to the insurance licensee. AU-5.2.6 07/2008 Added cross reference. AU-6.3 10/2008 Introduced a minimum licensing fee for new applicants whose annual licensing fees may be prorated. AU-2.1.8 04/2009 Amended the legal status of insurance broker to no longer allow the establishment of new licensees as single person company. AU-6.3.12 and 6.3.12A 04/2009 Clarified the rules regarding annual license fees to be paid by new licensees in relation to the first year in which the license has been granted. AU-6.3.16 04/2009 Deleted Paragraph waiving annual fees for insurance licensees in run-off and whose license has been restricted to servicing existing business. AU-A.1, AU-B.2, AU-1.3A, AU-4, AU-5.3, AU-5.5 and AU-6.3 10/2009 Added registration requirements for appointed representatives. AU-A.1.13 10/2009 Reference to Regulations added to Paragraph under Legal Basis. AU-2.1.8 and AU-2.1.11 10/2009 The legal status option for insurance brokers and insurance consultants to be established as a branch resident in Bahrain of a company incorporated in another jurisdiction has been deleted. AU-1.4.16A 04/2010 Guidance provided on the definition of regulated services for insurance consultants. AU-2.1.8 04/2010 Clarified the legal status for insurance brokers. AU-4.1.2A 04/2010 Added guidance on relevant loss adjusters associations used in evaluating expertise condition. AU-5.2.1 04/2010 Added requirement for licensees to verify accuracy of information contained in form 3 (Approved persons). AU-5.2.2A and B 04/2010 Clarified requirements when submitting Form 3. AU-5.2.7 and 5.2.8 04/2010 Clarified notification requirements when applying for Approved person status. AU-A.1.13 01/2011 Clarified legal basis. AU-5.1.5A 01/2011 Removed the reference to a letter of comfort that may be provided with an application for license. AU-1.2.9A 04/2011 Clarified the position of Chairman and that of managing director. This Rule was moved from the former version of Module HC. AU-1.2.11A 04/2011 Added a definition Paragraph for the compliance officer. AU-A.1.10 10/2011 Guidance Paragraph amended as Volume 5_Representative Offices was issued in December 2010. AU-A.1.13 10/2011 Legal basis updated to reflect all Articles of the CBB Law covered by this Module as well as applicable Resolutions. AU-5.1.13 10/2011 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued to be in line with other Volumes of the Rulebook. AU-5.5 10/2011 Clarified language on cancellation of a license to be in line with other Volumes of the CBB Rulebook. AU-1.4.10 04/2012 Reference added to appointed representatives. AU-2.1.8 and AU-2.1.9 10/2012 Clarified legal status for single person company and natural person. AU-5.5.4A 10/2012 Corrected cross reference. AU-A.1.13 01/2013 Updated legal basis. AU-B.1.1 01/2013 Updated prohibition as per issuance of Resolution No.(16) for the year 2012. AU-1.1 01/2013 References added to requirements under Resolution No.(16) for the year 2012. AU-6.3 07/2013 Amended due date and collection process for annual license and registration fees. AU-1.2 04/2014 Approved persons requirement updated to reflect consultation undertaken on the enhanced operational and solvency framework. AU-1.4.13 10/2014 Amended the definition of exempt introducer. AU-2.1.11 10/2014 Aligned with Commercial Companies Law. AU-A.1.13 07/2015 Legal basis updated to reflect Resolution No (23) of 2015. AU-5.2 07/2015 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons. AU-1.2 01/2016 Clarified general requirements for approved persons. AU-3 01/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons. AU-4.2.2 01/2016 Corrected cross reference. AU-5.1.4 01/2016 Paragraph deleted as no longer applicable. AU-5.2 01/2016 Minor amendments to be aligned with other Volumes of the Rulebook. AU-5.6 07/2017 Added new Section on Publication of the Decision to Grant, Cancel or Amend a License. AU-A.1.10 04/2018 Amended Paragraph. AU-5.1.1 04/2018 Amended Paragraph. AU-5.1.12E 04/2018 Amended sub-paragraph. AU-5.2.2 04/2018 Amended Paragraph. AU-5.3.1 04/2018 Amended Paragraph. AU-5.1.1 07/2019 Amended Paragraph to remove references to hardcopy Form 1 submission to online submission. AU-1.1.18A 10/2019 Added a new Paragraph on Insurance Aggregators. AU-1.1.18B 10/2019 Added a new Paragraph on Insurance Aggregators. AU-1.1.18C 10/2019 Added a new Paragraph on Insurance Aggregators. AU-5.1.12I 10/2019 Changed from Rule to Guidance. AU-5.1.12J 10/2019 Changed from Rule to Guidance. AU-5.6.1 10/2019 Changed from Rule to Guidance. AU-1.2 10/2020 Amended Section on Approved Persons. AU-1.4.3A 10/2020 Added a new Paragraph on compliance with AAOIFI Standards. AU-1.3A.3 07/2023 Added a new Paragraph on meeting the requirements of an appointed representative. AU-1.3A.4 07/2023 Added a new Paragraph on appointed representative termination notification. AU-1.3A.5 07/2023 Added a new Guidance on appointed representatives compliance with requirements. AU-4.1.1 07/2023 Deleted appointed representatives from the relevant expertise. AU-4.1.5 07/2023 Deleted Paragraph. AU-4.1.6 07/2023 Deleted Paragraph. AU-4.1.7 07/2023 Deleted Paragraph. AU-4.2.1 07/2023 Deleted appointed representatives. AU-5.5.9 – AU-5.5.10 07/2023 Deleted appointed representatives. AU-6.3.6 07/2023 Amended registration fixed fee for registered actuaries. AU-A.2.3
This Module supersedes various articles contained in Ministerial Order No. 6 of 1990 regarding the issue of regulations for implementing legislative decree No. 17 of 1987 with respect to insurance companies and organisations. The specific articles in the Ministerial Order that have been cancelled by this Module are listed below:
Order No. 6 Article Ref. Module Ref. Subject 2–8 Licensing of insurance firms 21–27 Licensing of insurance brokers 33–42 Registration of actuaries 43–51 Registration of loss adjusters 53–64 Licensing of insurance consultants AU-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: July 2007AU-B AU-B Scope of Application
AU-B.1 AU-B.1 The Public
AU-B.1.1
The Authorisation requirements in Chapter AU-1 are generally applicable to the public, in that they prevent a person (whether legal or natural) from undertaking certain specified activities if they do not hold the appropriate authorisation from the CBB or marketing any
financial services unless specifically allowed to do so by the CBB (see Rule AU-1.1.1). In addition, those applying for authorisation are also required to comply with the relevant requirements and procedures contained in this Module.Amended: January 2013
Amended: July 2007AU-B.1.2
Three types of authorisation are prescribed:
(i) Any person who provides aregulated insurance service within or from the Kingdom of Bahrain requires a license (see AU-1.1);(ii) Natural persons wishing to perform acontrolled function in aninsurance licensee require prior CBB approval, as anapproved person (see AU-1.2); and(iii) Any person wishing to provide actuarial or loss adjuster services within the Kingdom of Bahrain is required to register with the CBB (see AU-1.3).Amended: July 2007AU-B.1.3
Because of the general applicability of many of the requirements contained in this Module, they are supported by way of a Regulation (see Section UG-1.1 for an explanation of the CBB’s rule-making powers and different regulatory instruments).
Added: July 2007AU-B.2 AU-B.2 Authorised Persons
AU-B.2.1
Various requirements in Chapters AU-2 to AU-5 inclusive also apply to persons once they have been authorised by the CBB (whether as licensees,
approved persons or registeredactuaries ,loss adjusters andappointed representatives ).Amended: October 2009
Amended: July 2007AU-B.2.2
Chapter AU-2 applies to
insurance licensees (not just applicants), since licensing conditions have to be met on a continuous basis by licensees. Similarly, Chapter AU-3 applies toapproved persons on a continuous basis; it also applies toinsurance licensees seeking anapproved person authorisation. Chapter AU-4 applies toactuaries ,loss adjusters andappointed representatives that are either registered by the CBB or are seeking to be registered by the CBB. Chapter AU-5 contains requirements applicable to licensees, with respect to the starting up of their operations, as well as to licensees,approved persons and registeredactuaries ,loss adjusters andappointed representatives with respect to the amendment or cancellation of their authorised status. Finally, Section AU-6.2 imposes annual fees on licensees and registeredactuaries ,loss adjusters andlicensed principals for their registeredappointed representatives .Amended: October 2009
Amended: July 2007AU-1 AU-1 Authorisation Requirements
AU-1.1 AU-1.1 Insurance Licensees
General Prohibition
AU-1.1.1
No person may:
(a) Undertake (or hold themselves out to undertake)regulated insurance services , by way of business, within or from the Kingdom of Bahrain unless duly licensed by the CBB;(b) Hold themselves out to be licensed by the CBB unless they have as a matter of fact been so licensed; or(c) Market anyfinancial services in the Kingdom of Bahrain unless:(i) Allowed to do by the terms of a license issued by the CBB;(ii) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or(iii) Has obtained the express written permission of the CBB to offerfinancial services .Amended: January 2013
Amended: July 2007AU-1.1.1A
For the purposes of Rule AU-1.1.1(a), please refer to Section AU-1.4 for the definition of ‘
regulated insurance services ’ and ‘by way of business’. Such activities will be deemed to be undertaken within or from the Kingdom of Bahrain if, for example, the person concerned:(a) Is incorporated in the Kingdom of Bahrain;(b) Uses an address situated in the Kingdom of Bahrain for its correspondence; or(c) Directly solicits clients, who are resident within the Kingdom of Bahrain.Added: July 2007AU-1.1.2
For the purposes of AU-1.1.1(b), and in accordance with Article 41(b) of the CBB Law persons would be considered in breach of this requirement if they were to trade as, or incorporate a company in Bahrain with a name containing the words '(re)insurance', '(re)assurance' or '(re)takaful', or the words 'broker', 'consultant', or 'manager' in combination with '(re)insurance', '(re)assurance' or '(re)takaful' (or the equivalents in any language), without holding the appropriate CBB license or the prior approval of the CBB.
Amended: July 2007AU-1.1.2A
In accordance with Resolution No.(16) for the year 2012 and for the purpose of Subparagraph AU-1.1.1(c), the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire
financial services in return for monetary payment or some other form of valuable consideration.Added: January 2013
Authorisation
AU-1.1.3
Depending on the type of
regulated insurance service that a person wishes to undertake, applicants must seek to be licensed either as aninsurance firm , aninsurance broker , aninsurance consultant , aninsurance manager or aninsurance exchange operator . These license categories cannot be combined.Amended: July 2007AU-1.1.4
Within the Kingdom of Bahrain and in respect of Bahrain residents, licensed
insurance firms andinsurance brokers may only effect contracts of insurance through intermediaries when these intermediaries are:(a) Licensed by the CBB (e.g., as aninsurance broker );(b)Exempt introducers (as defined in Paragraph AU-1.4.13); or(c)Appointed representatives .Amended: July 2007AU-1.1.5
Persons wishing to be licensed to undertake
regulated insurance services within or from the Kingdom of Bahrain must apply in writing to the CBB.Amended: July 2007AU-1.1.6
An application for a license must be in the form prescribed by the CBB and must contain, inter alia:
(a) A business plan specifying the type of business to be conducted;(b) Application forms for allcontrollers ;(c) Application forms for allcontrolled functions ; and(d) Forinsurance brokers andinsurance consultants , details of proposed professional indemnity coverage.Amended: July 2007AU-1.1.7
The CBB will review the application and duly advise the applicant in writing when it has:
(a) Granted the application without conditions;(b) Granted the application subject to conditions specified by the CBB; or(c) Refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.Amended: July 2007AU-1.1.8
Detailed Rules and Guidance regarding information requirements and processes for licenses can be found in Section AU-5.1. As specified in Paragraph AU-5.1.12 and in accordance with Article 44(e) of the CBB Law, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.
Amended: July 2007AU-1.1.8A
In granting new licenses, the CBB will specify the type of
regulated insurance services for which a license has been granted, and include further conditions in relation to the license such as the class of business authorised, whether theinsurance firm is operating on a conventional or takaful basis, limited toreinsurance or licensed as acaptive insurer .Added: July 2007AU-1.1.9
All applicants seeking an
insurance license must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed,insurance licensees must maintain these criteria on an ongoing basis.Amended: July 2007AU-1.1.10
An
insurance licensee must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than insurance business and activities directly arising from or incidental to that business.AU-1.1.11
In instances where an
insurance licensee carries on a commercial business, at the time where the Insurance Rulebook becomes effective, theinsurance licensee must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to Paragraph ES-2.2.1).Amended: July 2007AU-1.1.12
Activities 'directly arising from or incidental' to an
insurance firm's business, for instance, will depend on the type of insurance provided by an insurer. By way of example, an insurance firm providing health insurance may show a connection with owning and managing hospitals, an insurer providing insurance that covers damage to motor vehicles may reasonably be able to own accident repairers or garages. Insurers should consult the CBB in relation to their own circumstances in determining if an activity directly arises from or is incidental to their insurance business.Amended: July 2007Insurance Firms
AU-1.1.13
For the purposes of Volume 3 (Insurance),
insurance firms are defined asinsurance licensees who undertake theregulated insurance service of carrying on insurance business, as defined in Paragraphs AU-1.4.7 to AU-1.4.9.Amended: July 2007AU-1.1.14
An
insurance firm must satisfy the CBB as to its suitability for each type and class of insurance business for which it is seeking authorisation. With the exception ofcaptive insurers andpure reinsurers , aninsurance firm cannot undertake both general andlong-term insurance business.Insurance firms (includingcaptive insurers ), must operate on either conventional insurance principles or on takaful principles: they cannot combine the two.Amended: July 2007
Amended: October 2007AU-1.1.15
In granting new licenses, the CBB will specify the classes of insurance for which authorisation has been granted, and on what basis (i.e. conventional insurance principles or takaful principles). For reinsurance companies, the license will restrict the
insurance firm to undertaking reinsurance business only. Forcaptive insurers , the license will also restrict theinsurance firm to effecting insurance contracts with its own group members only. Grandfathering provisions apply for thoseinsurance firms whose past license granted them the right to undertake both general andlong-term insurance business (composite companies). In addition, composite companies are subject to the requirements of Paragraph GR-1.1.3 with respect to separate books and records for each kind of business. The grandfathering exemption will only apply to the licensee's classes of insurance business as at 1st April 2005, i.e. when Volume 3 (Insurance) was first issued. Should theinsurance licensee wish to add additional classes of business, it will be required to separate its general and long-term business into separate licenses.Amended: July 2007Insurance Brokers
AU-1.1.16
For the purposes of Volume 3 (Insurance),
insurance brokers are defined asinsurance licensees who undertake theregulated insurance service of broking of insurance contracts, as defined in Paragraphs AU-1.4.10 to AU-1.4.15.Amended: July 2007AU-1.1.17
[This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]
Amended: July 2007AU-1.1.18
An
insurance broker may be licensed for one or more of the following types of business:(a) General insurance (as defined in Paragraph AU-1.4.9);(b) Unit-linked long-term insurance;(d)Reinsurance ; and(e)Takaful products.Amended: July 2007
Amended: October 2007Insurance Consultants
AU-1.1.19
For the purposes of Volume 3 (Insurance),
insurance consultants are defined asinsurance licensees who undertake theregulated insurance service of offering insurance advice, as defined in Paragraphs AU-1.4.16 to AU-1.4.18.Amended: July 2007AU-1.1.20
[This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]
Amended: July 2007AU-1.1.21
An
insurance consultant may be licensed for one or more of the following types of business:(b) Unit-linked long-term insurance;(d)Reinsurance ; and(e)Takaful products.Amended: July 2007Insurance Aggregator
AU-1.1.18A
For the purposes of Volume 3 (Insurance),
insurance aggregators are defined as insurance intermediaries with an insurance broker's license who operate an online platform, whether hosted on an Internet website or available as a smart device application which provides price comparisons and facilitates the purchase of insurance on behalf of insurance companies.Added: October 2019AU-1.1.18B
If any
insurance aggregator wishes to provide additional regulated insurance broker services, such as handling of claims for its clients, it must seek the approval of the CBB.Added: October 2019AU-1.1.18C
An
insurance aggregator license is allowed to provide insurance aggregation and other brokerage services with the CBB's approval only through the online platform. The aggregator may not undertake the activities of a traditional broker.Added: October 2019Insurance Managers
Insurance Exchange Operators
Suitability
AU-1.1.24
Those seeking authorisation must satisfy the CBB as to their suitability to carry out the
regulated investment services for which they are seeking authorisation.Added: July 2007AU-1.1.25
In assessing applications for a license, the CBB will assess whether an applicant satisfies the licensing conditions (as specified in Chapter AU-2) with respect to all the
regulated investment services that the applicant proposes undertaking.Added: July 2007AU-1.2 AU-1.2 Approved Persons
General Requirement
AU-1.2.1
Insurance licensees must obtain the CBB's prior written approval for any person wishing to undertake acontrolled function in aninsurance licensee . The approval from the CBB must be obtained prior to their appointment, subject to the variations contained in Paragraph AU-1.2.3.Amended: January 2016
Amended: July 2007AU-1.2.2
Controlled functions are those functions occupied by board members and persons in executive positions and include:(a)Board Member /Director (for Bahraini insurance licensee only);(b)Chief Executive orGeneral Manager and their Deputies;(c) Heads of other functions including (IT and HR functions);(d) Head of risk management;(e) Compliance officer;(f) Money Laundering Reporting Officer;(g) [This sub-Paragraph was deleted in October 2020];(h) Internal Shari'a reviewer (where applicable);(i)Unit-linked investment adviser (where applicable);(j)Signing Actuary (where the function is undertaken by aDirector or anemployee of theinsurance firm );(k) Chief Financial Officer and/ or Head of Finance;(l) Head of Internal Audit;(m) Head of Underwriting;(n) Head of Claims; and(o) Head of Sales and Marketing/ Head of Business Development.Amended: October 2020
Amended: January 2016
Amended: April 2014
Amended: October 2007
Amended: July 2007AU-1.2.3
Controlled functions may be combined with any other functions, subject to the CBB's prior written approval and such combination must not result in any possible conflict of interest.Amended: April 2014
Amended: October 2007
Amended: July 2007AU-1.2.4
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: July 2007AU-1.2.5
[This Paragraph was deleted in April 2014.]
Deleted: April 2014Basis for Approval
AU-1.2.6
Approval under Paragraph AU-1.2.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections AU-3.1 and AU-3.2 respectively.
Amended: July 2007Definitions
Board Member/ Director
AU-1.2.7
Director is any person who occupies the position of aDirector , as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).Amended: July 2007AU-1.2.8
The fact that a person may have '
Director ' in their job title does not of itself make them aDirector within the meaning of the definition noted in Paragraph AU-1.2.7. For example, a 'Director of Marketing', is not necessarily a member of the Board ofDirectors and therefore may not fall under the definition of Paragraph AU-1.2.7.Amended: July 2007Chief Executive Officer or General Manager and their Deputies
AU-1.2.9
The
Chief Executive orGeneral Manager means a person who is responsible for the conduct of the licensee (regardless of actual title). TheChief Executive orGeneral Manager must be resident in Bahrain. This person is responsible, alone or jointly, for the conduct of the whole of the firm, or, in the case of anoverseas insurance licensee , for all of the activities of the branch.AU-1.2.9A
The Chairman of the Board may not act as the
Chief Executive orGeneral Manager . However, in the case of appointing aDirector on the Board as theManaging Director of theinsurance licensee , such person:(a) Should be fully responsible for the executive management and performance of theinsurance licensee , within the framework of delegated authorities set by the Board;(b) Must devote full-time working hours to theinsurance licensee ; and(c) Must not be employed at any other firm.Added: April 2011Heads of other functions
AU-1.2.10
Head of function means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.Chief Risk Officer/ Head of Risk Management
AU-1.2.10A
Chief risk officer/ Head of risk management is responsible for the management of all risk exposures arising from the activities of the
insurance firm .Amended: October 2020
Added: April 2014AU-1.2.11
Whether a person is a
head of function will depend on the facts in each case and is not determined by the presence or absence of the word in their job title. Examples ofhead of function might include, depending on the scale, nature and complexity of the business, a deputy Chief Executive; heads of departments such as Underwriting, Claims, Risk Management, Compliance or Internal Audit; the Chief Financial Officer; or aSigning Actuary (where that person is aDirector oremployee of the insurance firm concerned).Amended: July 2007Compliance Officer
AU-1.2.11A
All
insurance licensees must designate anemployee , of appropriate standing and resident in Bahrain, as Compliance Officer. The duties of the Compliance Officer include:(a) Having responsibility for oversight of the licensee's compliance with the requirements of the CBB; and(b) Reporting to the licensee's Board in respect of that responsibility.Added: April 2011Money Laundering Reporting Officer (MLRO)
Internal Shari’a Reviewer
AU-1.2.11B
The internal Shari'a reviewer in a
Takaful firm is responsible for the examination and evaluation of the adequacy and effectiveness of theTakaful firm 's system of internal Shari'a control. The internal Shari'a review function must comply with AAOIFI Governance standard for Islamic Financial Institutions No. 3. (See also Module TC Paragraph TC-1.1.10).Amended: October 2020
Added: April 2014Unit-Linked Investment Adviser
AU-1.2.11C
A
Unit-Linked Investment Adviser refers to the function of advising clients on contracts that are, by their nature, investment products, including, but not limited to pension and retirement products.Added: October 2020Signing Actuary
AU-1.2.11D
A
Signing Actuary is appointed to provide professional opinion and report on an insurance firm's actuarial evaluation; level of reserves that should be held in order to meet potential insurance liabilities. Thesigning actuary may be a Director or employee of the licensee and are accredited by an internationally recognised organisation.Added: October 2020Chief Financial Officer/ Head of Finance
AU-1.2.11E
The Chief Financial Officer/Head of Finance is responsible for directing the
insurance licensee’s financial function, including ensuring that the relevant accounting treatment is applied to all of the activities of theinsurance licensee in a timely manner. The scope of authority of the CFO/ Head of Finance is outlined in more detail in Subparagraph HC-6.3.2 (b).Added: October 2020Head of Internal Audit
AU-1.2.11F
The Head of Internal Audit is responsible for providing independent and objective review on the adequacy and effectiveness of the holistic internal control environment within the
insurance licensee . The duties of the head of internal audit are outlined in more detail in Subparagraph HC-6.3.2 (d).Added: October 2020Head of Underwriting
AU-1.2.11G
The Head of Underwriting function is involved in portfolio analysis and to manage the underwriting process such as risk assessment, pricing and negotiation with the broker or clients. The Head of Underwriting should ensure effective oversight and guidance of underwriting risk in line with the insurance licensee’s risk appetite and policies and procedures.
Added: October 2020Head of Claims
AU-1.2.11H
The Head of Claims function is responsible for directing and overseeing the operations of an insurance claims function to meet operational, financial and service requirements. The Head of Claims should ensure effective oversight and control of settlements in line with the insurance licensee’s risk appetite and policies and procedures. Moreover, the Head of Claims are involved in strategic processing and payment of claims and are often involved in sets policies on insurance claims.
Added: October 2020Head of Sales and Marketing/Head of Business Development
AU-1.2.11I
The Head of Sales and Marketing/Head of Business Development is responsible for implementing the corporate strategy; marketing, sales and public relations. He/ she is responsible for developing and overseeing the marketing campaigns, social media accounts, digital marketing channels and other marketing plans. He/ she ensures innovation in product design and developments and conduct behavioural and trend analysis. He/ she engages directly with customers and ensures services provided to customers are in line with insurance licensee’s policies and procedures and with industry best practices.
Added: October 2020AU-1.2.12
Where a firm is in doubt as to whether a function should be considered a
controlled function it must discuss the case with the CBB.Amended: July 2007AU-1.2.13
[This Paragraph was moved to AU-1.2.11C in October 2020].
Amended: October 2020
Amended: July 2007AU-1.3 AU-1.3 Registered Actuaries and Loss Adjusters
AU-1.3.1
In accordance with Article 74 of the CBB Law, a person may not carry on the business of an
actuary or aloss adjuster , without being registered as such with the CBB.Amended: July 2007AU-1.3.2
For the purposes of Paragraph AU-1.3.1 and in accordance with Article 1 of the CBB Law,
actuaries are defined as persons who hold themselves out as able to give a professional opinion on the level of reserves that should be held in order to meet potential insurance liabilities and are accredited by an international recognised organisation.Amended: July 2007AU-1.3.3
For the purposes of Paragraph AU-1.3.1,
loss adjusters are defined as persons who hold themselves out as being able to determine the extent of a firm's liability for loss when a claim is submitted. In doing so,loss adjusters may investigate and settle losses for aninsurance firm by surveying or assessing the extent of damages being claimed for under an insurance contract, investigate the causes of such damage, and the extent to which those damages are covered by the contract of insurance.Amended: July 2007AU-1.3A AU-1.3A Registered Appointed Representatives
AU-1.3A.1
In accordance with Resolution 11 issued under Article 74 of the CBB Law, a person may not be appointed by a
licensed principal as anappointed representative , without being registered as such with the CBB.Adopted: October 2009AU-1.3A.2
For the purposes of Paragraph AU-1.3A.1, an
appointed representative is defined as an agent, who is not licensed by the CBB asinsurance firm ,insurance broker orinsurance consultant , appointed by aninsurance firm (licensed principal ) as its representative according to the rules in Chapter GR-9.Adopted: October 2009AU-1.3A.3
For the purposes of Paragraph AU-1.3A.1, an
insurance firm must submit a confirmation that theappointed representative meets the criteria for appointment and thelicensee will be able to meet the on-going requirements stipulated in Chapter GR-9.Added: July 2023AU-1.3A.4
Insurance firms must notify the CBB when an arrangement with anappointed representative is terminated within 5 working days of such termination.Added: July 2023AU-1.4 AU-1.4 Definition of Regulated Insurance Services
AU-1.4.1
For the purposes of Volume 3 (Insurance) and in accordance with Article 39 of the CBB Law,
regulated insurance services are any of the activities specified in Section AU-1.4, carried on by way of business. However, upon application, the CBB may exclude one or more specific transactions from the definition ofregulated insurance services .Amended: July 2007AU-1.4.2
The CBB will normally only consider granting such an exemption when a Bahrain resident is unable to obtain a specific product in Bahrain and it would be unreasonable to require the overseas provider of that product to be licensed for that particular transaction.
Amended: July 2007AU-1.4.3
For the purposes of Volume 3 (Insurance), carrying on a
regulated insurance service by way of business means:(a) Undertaking one or more of the activities specified in Section AU-1.4 for commercial gain;(b) Holding oneself out as willing and able to engage in that activity; or(c) Regularly soliciting other persons to engage in transactions constituting that activity.Amended: July 2007AU-1.4.3A
Where licensees are undertaking regulated activities in accordance with Shari'a, all transactions and contracts concluded by
Insurance licensees must comply with Sharia standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The validity of the contract or transaction is not impacted, if at a later date, the relevant AAOIFI Sharia standards are amended.Added: October 2020General Exclusions
AU-1.4.4
With the exception of
insurance firms licensed to carry on insurance business as acaptive insurer , aperson does not carry on an activity constituting aregulated insurance service if theperson is a body corporate and carries on that activity solely with or for other bodies corporate, and they are all members of the same group.Amended: July 2007
Amended: October 2007AU-1.4.5
A
person does not carry on an activity constituting aregulated insurance service if the activity:(a) Is carried on in the course of a business which does not ordinarily constitute of the carrying on of financial services;(b) May reasonably be regarded as a necessary part of any other services provided in the course of that business; and(c) Is not remunerated separately from the other services.Amended: July 2007
Amended: October 2007AU-1.4.6
A
person does not carry on an activity constituting aregulated insurance service if he carries on an activity with or for anotherperson , and they are both members of the samefamily .Amended: October 2007Carrying on of Insurance Business (Insurance Firms)
AU-1.4.7
The carrying on of insurance business includes the carrying out and effecting of insurance contracts as principal, including with limitation contracts of
long-term insurance or contracts ofgeneral insurance . Effecting contracts of insurance means assuming (as principal) insurance risk, by entering into a contract of insurance or contract of reinsurance. Carrying out contracts of insurance means performing (as principal) obligations under a contract of insurance or reinsurance.AU-1.4.8
A contract of
long-term insurance includes any insurance contract dealing with life insurance, personal accident with a term over 1 year and savings and fund accumulation insurance.AU-1.4.9
A contract of
general insurance includes any insurance contract dealing within one or more of the following categories:(a) Fire and other property damage;(b) Marine, aviation and transport;(c) Accident and liability insurance;(d) Motor insurance; or(e) Such other activities as the CBB may specify from time to time.Amended: July 2007The Broking of Insurance Contracts (Insurance Brokers/Appointed Representatives)
AU-1.4.10
The broking of insurance contracts means:
(a) Acting as agent for anotherperson in relation to the buying of insurance for that otherperson ;(b) Making arrangements with a view to anotherperson , whether as principal or agent, buying insurance; or(c) Advising on insurance.Amended: July 2007
Amended: October 2007AU-1.4.11
In Subparagraph AU-1.4.10 (c), 'advising' means giving advice to a
person in his capacity as apolicyholder or potentialpolicyholder (or in his capacity as agent for apolicyholder or potentialpolicyholder ), on the merits of entering into a contract of insurance whether as principal or agent.Amended: July 2007
Amended: October 2007AU-1.4.12
A person does not carry on the activities specified in Subparagraphs AU-1.4.10 (a) or (b) if he enters or is to enter into a transaction in respect of a contract of insurance as principal.
Amended: July 2007AU-1.4.13
A
person does not carry on the broking of insurance contracts if he falls under the definition ofexempt introducer , defined as:(a) Aperson selling an extended warranty insurance product where the product is sold as part of an exclusive arrangement originated by the product manufacturer and in conjunction with the purchase by the insured of the product;(b) Aperson selling travel insurance as part of, or in conjunction with, a travel package, either directly or through a travel agent (where no advice is being provided other than that contained in the product literature);(c) Aperson , approved or licensed as aninsurance intermediary in its country of incorporation or residence, providing marine, aviation or transit insurance, general reinsurance or long-term reinsurance toclients in Bahrain;(d) [This Subparagraph was deleted in October 2014]; and(e) An insurer or reinsurance broker located outside Bahrain ('A') placing business on behalf of a CBB licensedinsurance broker ('B'), where B is carrying on business in Bahrain and on behalf of Bahrain residents and A is acting on behalf of B.Amended: October 2014
Amended: July 2007
Amended: October 2007AU-1.4.14
A
person does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:(a) That of giving advice of the kind mentioned in Paragraph AU-1.4.13; nor(b) That of leading or enabling persons to buy insurance contracts.Amended: July 2007
Amended: October 2007AU-1.4.15
A
person does not arrange insurance contracts merely by providing the means by which one party to a transaction is able to communicate with other such parties.Amended: October 2007The Offering of Insurance Advice (Insurance Consultants)
AU-1.4.16
The offering of insurance advice means advising on insurance to third parties, without also acting as agent or making arrangements with a view to another
person buying insurance.Amended: October 2007AU-1.4.16A
For purposes of Paragraph AU-1.4.16, should the
insurance consultant receive a fee for his services as agent from the party that provides the insurance or reinsurance to the third party, such services will be considered as broking of insurance and will be covered under Paragraph AU-1.4.10.Added: April 2010AU-1.4.17
In Paragraph AU-1.4.16, 'advising on insurance' means giving advice to a
person in his capacity as apolicyholder or potentialpolicyholder (or in his capacity as agent for apolicyholder or potentialpolicyholder ), on the merits of entering into a contract of insurance whether as principal or agent.Amended: July 2007
Amended: October 2007AU-1.4.18
A
person does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:(a) That of giving advice of the kind mentioned in Paragraph AU-1.4.16; nor(b) That of leading or enabling persons to buy insurance.Amended: July 2007
Amended: October 2007AU-1.4.19
Advice given by professionals may not constitute the activity of advising on insurance, even if the matter relates to insurance, providing it satisfies the general exclusion specified in Paragraph AU-1.4.5. These may include circumstances such as lawyers providing legal advice on the interpretation of insurance contracts; business consultancy advice on the establishment of a new business, which may include, in general terms, discussion of the classes of insurance that the business may need; and the interpretation of insurance contracts by
loss adjusters .Amended: July 2007The Provision of Insurance Management Services (Insurance Managers)
AU-1.4.20
The provision of insurance management services means the provision of management services to, or the exercising of managerial functions on behalf of, an
insurance firm .AU-1.4.21
Management services and managerial functions include the administration and underwriting of insurance contracts.
AU-1.4.22
A
person does not provide insurance management services to aninsurance firm , if he is an employee or a Board member of that licensee.Amended: October 2007AU-1.4.23
An
insurance manager may provide management services to undertakings other thaninsurance firms , providing that these activities do not compromise the manager's ability to provide a professional service toinsurance firms and the manager can meet the licensing conditions specified in Chapter AU-2. It is possible for a group to include separate licensees, one aninsurance broker and the other aninsurance manager .The Operating of an Insurance Exchange
AU-1.4.24
The operating of an insurance exchange means the maintenance, administration and management of an insurance exchange located within the Kingdom of Bahrain by, inter alia, determining its membership, operating rules or arranging the provision of shared services to users of the exchange.
AU-1.4.25
For the purposes of Paragraph AU-1.4.24, an insurance exchange means a distinct market place comprising as members
insurance firms orinsurance brokers , and undertaking insurance related activities. The fact that the exchange may undertake other non-insurance related activities does not preclude it from being an 'insurance exchange' within the meaning of Paragraph AU-1.4.24.Amended: July 2007AU-2 AU-2 Licensing Conditions
AU-2.1 AU-2.1 Condition 1: Legal Status
Insurance Firm
AU-2.1.1
Except for
captive insurers , the legal status of aninsurance firm must be:(i) A Bahraini joint stock company (BSC);(ii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance firm in that territory; or(iii) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005.Amended: July 2007AU-2.1.2
For
captive insurers , the legal status of aninsurance firm must be:(i) A Bahraini special purpose vehicle (SPV), specifically established to carry out the activities of acaptive insurer ; orAmended: July 2007AU-2.1.3
A Bahraini SPV is a category of a closed Bahraini joint stock company (BSC(c)). The minimum capital required by the Ministry of Commerce and Industry to incorporate such a company is much lower than for other types of companies, at BD 1,000. In addition, however,
captive insurers must satisfy the CBB's capital requirements for captives, as set out in Module CA (Capital Adequacy).Amended: July 2007
Amended: January 2008AU-2.1.4
Where the
insurance licensee is a branch of an overseas insurance company, in deciding whether to grant a license, the CBB will pay close regard to its activities elsewhere and how these activities are regulated. If theinsurance licensee is not regulated elsewhere (e.g. some countries do not regulate reinsurance firms) or in a jurisdiction not substantially compliant with IAIS Core Principles or FATF standards, then an application for licensing can only be considered after exhaustive enquiries into the firm'sshareholders , management structure and financial position.Amended: July 2007AU-2.1.5
[Guidance Paragraph deleted in January 2007.]
Amended: July 2007AU-2.1.6
[Guidance Paragraph deleted in October 2005.]
Insurance Broker
AU-2.1.7
Licensees who were carrying out activities that fall within the definition of the regulated activity of
insurance broker prior to 1 April 2005 may be unincorporated entities or natural persons and were allowed to continue as such until 31 December 2006.Amended: July 2007AU-2.1.8
The legal status of an
insurance broker after 1 April 2009 must be:(i) A Bahraini joint stock company (BSC);(ii) A Bahraini company with limited liability ('WLL');(iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory, and licensed to conduct insurance business in Bahrain prior to 1st April 2009;(iv) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005;(v) A Bahraini single person company which was incorporated and licensed to conduct insurance business prior to 1st April 2009; or(vi) A natural person that has been licensed by the CBB to conduct insurance business prior to April 2005.Amended: October 2012
Amended: April 2010
Amended: October 2009
Amended: April 2009
Amended: July 2007AU-2.1.9
Licensees referred to in Subparagraphs AU-2.1.8 (v) and (vi) will be granted a six-month period from the date of the death of the natural person to convert the license to comply with Subparagraph AU-2.1.8 (i) or (ii), subject to the CBB's prior written approval.
Amended: October 2012
Amended: July 2007AU-2.1.10
An
insurance broker's business activity must be restricted by its Memorandum and Articles of Association to insurance broking.Insurance Consultant
AU-2.1.11
Persons carrying out the regulated activity of
insurance consultant , and who meet the licensing criteria of this Section, must be:(i) [This Subparagraph was deleted in October 2014];(ii) A Bahraini single person company;(iii) A Bahraini joint stock company (BSC);(iv) A Bahraini company with limited liability ('WLL'); or(v) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005.Amended: October 2014
Amended: October 2009
Amended: July 2007Insurance Manager
AU-2.1.12
Persons carrying out the regulated activity of
insurance manager , and who meet the licensing criteria of this Section must be:(i) A Bahraini joint stock company (BSC);(ii) A Bahraini company with limited liability ('WLL'); or(iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory.Amended: July 2007AU-2.1.13
An
insurance manager is a professional provider of services toinsurance firms , which may include company secretarial, bookkeeping, claims processing and underwriting and, where duly licensed, insurance consulting and actuarial services. The CBB would, in principle, regard it as acceptable for theinsurance manager to provide these services to other clients, whether or not insurance clients. It would not regard it as acceptable for the firm to combine these activities with that ofinsurance broker , although it is possible for a group to include bothinsurance broker andinsurance manager activities, for instance, by aninsurance broker establishing a subsidiary to act as aninsurance manager (or vice versa).Amended: July 2007AU-2.2 AU-2.2 Condition 2: Mind and Management
AU-2.2.1
Insurance licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom.Overseas insurance licensees must maintain a local management presence and premises in the Kingdom appropriate to the nature and scale of their activities.AU-2.2.2
In assessing the location of an
insurance licensee's Head Office, the CBB will take into account the residency of its Directors and senior management. The CBB requires the majority of key decision makers in executive management — including theChief Executive Officer — to be resident in Bahrain. In the case of overseas licensees, the CBB requires thebranch orsubsidiary of a foreign owned company to have a substantive presence, demonstrated by a level of staff and other resources sufficient to ensure adequate local scrutiny and control over business booked in the Bahrainbranch orsubsidiary .Amended: July 2007AU-2.2.3
In the case of
insurance licensees originally licensed as exempt companies, the CBB will consider the granting of temporary individual waivers on a case-by-case basis from the requirements in Paragraph AU-2.2.1. In all cases, the CBB's objective is to require all such companies that wish to remain licensed by the CBB, to have a suitable office in the Kingdom of Bahrain. This requirement means that knowledgeable staff should be resident in Bahrain.Amended: July 2007AU-2.2.4
Subject to CBB approval, an
insurance licensee that is a captive (re)insurance company may maintain its Head Office or place of business at the offices of aninsurance manager appointed to manage its affairs.Amended: July 2007AU-2.2.5
The CBB's overall approach to
captive insurers is summarized in Module CI. The day-to-day operations ofcaptive insurers are typically outsourced to specialist captive managers, and Paragraph AU-2.2.4 allows for this possibility. The CBB requires captive managers providing services to CBB-licensedcaptive insurers to be also licensed by the CBB and thus also to have a substantive presence within the Kingdom.Amended: July 2007
Amended: October 2007AU-2.3 AU-2.3 Condition 3: Controllers and Close Links
AU-2.3.1
Insurance licensees must satisfy the CBB that theircontrollers are suitable and pose no undue risks to the licensee.Insurance licensees must also satisfy the CBB that theirclose links do not prevent the effective supervision of theinsurance licensee by the CBB and otherwise pose no undue risks to the licensee.Amended: July 2007AU-2.3.2
Chapters GR-5 and GR-6 contains the CBB's requirements and definitions regarding
controllers andclose links .Amended: July 2007AU-2.3.3
In summary,
controllers are persons who directly or indirectly are significantshareholders in aninsurance licensee , or who are otherwise able to exert significant influence on theinsurance licensee . The CBB seeks to ensure thatcontrollers pose no significant risks to the licensee. In general terms,controllers are assessed in terms of their financial standing, their judicial and regulatory record, and standards of business and (where relevant) personal probity.Amended: July 2007
Amended: October 2007AU-2.3.4
In summary, an
insurance licensee hasclose links with itssubsidiaries , with itsparent undertakings , and withsubsidiaries of itsparent undertakings . It also hasclose links with any entity in which the licensee, itssubsidiaries , itsparent undertakings , and thesubsidiaries of itsparent undertakings has an equity interest of more than 20% (either in terms of capital or voting rights). The CBB seeks to ensure that these closely linked entities do not pose any material financial, reputational or other risks to the licensee. The CBB also seeks to ensure that the structure and geographical spread of thegroup is such that it is subject to adequate scrutiny atgroup level.Amended: July 2007
Amended: October 2007AU-2.3.5
In all cases, when judging applications from existing
groups , the CBB will have regard to the reputation and financial standing of thegroup as a whole. Where relevant, the CBB will also take into account the extent and quality of supervision applied to overseas members of thegroup and take into account any information provided by other supervisors in relation to any member of thegroup .Amended: July 2007
Amended: October 2007AU-2.4 AU-2.4 Condition 4: Board and Employees
AU-2.4.1
In accordance with Article 65 of the CBB Law, those nominated to carry out
controlled functions must satisfy the CBB'sapproved persons requirements.Amended: July 2007AU-2.4.2
The definition of
controlled functions is contained in Section AU-1.2, whilst Chapter AU-3 sets out the CBB'sapproved persons requirements.Amended: July 2007AU-2.4.3
The
insurance licensee's staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner.Insurance licensees must ensure theiremployees meet any training and competency requirements specified by the CBB.Amended: July 2007AU-2.5 AU-2.5 Condition 5: Financial Resources
AU-2.5.1
Insurance licensees must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. The level of financial resources held must at all times meet the minimum requirements contained in Module CA (Capital Adequacy), as specified for the category of insurance license held.Amended: July 2007AU-2.5.2
A 3-year business plan, with financial projections, must be submitted with any application for a license, demonstrating the adequacy of financial resources over that period, together with details (where appropriate) as to the calculation of rates, technical reserves, use of reinsurance, investment and valuation policies.
AU-2.5.3
Overseas insurance applicants are required to provide written confirmation from their head office that the head office will provide financial support to the branch sufficient to enable it to meet its obligations as and when they fall due. Overseas insurance applicants must also demonstrate that the company as a whole is adequately resourced for the amount of risks underwritten, and that it and its
group meet solvency standards applied by itshome supervisor .Amended: October 2007AU-2.5.4
Insurance firms andinsurance brokers must maintain a cash deposit with a retail bank licensed to operate in the Kingdom of Bahrain, in keeping with the requirement specified in Section GR-7.1.Amended: July 2007
Amended: October 2007AU-2.5.5
Insurance brokers andinsurance consultants must maintain professional indemnity coverage as specified in Chapter GR-10.AU-2.6 AU-2.6 Condition 6: Systems and Controls
AU-2.6.1
Insurance licensees must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities. These systems and controls must meet the minimum requirements contained in Modules HC (High-level Controls) and RM (Risk Management), as specified for the category of insurance license held.Amended: July 2007AU-2.6.1A
Insurance licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems and errors. Such segregation should ensure that no single individual has control over all stages of a transaction.Added: July 2007AU-2.6.2
Insurance licensees must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module FC, as specified for the category of insurance license held.Amended: July 2007AU-2.6.3
Applicants will be required to demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB, as part of the licensing approval process.
Amended: July 2007AU-2.6.4
Insurance brokers must, in connection with any premium monies received in the course of their business, establish and maintain separate client accounts separate to those for their own funds as required per Section GR-1.2.AU-2.7 AU-2.7 Condition 7: External Auditors and Reporting Actuaries
AU-2.7.1
Article 61 of the CBB Law requires that
insurance licensees appoint externalauditors , subject to prior CBB approval. The minimum requirements regardingauditors contained in Module AA (Auditors and Actuaries) must be met.Amended: July 2007AU-2.7.2
Article 72 of the CBB Law requires that
insurance firms authorised to undertakelong-term business appoint anactuary , subject to prior CBB approval. The minimum requirements contained in Module AA (Auditors and Actuaries) regardingactuaries must be met at all times.Amended: July 2007
Amended: October 2007AU-2.7.3
Applicants must submit details of their proposed external
auditors and, where relevant,actuary , to the CBB as part of their license application.Amended: July 2007
Amended: October 2007AU-2.8 AU-2.8 Condition 8: Other Requirements
Books and Records
AU-2.8.1
Article 59 of the CBB Law requires that
insurance licensees maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, or persons appointed by the CBB, at any time.Insurance licensees must comply with the minimum record-keeping requirements contained in Module GR. Books of accounts must comply with International Financial Reporting Standard (IFRS) (and forTakaful andRetakaful companies relevant AAOIFI standards), and recognised international actuarial standards.Amended: July 2007
Amended: October 2008Provision of Information
General Conduct
AU-2.8.3
Insurance licensees must conduct their activities in a professional and orderly manner, in keeping with good market practice standards.Insurance licensees must comply with the general standards of business conduct contained in Module PB, as well as the standards relating to treatment ofcustomers contained in Module BC.Amended: July 2007License and Registration Fees
AU-2.8.4
Insurance licensees and registered persons must comply with any license and registration fee requirements applied by the CBB, and outlined in Chapter AU-6.Amended: July 2007AU-2.8.5
Following the transfer of insurance supervision to the CBB, the Central Bank is applying license and registration fees on
insurance licensees and registered persons, effective for the year 2007.Amended: July 2007Additional Conditions
AU-2.8.6
Insurance licensees must comply with any other specific requirements or restrictions imposed by the CBB on the scope of their license.Amended: July 2007AU-2.8.7
When granting a license, the CBB specifies the
regulated insurance service that the licensee may undertake and (where relevant) the type and classes of insurance business that the licensee may undertake. Pursuant to Article 45 of the CBB Law, the CBB has the right to impose such terms and conditions, as it deems necessary when issuing a license. Licensees must respect the scope of their license. Section AU-5.4 sets out the process for varying the scope of an authorisation, should a licensee wish to undertake newregulated insurance services .Amended: July 2007AU-2.8.8
In addition, the CBB may impose additional restrictions or requirements, beyond those already specified in Volume 3, to address specific risks. For instance, authorisation may be granted subject to strict limitations on intra-group transactions.
Amended: July 2007AU-3 AU-3 Approved Persons Conditions
AU-3.1 AU-3.1 Condition 1: 'Fit and Proper'
AU-3.1.1
Licensees seeking an
approved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake thecontrolled function in question.Amended: July 2007AU-3.1.2
The authorisation requirement for persons nominated to carry out
controlled functions is contained in Section AU-1.2. The authorisation process is described in Section AU-5.2.AU-3.1.3
Each applicant applying for
approved person status and those individuals occupyingapproved person positions must comply with the following conditions:(a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;(b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;(c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;(d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;(e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;(f) Must have personal integrity, good conduct and reputation;(g) Has appropriate professional and other qualifications for thecontrolled function in question; and(h) Has sufficient experience to perform the duties of thecontrolled function .Amended: January 2016
Amended: July 2007AU-3.1.4
In assessing the conditions prescribed in Paragraph AU-3.1.3, the CBB will take into account the criteria contained in Paragraph AU-3.1.5. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of
controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake acontrolled function in oneinsurance licensee may not be considered to have sufficient expertise and experience to undertake nominally the samecontrolled function but in a much bigger licensee.Amended: January 2016
Amended: July 2007AU-3.1.5
In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:
(a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;(b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;(e) The contravention of any financial services legislation;(f) Whether the person has ever been refused a license, authorisation, registration or other authority;(g) Dismissal or a request to resign from any office or employment;(h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;(i) The extent to which the person has been truthful and open with supervisors; and(j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.AU-3.1.6
With respect to Paragraph AU-3.1.5, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.
AU-3.1.7
Approved persons undertaking acontrolled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking acontrolled function .Amended: January 2016
Amended: July 2007AU-3.1.8
In determining where there may be a conflict of interest arising, factors that may be considered will include whether:
(a) A person has breached any fiduciary obligations to the company or terms of employment;(b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensee; and(c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licensee.Amended: January 2016
Amended: July 2007AU-3.1.9
Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-8.
Added: January 2016AU-3.2 AU-3.2 [This Section was deleted in January 2016]
AU-3.2.1
[This Paragraph was deleted in January 2016.]
Deleted: January 2016
Amended: July 2007AU-3.2.2
[This Paragraph was deleted in January 2016.]
Deleted: January 2016
Amended: July 2007AU-3.2.3
[This Paragraph was moved to Paragraph AU-3.1.9 in January 2016.]
Amended: January 2016
Amended: July 2007AU-4 AU-4 Registration Conditions
AU-4.1 AU-4.1 Condition 1: Relevant Expertise
AU-4.1.1
Actuaries andloss adjusters seeking registration must satisfy the CBB that they have relevant expertise and qualifications. They must hold appropriate professional qualifications from a relevant, recognised professional body.Amended: July 2023
Amended: October 2009
Amended: July 2007AU-4.1.2
For
actuaries , all Fellows (or members of equivalent status) in good standing of the Society of Actuaries (USA), the Institute and Faculty of Actuaries (UK) or the American Academy of Actuaries or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirement in Paragraph AU-4.1.1.Amended: July 2007AU-4.1.2A
For
loss adjusters , all Fellows (or members of equivalent status) in good standing of the Chartered Institute of Loss Adjusters (CILA), the European Federation of Loss Adjusting Experts (FUEDI), the National Association of Independent Insurance Adjusters (NAIIA) or the Canadian Independent Adjusters' Association (CIAA) or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirements in Paragraph AU-4.1.1.Added: April 2010AU-4.1.3
In the case of corporate persons wishing to provide actuarial or
loss adjuster services, the CBB expects management and other staff collectively to have sufficient appropriate professional qualifications to ensure a professional level of service.Amended: July 2007AU-4.1.4
The above requirement does not oblige
actuaries orloss adjusters to be residents of the Kingdom of Bahrain, in order to be registered by the CBB. Non-residentactuaries andloss adjusters wishing to practice in Bahrain may seek registration on the same basis as residentactuaries andloss adjusters .Amended: July 2007AU-4.1.5
[This Paragraph was deleted in July 2023].
Deleted: July 2023
Adopted: October 2009AU-4.1.6
[This Paragraph was deleted in July 2023].
Deleted: July 2023
Adopted: October 2009AU-4.1.7
[This Paragraph was deleted in July 2023].
Deleted: July 2023
Adopted: October 2009AU-4.2 AU-4.2 Condition 2: General Suitability
AU-4.2.1
Actuaries andloss adjusters seeking registration must satisfy the CBB that the proposed registrants are generally suitable to operate as such.Amended: July 2023
Amended: October 2009
Amended: July 2007AU-4.2.2
In the case of natural persons, the CBB will have regard to the fitness and propriety, of the proposed registrant using the Rules and Guidance contained in Section AU-3.1.
Amended: January 2016
Amended: October 2009
Amended: October 2007
Amended: July 2007AU-4.2.3
In the case of corporate persons, the CBB will have regard to the corporation's reputation, financial soundness, and business conduct. The CBB will also review closely linked entities against the same criteria, using the definition of
close links contained in Module GR.Amended: July 2007AU-5 AU-5 Information Requirements and Processes
AU-5.1 AU-5.1 Licensing
Application Form and Documents
AU-5.1.1
Applicants for a license must fill in the Application Form 1 (Application for a License) online, available on the CBB website under Eservices/online Forms. The applicant must upload scanned copies of supporting documents listed in Paragraph AU-5.1.5, unless otherwise directed by the CBB.
Amended: July 2019
Amended: April 2018
Amended: July 2007AU-5.1.2
Articles 44 to 47 of the CBB Law govern the licensing process. This prescribes a single stage process, with the CBB required to take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and timelines.
Amended: July 2007
Amended: October 2007AU-5.1.3
References to applicant mean the proposed licensee seeking authorisation. An applicant may appoint a representative — such as a law firm or professional consultancy – to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.
Amended: July 2007
Amended: October 2007AU-5.1.4
This Paragraph was deleted in January 2016.]
Deleted: January 2016
Amended: July 2007AU-5.1.5
Unless otherwise directed by the CBB, the following documents must be provided in support of a Form 1:
(a) A duly completed Form 2 (Application for Authorisation of Controller) for eachcontroller of the proposed licensee;(b) A duly completed Form 3 (Application for Approved Person status), for each individual applying to undertakecontrolled functions , (as defined under Paragraph AU-1.2.2) of the proposed licensee;(c) A comprehensive business plan for the application, addressing the matters described in Paragraph AU-5.1.6;(d) For overseas companies, a copy of the company's current commercial registration or equivalent documentation;(e) Where the applicant is a Bahraini company, a copy of the applicant's commercial registration certificate;(f) Where the applicant is a corporate body, a certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB insurance license;(g) Details of the proposed licensee'sclose links , as specified under Chapter GR-6;(h) In the case of applicants that are part of a regulatedgroup , a letter of non-objection to the proposed license application from the applicant'shome supervisor , together with confirmation that thegroup is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;(i) In the case of branch applicants, a letter of non-objection to the proposed license application from the applicant'shome supervisor , together with confirmation that the applicant is in good regulatory standing and the company concerned is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;(j) In the case of branch applicants, copies of the audited financial statements of the applicant (head office) for the three years immediately prior to the date of application;(k) In the case of applicants that are part of agroup , copies of the audited financial statements of the applicant'sgroup , for the three years immediately prior to the date of application.(l) In the case of applicants not falling under either (j) or (k) above, copies of the audited financial statements of the applicant's majorshareholder , for the three years immediately prior to the date of application;(m) In the case of applicants seeking to raise part of their capital through a private placement, a draft of the relevant private placement memorandum, together with a formal, independent legal opinion that the documents comply with all applicable capital markets laws and regulations;(n) A draft copy of the applicant's memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;(o) [Subparagraph deleted in January 2008];(p) [Subparagraph deleted in January 2008];(q) Forinsurance firms andinsurance brokers , confirmation of the cash deposit required to be held with a retail bank (licensee) in Bahrain under Article 181 of the CBB Law (see Section GR-7.1); and(r) [Subparagraph deleted in January 2008].Amended: January 2011
Amended: January 2008
Amended: October 2007
Amended: July 2007AU-5.1.5A
The CBB may require that an acceptably worded a letter of guarantee be provided in support of the application for a license. Where the application for the license is for an incorporated entity, the CBB may seek a letter of guarantee from the major shareholder. Where the application is for an
overseas insurance licensee , the CBB may seek a letter of guarantee from the parent company.Amended: January 2011
Added: January 2008AU-5.1.6
The business plan submitted in support of an application must explain:
(a) An outline of the history of the applicant and itsshareholders ;(b) The reasons for applying for a license, including the applicant's strategy and market objectives;(c) The proposed type of activities to be carried on by the applicant in/from the Kingdom of Bahrain;(d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;(e) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions, including underwriting, claims and accounting; and(f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital and solvency requirements.Amended: July 2007AU-5.1.7
In the case of applicants seeking to raise capital (refer to AU-5.1.5(m)), the CBB’s review is aimed at checking that the proposed private placement complies with applicable capital markets laws and regulations, and that the information contained in the private placement memorandum (‘PPM’) is consistent with the information provided in the license application. The CBB’s review does not in any way constitute an approval or endorsement as to any claims made in the PPM regarding the future value of the company concerned. Note also that the CBB will not license applicants without a core group of sponsoring
shareholders (who can demonstrate a strong business track record with relevant expertise), and where failure of the private placement to raise its targeted amount would leave the institution unable to comply with the CBB’s minimum capital requirements. The CBB will normally expect coreshareholders to account for at least 40% of the applicant’s proposed initial total capital.Added: July 2007AU-5.1.8
The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the licensed application, and must preclude the applicant from undertaking other
regulated insurance services , or commercial activities, unless these arise out of its insurance activities or are incidental to those.Amended: July 2007AU-5.1.8 [Deleted]
Deleted July 2007AU-5.1.9
All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.
Amended: July 2007AU-5.1.10
Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs prior to authorisation must be reported to the CBB.
Amended: July 2007Licensing Process and Timelines
AU-5.1.12
By law, the 60-day time limit referred to in Paragraph AU-5.1.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule AU-5.1.5 have to be provided, before the CBB may issue a license.
Amended: July 2007AU-5.1.12A
The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer AU-5.1.5(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license. Likewise, a Bahrain company proposing to undertake financial services activities would not be able to obtain a commercial registration from the Ministry of Commerce and Industry without such assurances (refer AU-5.1.5(e) above).
Added: July 2007AU-5.1.12B
Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule 5.1.5. This draft application should contain at least items AU-5.1.5(a); AU-5.1.5(b), with respect to proposed
Directors (but not necessarily senior management); AU-5.1.5(c); AU-5.1.5(d); and AU-5.1.5(g) to AU-5.1.5(m) inclusive.Added: July 2007AU-5.1.12C
On the basis of the information specified in Paragraph AU-5.1.12B, the CBB may provide an initial ‘in principle’ confirmation that the applicant appears likely to meet the CBB’s licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The ‘in principle’ confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.
Added: July 2007AU-5.1.12D
An ‘in principle’ confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB’s ‘fit and proper’ requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule AU-5.1.5 and, once assessed as complete by the CBB, a signed and dated final version of Form 1.
Amended: July 2007
Amended: October 2007
Amended: April 2008AU-5.1.12E
Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans, for guidance on the CBB's license categories and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final).
Amended: April 2018
Added: July 2007AU-5.1.12F
Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The Central Bank can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.
Added: July 2007AU-5.1.12G
At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule AU-5.1.12H below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).
Added: July 2007Granting or Refusal of License
AU-5.1.12H
To be granted a license, an applicant must demonstrate compliance with the applicable requirements of the CBB Law and this Module. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.
Added: July 2007AU-5.1.12I
The CBB may refuse to grant a license if in its opinion:
(a) The requirements of the CBB Law or this Module are not met;(b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potentialcustomers .Amended: October 2019
Amended: July 2007
Amended: October 2007AU-5.1.12J
Where the CBB proposes to refuse an application for a license, it will give the applicant a written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice; these procedures will comply with the provisions contained in Article 46 of the CBB Law.
Amended: October 2019
Added: July 2007Starting Operations
AU-5.1.13
Within 6 months of the license being issued, the new licensee must provide to the CBB (if not previously submitted):
(a) The registered office address and details of premises to be used to carry out the business of the proposed licensee;(b) The address in the Kingdom of Bahrain where full business records will be kept;(c) The licensee's contact details including telephone and fax number, e-mail address and website;(d) A copy of its business continuity plan;(e) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;(f) A copy of theauditor's acceptance to act asauditor for the applicant;(g) A copy of anauditor's opinion certifying that the licensee's capital — as specified in the business plan submitted under Rule AU-5.1.5 — has been paid in;
(h) Forinsurance brokers andinsurance consultants , a copy of the licensee's professional indemnity insurance policy or confirmation that a deposit to an amount specified by the CBB has been placed in escrow in an account of a retail bank licensed in the Kingdom of Bahrain (see Chapter GR-10); and(i) A copy of the applicant's notarised memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;(j) A copy of the Ministry of Industry and Commerce commercial registration certificate;(k) An updated organisation chart showing the reporting lines, committees (if any) and including the names of the persons undertaking thecontrolled functions ;(l) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that theinsurance licensee is licensed by the CBB; and(m) Any other information as may be specified by the CBB.Amended: October 2011
Amended: July 2007
Amended: January 2008AU-5.1.14
New licensees must start their operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.
Amended: July 2007AU-5.2 AU-5.2 Approved Persons
Prior Approval Requirements and Process
AU-5.2.1
Insurance licensees must obtain CBB's prior written approval before a person is formally appointed to acontrolled function . The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in Form 3, including previous experience, is accurate. Form 3 is available under Volume 3 Part B Authorisation Forms of the CBB Rulebook.Amended: January 2016
Amended: July 2015
Amended: April 2010
Amended: July 2007AU-5.2.2
When the request for
approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake acontrolled function is in relation to an existinginsurance licensee , the Form 3, except if dealing with a MLRO, must be marked for the attention of the Director, Insurance Supervision Directorate. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.Amended: April 2018
Amended: July 2007
Amended: April 2008AU-5.2.2A
When submitting the Forms 3,
insurance licensees must ensure that the Form 3 is:(a) Submitted to the CBB with a covering letter signed by an authorised representative of theinsurance licensee , seeking approval for the proposedcontrolled function ;(b) Submitted in original form;(c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and(d) Signed by an authorised representative of thelicensee and all pages stamped with thelicensee's seal.Amended: July 2015
Added: April 2010AU-5.2.2B
Insurance licensees seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.Added: July 2015AU-5.2.2C
For existing licensees applying for the appointment of a
Director or theChief Executive /General Manager , the authorised representative should be the Chairman of the Board or aDirector signing on behalf of the Board. For all othercontrolled functions , the authorised representative should be theChief Executive /General Manager .Amended: July 2015
Added: April 2010Assessment of Application
AU-5.2.3
The CBB shall review and assess the application for
approved person status to ensure that it satisfies all the conditions required in Paragraph AU-3.1.3 and the criteria outlined in Paragraph AU-3.1.5.Amended: January 2016
Added: July 2015AU-5.2.4
For purposes of Paragraph AU-5.2.3,
insurance licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all regulatory requirements, including but not limited to receiving the application complete with all the required information and documents, as well as verifying references.Amended: January 2016
Added: July 2015AU-5.2.4A
The CBB reserves the right to refuse an application for
approved person status if it does not satisfy the conditions provided for in Paragraph AU-3.1.3 and does not satisfy the CBB criteria in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to theinsurance licensee concerned, setting out the basis for the decision.Amended: January 2016
Added: July 2015AU-5.2.5
[This Paragraph was deleted in January 2016.]
Deleted: January 2016
Amended: July 2015
Amended: July 2008
Amended: July 2007Appeal Process
AU-5.2.5A
Insurance licensees or the nominatedapproved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application forapproved person status. The CBB shall decide on the appeal and notify theinsurance licensee of its decision within 30 calendar days from submitting the appeal.Added: July 2015AU-5.2.5B
Where notification of the CBB's decision to grant a person
approved person status is not issued within 15 business days from the date of meeting all regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents,insurance licensees or the nominatedapproved persons may appeal to the the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify theinsurance licensee of its decision within 30 calendar days from the date of submitting the appeal.Amended: January 2016
Added: July 2015Notification Requirements and Process
AU-5.2.6
Insurance licensees must immediately notify the CBB when anapproved person ceases to hold acontrolled function together with an explanation as to the reasons why (see Paragraph AU-5.5.6). In such cases, theirapproved person status is automatically withdrawn by the CBB.Amended: July 2008
Amended: April 2008
Amended: July 2007AU-5.2.7
Insurance licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for anapproved person .Added: April 2010AU-5.2.8
Insurance licensees must immediately notify the CBB when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of theirapproved persons .Added: April 2010AU-5.3 AU-5.3 Registration
AU-5.3.1
Persons wishing to be registered as an
actuary orloss adjuster must submit a duly completed Form 4 (Application for Registration). Persons wishing to be registered asappointed representative must submit Form 5 (Application for Appointed Representative). The form must be marked for the attention of the Director, Licensing Directorate.Amended: April 2018
Amended: October 2009AU-5.3.2
The CBB aims to respond to applications for registration within 2 weeks of receipt of a Form 4 or Form 5, although in some cases, where referral to an overseas supervisor is required, the response time is likely to be longer.
Amended: October 2009
Amended: July 2007AU-5.3.3
All refusals by the CBB to grant a person registered person status have to be reviewed and approved by an Executive Director of the CBB. A notice of intent is issued to the applicant concerned, setting out the basis for the decision. The applicant has 30 calendar days from the date of the notice in which to appeal the decision. The CBB then has 30 calendar days from the date of the representation in which to make a final determination. See also Chapter EN-9.
Amended: October 2009
Amended: July 2007AU-5.4 AU-5.4 Amendment of Authorisation
Licenses
AU-5.4.1
Insurance licensees wishing to vary the scope of their license must obtain the CBB’s written approval, before effecting any such change.Insurance licensees must seek prior CBB approval before undertaking new activities (such as carrying out or broking new classes of business). Approval must be sought whenever a licensee wishes to add or cease undertaking aregulated insurance service , or to vary a condition imposed on their license.Amended: July 2007AU-5.4.2
Failure to secure the CBB approval prior to effecting such changes is likely to be viewed as a serious breach of a licensee's regulatory obligations and may constitute a breach of Article 40(a) of the CBB Law.
Amended: July 2007AU-5.4.3
In addition to any other information requested by the CBB, and unless otherwise directed by the CBB, an
insurance licensee requesting CBB approval to undertake newregulated insurance services must provide the following documentation:(a) A summary of the rationale for undertaking the proposed new service;(b) A description of how the new service will be managed and controlled;(c) An analysis of the financial impact of the new service; and(d) A summary of the due diligence undertaken by the Board and management of theinsurance licensee on the proposed new service.Amended: July 2007AU-5.4.4
The CBB will only agree to amend a license if doing so poses, in its judgement, no unacceptable risks to
customers . As provided for under Article 48 of the CBB Law, the CBB may itself move to amend a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires such a change. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances.Amended: July 2007
Amended: October 2007Approved Persons
AU-5.4.5
Insurance licensees must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the same licensee.Added: July 2007AU-5.4.6
In such instances, a new Form 3 (Application for Approved Person status) should be completed and submitted to the CBB. Note that a person may be considered ‘fit and proper’ for one
controlled function , but not for another, if for instance the new role requires a different set of skills and experience. Where anapproved person is moving to acontrolled function in another licensee, the first licensee should notify the CBB of that person’s departure (see Rule AU-5.5.6), and the new licensee should submit a request for approval under Rule AU-1.2.1.Added: July 2007AU-5.5 AU-5.5 Cancellation of Authorisation
Voluntary Surrender of a License or Closure of a Branch
Cancellation of a License by the CBB
AU-5.5.1
In accordance with Article 50 of the CBB Law,
insurance licensees wishing to cancel their license or cease activities for a branch must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Insurance Supervision Directorate, setting out in full the reasons for the request and how the business is to be wound up.Amended: October 2011
Amended: July 2007AU-5.5.2
Insurance licensees must satisfy the CBB that theircustomers' interests are to be safeguarded during and after the proposed cancellation. The requirements contained in Module GR regarding cessation of business must be satisfied.Amended: July 2007
Amended: October 2007AU-5.5.3
Failure to comply with Rule AU-5.5.1 may constitute a breach of Article 50(a) of the CBB Law. The CBB will only approve such requests where it has no outstanding regulatory concerns and any relevant
customers' interests would not be prejudiced. A voluntary surrender will not be accepted where it is aimed at pre-empting supervisory actions by the CBB. A voluntary surrender will only take effect once the licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities tocustomers .Amended: July 2007AU-5.5.4
As provided for under Article 48(c) of the CBB Law, the CBB may itself move to cancel a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires a cancellation. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances and the licensee's right to appeal the formal notice of cancellation issued by the CBB.
Amended: October 2011
Added: July 2007AU-5.5.4A
Cancellation of a license requires the CBB to issue a formal notice of cancellation to the licensee concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.
Amended: October 2012
Added: October 2011AU-5.5.4B
Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to
clients . Until such time, the CBB will retain all its regulatory powers towards the licensee and will direct the licensee so that no newregulated insurance services may be undertaken whilst the licensee discharges its obligations to itsclients .Added: October 2011AU-5.5.5
In the case of
insurance brokers andinsurance consultants , the requirements relating to professional indemnity coverage must be observed (see Paragraph GR-10.1.8)Amended: July 2007
Amended: October 2007Approved Persons
AU-5.5.5
Cancellation of authorised status requires BMA to issue a formal notice of cancellation to the person concerned. The notice of cancellation must describe the BMA's rationale for the proposed cancellation.
AU-5.5.6
In accordance with Paragraph AU-5.2.6,
insurance licensees must promptly notify the CBB in writing when a person undertaking acontrolled function will no longer be carrying out that function. If acontrolled function falls vacant, theinsurance licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, theinsurance licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of thecontrolled function affected. These interim arrangements must be approved by the CBB.Amended: July 2007
Amended: April 2008AU-5.5.7
The explanation given for any such changes should simply identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.
Amended: July 2007AU-5.5.8
The CBB may also move to declare someone as not ‘fit and proper’, in response to significant compliance failures or other improper behaviour by that person: see Chapter EN-8 regarding the cancellation of ‘fit and proper’ approval.
Added: July 2007Registered Persons
AU-5.5.9
Registered
actuaries andloss adjusters wishing to cancel their registration status with the CBB must obtain the CBB's written approval. All such requests must be made in writing to the Director, Insurance Supervision Directorate.Amended: July 2023
Amended: October 2009
Added: July 2007AU-5.5.10
The CBB may itself cancel the registered status of an
actuary orloss adjuster should the registered person fail to comply with registration conditions outlined in Chapter AU-4: see Chapter EN-9 regarding the cancellation of registration.Amended: July 2023
Amended: October 2009
Added: July 2007AU-5.6 AU-5.6 Publication of the Decision to Grant, Cancel or Amend a License
AU-5.6.1
In accordance with Articles 47 and 49 of the CBB Law, the CBB will publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.
Amended: October 2019
Added: July 2017AU-5.6.2
For the purposes of Paragraph AU-5.6.1, the cost of publication must be borne by the Licensee.
Added: July 2017AU-5.6.3
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: July 2017AU-6 AU-6 Licensing and Registration Fees
AU-6.1 AU-6.1 Introduction
AU-6.1.1
Insurance licensees and registered persons must comply with any fees levied by the CBB, pursuant to Article 180 of the CBB Law. The fees charged vary on the type of insurance license or registration granted by the CBB. Fees are levied at the time of application for licensing and on an annual basis for licensees and registered persons, thereafter.Added: July 2007AU-6.2 AU-6.2 License Application Fees
AU-6.2.1
With immediate effect, applicants seeking an insurance license from the CBB must pay a non-refundable application fee of BD 100 at the time of submitting their application to the CBB.
Added: July 2007AU-6.2.2
There are no application fees for those seeking approved person status.
Added: July 2007AU-6.2.3
Actuaries ,loss adjusters andappointed representatives seeking registration status are exempt from application fees but are subject to annual fees as outlined in Section AU-6.3.Amended: October 2009
Added: July 2007AU-6.3 AU-6.3 Annual Fees
AU-6.3.1
Insurance licensees or registered persons must pay to the CBB an annual licensing or registration fee, on 1st December of the preceding year for which fees are due.Amended: July 2013
Added: July 2007AU-6.3.2
The relevant fees are specified in Rules AU-6.3.3 to AU-6.3.6A below: different fees are specified for
insurance firms (other thancaptive insurance firms ),captive insurance firms ,insurance brokers ,insurance consultants ,insurance managers ,actuaries ,loss adjusters andappointed representatives . The fees due on 1st December are those due for the following calendar year. Where applicable, variable fees are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example) based on a percentage, is calculated using the audited financial statements for 2012, assuming a 31st December year end.Amended: July 2013
Amended: October 2009
Added: July 2007AU-6.3.3
For
insurance firms , other thancaptive insurance firms , the annual licensing fee is a fixed amount of BD 6,000. Forcaptive insurance firms , the annual licensing fee is a fixed amount of BD 1,000.Amended: July 2013
Added: July 2007AU-6.3.4
Insurance brokers , other than Bahraini single person companies, allinsurance consultants and allinsurance managers must pay a variable annual licensing fee, based on 0.25% of theirrelevant operating expenses , subject to a minimum ('floor') of BD 500 and a maximum ('cap') of BD 3,000.Amended: July 2013
Added: July 2007AU-6.3.5
For
insurance brokers that are Bahraini single person companies, the annual licensing fee is a fixed amount of BD 175.Amended: July 2013
Added: July 2007AU-6.3.6
The annual registration fee for registered
actuaries is a fixed amount of BD 100. For registeredloss adjusters , unincorporated individuals must pay an annual registration fee of a fixed amount of BD 175 while incorporatedloss adjusters must pay an annual registration fee of a fixed amount of BD 1,200.Amended: July 2023
Amended: July 2013
Amended: October 2007
Added: July 2007AU-6.3.6A
For
appointed representatives , the annual fee must be paid by thelicensed principal . The fee for registeredappointed representatives , that are unincorporated individuals is a fixed amount of BD 25. For incorporatedappointed representatives , the fixed annual fee is based on the number of designated individuals within the corporate entity that are the representatives of the insurance firm. For incorporatedappointed representatives that have:(a) 1 to 10 designated individuals, the fee is BD500;(b) 11 to 20 designated individuals, the fee is BD 1000; and(c) More than 20 designated individuals, the fee is BD1500.Amended: July 2013
Adopted: October 2009AU-6.3.6B
For incorporated
appointed representatives , the fee amount is based on the number of designated individuals at the prior year end.Adopted: October 2009AU-6.3.6C
As an example, for purposes of Paragraph AU-6.3.6B, if at 31st December 2012 an incorporated
appointed representative had 8 designated individuals, the fee payable on 1st December 2013 for the 2014 year would be BD 500. If during the course of the year 2013, the number of designated individuals increased to 15 by year end 2013, the fee payable for the year 2015 would be BD 1000.Amended: July 2013
Adopted: October 2009AU-6.3.7
For purposes of Paragraph AU-6.3.4,
relevant operating expenses are defined as the total operating expenses of the licensee concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule AU-6.3.8.Added: July 2007AU-6.3.8
The adjustments to be made to
relevant operating expenses are the exclusion of the following items from total operating expenses:(a) Training costs;(b) Charitable donations;(c) CBB fees paid; and(d) Non-executiveDirectors' remuneration.Added: July 2007AU-6.3.9
For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.
Added: July 2007AU-6.3.10
The CBB would normally rely on the audited accounts of a licensee as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.
Added: July 2007AU-6.3.11
Insurance licensees , subject to Paragraph AU-6.3.4 must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which fees are due.Amended: July 2013
Amended: April 2009
Added: July 2007
AU-6.3.11A
Except for actuaries and loss adjustors, all annual license fees are collected by direct debit. For licensees subject to a variable fee, the fee levied will be based on form ALF that is provided in accordance with Paragraph AU-6.3.11.
Added: July 2013AU-6.3.11B
All licensees subject to direct debit for the payment of the annual fee, must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September, available under Part B of Volume 3 (Insurance) CBB Rulebook on the CBB Website.
Added: July 2013AU-6.3.11C
For actuaries and loss adjusters, the annual fixed fee must be remitted by direct deposit or wire transfer by 1st December of the previous year for which the fees are due. Payment instructions are outlined in Form ALF which must be completed when fees are remitted.
Added: July 2013AU-6.3.12
For new
insurance firm licensees , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license has been granted, shall be prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.Added: July 2007
Amended: October 2007
Amended: April 2008
Amended: April 2009AU-6.3.12A
For those new licensees subject to a fee based on their
relevant operating expenses (refer to Paragraph AU-6.3.4), the amount payable in relation to the first year in which the license has been granted is the floor amount of BD500.Added: April 2008
Amended: October 2008
Amended: April 2009AU-6.3.13
For newly registered
actuaries , individualloss adjusters andappointed representatives , the full annual amount of the annual registration fee referred to in Paragraph AU-6.3.6 and AU-6.3.6A, shall be the fee required to be paid to the CBB for the first year in which the registration status has been granted.Amended: October 2009
Amended: April 2008
Added: July 2007AU-6.3.14
For newly registered incorporated
loss adjusters , the annual registration fee referred to in Paragraph AU-6.3.6, shall be prorated for the year using the date of the official registration letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year, subject to a minimum fee of BD 250.Added: July 2007
Amended: April 2008
Amended: October 2008AU-6.3.15
[This Paragraph was deleted in July 2013]
Deleted: July 2013
Added: July 2007AU-6.3.16
[This Paragraph was deleted in April 2009]
Deleted: April 2009AU-6.3.17
Where a license or registration is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.
Added: July 2007AU-6.3.18
Insurance licensees or registered persons failing to comply with this Section may be subject to financial penalties for date sensitive requirements as outlined in Section EN-5.3B or may have their license or registered status withdrawn by the CBB.Added: July 2013PB PB Principles of Business
PB-A PB-A Introduction
PB-A.1 PB-A.1 Purpose
Executive Summary
PB-A.1.1
The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain (‘CBB’)
insurance licensees andapproved persons . They serve as a basis for other material in Volume 3 (Insurance), and help address specific circumstances not covered elsewhere in the Rulebook.Amended: January 2007PB-A.1.2
The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 3 (Insurance). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.
Legal Basis
PB-A.1.3
This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2011
Added: January 2007PB-A.1.4
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007PB-A.2 PB-A.2 Module History
PB-A.2.1
This Module was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007PB-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007PB-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes PB-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive. PB-1.1.1 01/2007 Small expansion of Principle 1 to refer to disclosure of all relevant information to customers, as required by CBB Regulations and Directives. PB-A.1.3 01/2011 Clarified legal basis PB-A.2.3 [Deleted]
Deleted: January 2007PB-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
PB-B PB-B Scope of Application
PB-B.1 PB-B.1 Scope of Application
PB-B.1.1
The 10 Principles of Business apply to all CBB
insurance licensees , in accordance with Paragraph PB-B.1.2. Principles 1–8 (Paragraphs PB-1.1 to PB-1.8 inclusive) also apply to allapproved persons , in accordance with Paragraph PB-B.1.3.Amended: January 2007PB-B.1.2
Principles 1 to 10 apply to activities carried out by the licensee, including activities carried out through overseas branches (if any). Principles 9 and 10 also take into account any activities of other members of the
group of which the licensee is a member.Amended: October 2007PB-B.1.3
Principles 1 to 8 apply to
approved persons in respect of thecontrolled function for which they have been approved.PB-B.1.4
Principles 1 to 8 do not apply to behaviour by an
approved person with respect to any other functions or activities they may undertake. However, behaviour unconnected to theircontrolled function duties may nonetheless be relevant to an assessment of that person's fitness and propriety.PB-B.1.5
The CBB's requirements regarding
approved persons andcontrolled functions are located in Module AU (Authorisation).Amended: January 2007PB-B.2 PB-B.2 Non compliance
PB-B.2.1
Breaching a Principle of Business makes the
insurance licensee orapproved person concerned liable to enforcement action. In the case of a licensee, this may call into question whether they continue to meet the licensing conditions (see Chapter AU-2). In the case of anapproved person , this may call into question whether they continue to meet the 'fit and proper' requirements for the function for which they have been approved (see Chapter AU-3).Amended: October 2007PB-B.2.2
Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.
Amended: January 2007PB-1 PB-1 The Principles
PB-1.1 PB-1.1 Principle 1 — Integrity
PB-1.1.1
Insurance licensees andapproved persons must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings withcustomers , and disclose fully all relevant information tocustomers , as required by the CBB's Regulations and Directives.Amended: January 2007PB-1.2 PB-1.2 Principle 2 — Conflicts of Interest
PB-1.2.1
Insurance licensees andapproved persons must take all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of acustomer .PB-1.3 PB-1.3 Principle 3 — Due Skill, Care and Diligence
PB-1.3.1
Insurance licensees andapproved persons must act with due skill, care and diligence.PB-1.4 PB-1.4 Principle 4 — Confidentiality
PB-1.4.1
Insurance licensees andapproved persons must observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures.PB-1.5 PB-1.5 Principle 5 — Market Conduct
PB-1.5.1
Insurance licensees andapproved persons must observe proper standards of market conduct, and avoid action that would generally be viewed as improper.PB-1.6 PB-1.6 Principle 6 — Customer Assets
PB-1.6.1
Insurance licensees andapproved persons must take reasonable care to safeguard the assets ofcustomers for which they are responsible.Amended: January 2007PB-1.7 PB-1.7 Principle 7 — Customer Interests
PB-1.7.1
Insurance licensees andapproved persons must pay due regard to the legitimate interests and information needs of theircustomers and communicate with them in a fair and transparent manner.Insurance licensees andapproved persons , when dealing withcustomers who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.PB-1.8 PB-1.8 Principle 8 — Relations with Regulators/Supervisors
PB-1.8.1
Insurance licensees andapproved persons must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies under whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.Amended: January 2007PB-1.9 PB-1.9 Principle 9 — Adequate Resources
PB-1.9.1
Insurance licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.PB-1.10 PB-1.10 Principle 10 — Management, Systems & Controls
PB-1.10.1
Insurance licensees must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations.Insurance licensees' systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.Amended: January 2007HC HC High-Level Controls
HC-A HC-A Introduction
HC-A.1 HC-A.1 Purpose
Executive Summary
HC-A.1.1
This Module presents requirements that have to be met by
insurance licensees with respect to:(a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code;(b) International best practice corporate governance standards set by bodies such as the International Association of Insurance Supervisors; and(c) Related high-level controls and policies.January 2011HC-A.1.2
The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.
January 2011HC-A.1.3
The purpose of the Module is to establish best practice corporate principles in Bahrain, and to provide protection for investors and other company stakeholders through compliance with those principles.
January 2011HC-A.1.4
Whilst the Module follows best practice, it is nevertheless considered as the minimum standard to be applied. This Module also includes additional rules and guidance issued by the CBB prior to the publication of the Code and previously contained in Module HC.
January 2011Structure of this Module
HC-A.1.5
This Module follows the structure of the Corporate Governance Code and each Chapter deals with one of the nine fundamental Principles of corporate governance. In addition, a Chapter has been added to deal specifically with requirements imposed on
insurance consultants ,insurance managers andcaptive insurance firms . The numbered directives included in the Code are Rules for purposes of Chapters HC-1 to HC-9. Recommendations under the Code have been included as guidance. However, where the previous version of Module HC had a similar recommendation as a Rule, the Module retains this Paragraph as a Rule.January 2011HC-A.1.6
The Module also incorporates other high-level controls and policies that apply in particular to
insurance licensees .January 2011HC-A.1.7
All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.
January 2011The Comply or Explain Principle
HC-A.1.8
This Module is issued as a Directive (as amended from time to time) in accordance with Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). In common with other Rulebook Modules, this Module contains a mixture of Rules and Guidance (See Module UG-1.2 for detailed explanation of Rules and Guidance). All Rulebook content that is categorised as a Rule must be complied with by those to whom the content is addressed. Other parts of this Module are Guidance; nonetheless every
insurance licensee to whom Module HC applies, is expected to comply with recommendations made as Guidance in Module HC or explain its noncompliance by way of an annual report to its shareholders and to the CBB (see Chapter HC-8).January 2011Monitoring and Enforcement of Module HC
HC-A.1.9
Disclosure and transparency are underlying principles of Module HC. Disclosure is crucial to allow outside monitoring to function effectively. This Module looks to a combined monitoring system relying on the Board, the
insurance licensee's shareholders and the CBB.January 2011HC-A.1.10
It is the Board's responsibility to see to the accuracy and completeness of the
insurance licensee's corporate governance guidelines and compliance with Module HC. Failure to comply with this Module is subject to enforcement measures as outlined in Module EN (Enforcement).January 2011Legal Basis
HC-A.1.11
This Module contains the CBB's Directive (as amended from time to time) relating to high-level controls and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).January 2011HC-A.1.12
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
January 2011Effective Date
HC-A.1.13
This updated Module issued is effective on 1st January 2011. All
insurance licensees to which Module HC applies should be in full compliance by the financial year end 2011. At everyinsurance licensee's annual shareholder meeting held after 1st January 2011, corporate governance should be an item on the agenda for information and any questions from shareholders regarding theinsurance licensee's governance. Where possible, theinsurance licensee should also have corporate governance guidelines in place at that time and should have a "comply or explain" report as described in Paragraph HC-A.1.8.January 2011HC-A.2 HC-A.2 Module History
HC-A.2.1
This Module was first issued in April 2005 by the BMA and updated in January 2007 to reflect the switch to the CBB. Following the issuance of the Corporate Governance Code by the Ministry of Industry and Commerce in March 2010, the Module was amended in January 2011 to be in line with the new Code and to include previous requirements that were in place in the originally issued Module HC. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
January 2011HC-A.2.2
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes HC-1 to HC-10 01/2011 Amendments due to introduction of new MOIC Corporate Governance Code. HC-1.3.7 04/2011 Clarified the rules regarding the limitation on Directorships held by board members. HC-1.4 04/2011 Amendment made to reflect new Rules on attendance of Directors at Board of Directors meetings. HC-6.6.3 04/2011 Guidance added dealing with the compliance function. Appendix A 04/2011 Clarified membership of audit committee to be in line with Rule HC-3.2.1. HC-B.2.2 01/2012 Clarified language related to corporate governance. HC-1.2.5 and HC-1.6.3 01/2012 Clarified that the Chairman of the Board may delegate specific duties dealt with in these Paragraphs. HC-1.4.4B 01/2012 Corrected typo. HC-1.5.7, HC-1.5.7A and HC-1.5.7B 01/2012 Clarified rule and guidance on the chairman of the Board. HC-1.10.1 01/2012 Deleted last sentence. HC-5.6.6 01/2012 Amended Paragraph. Appendix D 01/2012 Disclosure to shareholders amended. HC-7.2.5 and HC-10.7.6 10/2012 Clarified Guidance on election of board members. Appendices A, B and C 10/2012 Amended requirement for written report on performance evaluation for various Board committees. Appendix A 10/2012 Included reference to compliance under Committee Duties and Responsibilities. HC-2.2.3 and HC-2.4.1 01/2013 Clarified scope of application for Rules. HC-1.3.4 and HC-10.1.8 10/2014 Minor corrections to be consistent with wording used in other Volumes of the CBB Rulebook. HC-1.11.2, HC-2.2.5, HC-6.5.1 and HC-8.2.1 10/2014 Removed reference to single person company as HC-B.1.1 clearly states that the contents of this Module do not apply to insurance licensees with this legal status. HC-2.3.3 and HC-10.2.5A 04/2016 Added a requirement (or guidance, based on type of insurance license) for the licensee to have in place a board approved policy on the employment of relatives of approved persons. HC-2.4.1A and HC-10.2.6A 04/2016 Added the requirement (or guidance, based on type of insurance license) to disclose to the board on annual basis relatives of any approved persons occupying controlled functions. HC-2.3, HC-2.4 and HC-10.2 07/2016 Clarified application of Rules (or guidance, based on the type of insurance license) for overseas licensees. HC-B.1.3 10/2019 Added Insurance Aggregators. HC-10 10/2019 Added Insurance Aggregators to the Section. HC-1.2.2 & HC-1.11.5 01/2020 Amended Paragraphs on policy and procedures approval. HC-5.4.3 04/2020 Added a new Paragraph on KPIs compliance with AML/CFT requirements. HC-9.4 10/2020 Added a new Section on Terms of Appointment and Competence of the SSB. HC-1.5.8 04/2021 Amended Paragraph on independent directors. HC-1.5.10 04/2021 Added a new Paragraph on Directors Independence status. HC-1.5.11 04/2021 Added a new Paragraph on termination of Board membership of a retired, terminated CEO. HC-4.4.3 04/2021 Added a new Paragraph on notification on any change in board categorisation. HC-A.2.3
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
January 2011HC-B HC-B Scope of Application
HC-B.1 HC-B.1 Insurance Licensees
HC-B.1.1
The contents of this Module - unless otherwise stated - apply to all
Bahraini insurance licensees , incorporated under the Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Company Law'), except those companies operating as Bahraini single person company.January 2011HC-B.1.2
For
insurance brokers , Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply forinsurance brokers .January 2011HC-B.1.3
For
insurance consultants ,insurance managers ,Insurance Aggregators andcaptive insurance firms the applicable Guidance Paragraphs are included in Chapter HC-10. The Comply or Explain Principle (see Paragraph HC-A.1.8) applies to the content of Chapter HC-10.Amended: October 2019
January 2011HC-B.1.4
Overseas insurance licensees must satisfy the CBB that equivalent arrangements are in place at theparent entity level, and that these arrangements provide for effective high-level controls over activities conducted under the Bahrain license.January 2011HC-B.1.5
In assessing compliance with Paragraph HC-B.1.4, the CBB will take into account regulatory requirements applicable to the
parent entity, as well as the governance and systems and controls arrangements actually implemented by theparent entity and applied to the Bahrain operation. With the exception of specific requirements that explicitly apply tooverseas insurance licensees (i.e. Paragraph HC-B.1.4),overseas insurance licensees should consider the remaining contents of this Chapter as guidance, in judging whether high-level controls applied to the branch satisfy HC-B.1.4.January 2011HC-B.2 HC-B.2 Branches, Subsidiaries and Affiliates
HC-B.2.1
Bahraini insurance licensees must ensure that, as a minimum, the same or equivalent provisions of this Module apply to theirbranches , whether located inside or outside the Kingdom of Bahrain, such that these are also subject to effective high-level controls. In instances where local jurisdictional requirements are more stringent than those applicable in this Module, the local requirements are to be applied.January 2011HC-B.2.2
Bahraini insurance licensees must satisfy the CBB that financial services activities conducted insubsidiaries and other group members are subject to the same or equivalent arrangements for ensuring effective corporate governance over their activities.Amended: January 2012
January 2011HC-B.2.3
Where an
insurance licensee is unable to satisfy the CBB that itssubsidiaries and other group members are subject to the same or equivalent arrangements, the CBB will assess the potential impact of risks — both financial and reputational — to the licensee arising from inadequate high-level controls in the rest of the group of which it is a member. In such instances, the CBB may impose restrictions on dealings between the licensee and other group members. Where weaknesses in controls are assessed by the CBB to pose a major threat to the stability of the licensee, then its authorisation may be called into question.January 2011HC-1 HC-1 The Board
HC-1.1 HC-1.1 Principle
HC-1.1.1
All
Bahraini insurance licensees must be headed by an effective, collegial and informed Board of Directors ('the Board').January 2011HC-1.2 HC-1.2 Role and Responsibilities
HC-1.2.1
All directors must understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:
(a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and(b) The Board's fiduciary duties of care and loyalty to theinsurance licensee and the shareholders (see HC-2.1).January 2011HC-1.2.2
The Board's role and responsibilities include but are not limited to:
(a) Approving and reviewing at least annually the overall business performance and strategy for theinsurance licensee ;(b) Reviewing regularly the implementation of the strategy and operational performance;(c) Causing financial statements to be prepared which accurately disclose theinsurance licensee's financial position;(d) Monitoring management performance;(e) Reviewing regularly the level of risk;(f) Approving and reviewing at least annually systems and controls framework (including policies);(g) Convening and preparing the agenda for shareholder meetings;(h) Monitoring conflicts of interest and preventing abusive related party transactions;(i) Assuring equitable treatment of shareholders including minority shareholders; and(j) Setting out clearly and reviewing on a regular basis who has authority to enter the licensee into contractual obligations.January 2020
January 2011HC-1.2.3
With respect to Subparagraph HC-1.2.2(j), the Board should set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board will consider the financial impact the contractual obligation may have in relation to its capital.
January 2011HC-1.2.4
The directors are responsible both individually and collectively for performing these responsibilities and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the
insurance licensee . Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members and senior management.January 2011HC-1.2.5
When a new director is inducted, the chairman of the Board, or the licensee's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also HC-4.5.1).
Amended: January 2012
January 2011HC-1.2.6
The
insurance licensee should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, hisremuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.January 2011HC-1.2.7
The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.
January 2011Additional Guidance
HC-1.2.8
In assessing the licensee's strategic plans (Paragraph HC-1.2.2), the CBB would expect the Board to address the licensee's current and future aspirations with respect to its position in the market place, its size, products, value and other key aspirations that would be considered important by investors. Furthermore, the Board should demonstrate that it is able to proactively identify and understand the significant risks that the licensee faces in achieving its business objectives. A description of the licensee's strategy should be included in the annual financial statements. See also Module PD (Public Disclosure).
January 2011HC-1.2.9
In assessing the management framework (Paragraph HC-1.2.2), the CBB would expect the Board to have effective policies and processes in place for:
(a) Ensuring a formal and transparent Board nomination process;(b) Appointingsenior managers , and ensuring that they have the necessary integrity, technical and managerial competence, and experience;(c) Overseeing succession planning, and minimizing undue reliance on key individuals;(d) Reviewing keysenior management and Board remuneration packages and ensuring such packages are consistent with the corporate values and strategy of the licensee and encourage prudent risk taking;(e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and(f) Approving budgets and reviewing performance against those budgets.January 2011HC-1.2.10
In assessing the systems and controls framework (Paragraph HC-1.2.2), the CBB would expect the Board to be able to demonstrate that its operations, individually and collectively:
(a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the licensee's activities. These should pro-actively identify as well as monitor risk. The systems should produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;(b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and(c) Make effective use of the work of internal and externalauditors .January 2011HC-1.3 HC-1.3 Composition
HC-1.3.1
Captive insurance firms are exempt from the requirements of this Section, except for Paragraph HC-1.3.2, which apply to allBahraini insurance licensees .January 2011HC-1.3.2
The Memorandum and Articles of Association of licensees must adequately set out procedures for the appointment, removal and retirement of
Directors .January 2011HC-1.3.3
For
insurance firms , the Board must comprise at least fiveDirectors . ForBahraini insurance licensees , other thaninsurance firms , the Board must comprise at least threeDirectors . For allBahraini insurance licensees , at least half the Board's members, including the Board's chairman, must benon-executive Directors .January 2011HC-1.3.4
The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the
insurance licensee's Memorandum of Association.Amended: October 2014
January 2011HC-1.3.5
Potential
non-executive director s should be made aware of their duties before their nomination, particularly as to the time commitment required. The Nominating Committee should regularly review the time commitment required from eachnon-executive director and should require eachnon-executive director to inform the Committee before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.January 2011HC-1.3.6
The Board must periodically assess its composition and size and, where appropriate, reconstitute itself and its committees by selecting new
Directors to replace long-standing members or those whose contributions to the licensee or its committees is not adequate.January 2011HC-1.3.7
A Board member may have a maximum of two Directorships of financial institutions inside Bahrain. However, two Directorships of licensees within the same category of licensees would not be permitted. For purposes of this Rule only, insurance firms and reinsurance firms are considered as different categories.
Insurance firms may approach the CBB for exemption from this limit where the Directorships concern financial institutions within the same group.Amended: April 2011
January 2011HC-1.3.8
A
non-executive Director is aDirector who is not involved in the day-to-day management of the licensee and is not anemployee of the licensee. The Chairman of the Board cannot, therefore, also perform the role ofChief Executive .January 2011HC-1.3.9
The Board's
non-executive Director s must comprise a sufficient number ofindependent Director s to apply independent judgement to, amongst other things, tasks where there is a potential for conflict of interest or there is a need for impartiality.January 2011HC-1.3.10
The appointment of Board members is conditional on the approval of the CBB (See Section AU-1.2).
January 2011HC-1.4 HC-1.4 Decision Making Process
HC-1.4.1
The Board must be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.
January 2011HC-1.4.2
The chairman must take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.
January 2011HC-1.4.3
The Board must meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.
January 2011HC-1.4.4
Individual board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively (see table below). Voting and attendance proxies for board meetings are prohibited at all times.
Meetings per year 75% Attendance requirement 4 3 5 4 6 5 7 5 8 6 9 7 10 8 Amended: April 2011
January 2011HC-1.4.4A
The absence of Board members at Board and committee meetings must be noted in the meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when Board members stand for re-election (e.g. Board member XYZ attended 95% of scheduled meetings this year).
Added: April 2011HC-1.4.4B
In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the
insurance licensee must immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance. The CBB shall then consider the matter and determine whether disciplinary action, including disqualification of that Board member pursuant to Article 65 of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.Amended: January 2012
Added: April 2011HC-1.4.5
To meet its obligations under Rule HC-1.4.3 above, the Board should meet preferably no less than four times per year. The CBB recommends that meetings should take place once every quarter to address the Board's responsibilities for management oversight and performance monitoring. Furthermore, Board rules should require members to step down if they are not actively participating in Board meetings. Board members are reminded that non attendance at board meetings does not absolve them of their responsibilities as directors. It is important that each individual director should allocate adequate time and effort to discharge his responsibilities. All Directors are expected to contribute actively to the work of the Board in order to discharge their responsibilities and should make every effort to attend board meetings where major issues are to be discussed.
Insurance licensees are encouraged to amend their Articles of Association to provide for telephonic and videoconference meetings. Participation in board meetings by means of video or telephone conferencing is regarded as attendance and may be recorded as such.Amended: April 2011
January 2011HC-1.4.6
At least half the Board meetings of
Bahraini insurance licensees in any twelve-month period must be held in the Kingdom of Bahrain.January 2011HC-1.4.7
The chairman must ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors must receive the same Board information. At the same time, directors have a legal duty to inform themselves and they must ensure that they receive adequate and timely information and must study it carefully.
January 2011HC-1.4.8
The Board must also maintain adequate records of its meetings, such that key decisions and how they are arrived at can be traced.
January 2011HC-1.5 HC-1.5 Independence of Judgment
HC-1.5.1
The CBB requires Boards of
insurance firms to include at least two independent non-executive members. ForBahraini insurance licensees , other thaninsurance firms , Boards must include at least one independent non-executive member.January 2011HC-1.5.2
In the case of a
Bahraini insurance licensee , which is part of an overseas group, where there is sufficient independent scrutiny of the operations of the firm on a group wide basis, the CBB will consider exempting the licensee from the requirements of Paragraph HC-1.5.1.January 2011HC-1.5.3
Every director must bring independent judgment to bear in decision-making. No individual or group of directors must dominate the Board's decision-making and no one individual should have unfettered powers of decision.
January 2011HC-1.5.4
Executive directors must provide the Board with all relevant business and financial information within their cognizance, and must recognise that their role as a director is different from their role as an officer.January 2011HC-1.5.5
Non-executive director s must be fully independent of management and must constructively scrutinise and challenge management including the management performance ofexecutive director s.January 2011HC-1.5.6
At least half of an
insurance licensee's Board should benon-executive director s and at least three of those persons should beindependent director s. (Note the exception for controlled companies in Paragraph HC-1.6.2 and for possible exemption under Paragraph HC-1.5.2.)January 2011HC-1.5.7
The chairman of the Board should be an
independent director , so that there will be an appropriate balance of power and greater capacity of the Board for independent decision making.Amended: January 2012
January 2011HC-1.5.7A
The chairman and/or deputy chairman must not be the same person as the CEO.
Added: January 2012HC-1.5.7B
The chairman must not be an
executive director .Added: January 2012HC-1.5.8
The Board must review the independence of each director at least annually in light of interests disclosed by them and their conduct. Each
independent director must provide the Board with all necessary and updated information for this purpose.Amended: April 2021
Added: January 2011HC-1.5.9
To facilitate free and open communication among
independent directors , each Board meeting should be preceded or followed with a session at which onlyindependent directors are present, except as may otherwise be determined by theindependent directors themselves.January 2011HC-1.5.10
Where an independent director has served three consecutive terms on the board, such director will lose his/her independence status and must not be classified as an independent director if reappointed.
Added: April 2021HC-1.5.11
Where a Chief Executive Officer of an
insurance firm , who is also a Board member, no longer occupies the CEO position, whether due to resignation, retirement or termination, his/her Board Membership must also be immediately terminated.Added: April 2021HC-1.6 HC-1.6 Representation of all Shareholders
HC-1.6.1
Each director must consider himself as representing all shareholders and must act accordingly. The Board must avoid having representatives of specific groups or interests within its membership and must not allow itself to become a battleground of vested interests. If the company has a
controller (or a group ofcontrollers acting in concert), the latter must recognise its or their specific responsibility to the other shareholders, which is direct and is separate from that of the Board of directors.January 2011HC-1.6.2
In
insurance licensees with acontroller , at least one-third of the Board must beindependent directors . Minority shareholders must generally look toindependent directors' diligent regard for their interests, in preference to seeking specific representation on the Board.January 2011HC-1.6.3
In
insurance licensees with acontroller , bothcontrollers and other shareholders should be aware ofcontrollers specific responsibilities regarding their duty of loyalty to theinsurance licensee and conflicts of interest (see Chapter HC-2) and also of rights that minority shareholders may have to elect specific directors under the Company Law or if theinsurance licensee has adopted cumulative voting for directors. The chairman of the board or other individual delegated by the chairman of the board should take the lead in explaining this with the help of company lawyers.Amended: January 2012
January 2011HC-1.7 HC-1.7 Directors' Access to Independent Advice
HC-1.7.1
The Board must ensure that there are agreed-upon procedures for individual directors to have access to independent legal or other professional advice at the
insurance licensee's expense whenever they judge this necessary to discharge their responsibilities as directors and this must be in accordance with theinsurance licensee's policy approved by the Board.January 2011HC-1.7.2
Individual directors must also have access to the
insurance licensee's corporate secretary, who must have responsibility for reporting to the Board on Board procedures. Both the appointment and removal of the corporate secretary must be a matter for the Board as a whole, not for the CEO or any other officer.January 2011HC-1.7.3
Whenever a director has serious concerns which cannot be resolved concerning the running of the
insurance licensee or a proposed action, he should consider seeking independent advice and should ensure that the concerns are recorded in the Board minutes and that any dissent from a Board action is noted or delivered in writing.January 2011HC-1.7.4
Upon resignation, a
non-executive director should provide a written statement to the chairman, for circulation to the Board, if he has any concerns such as those in Paragraph HC-1.7.3.January 2011HC-1.8 HC-1.8 Directors' Communication with Management
HC-1.8.1
The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.
January 2011HC-1.8.2
Non-executive directors should have free access to theinsurance licensee's management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.January 2011HC-1.9 HC-1.9 Committees of the Board
HC-1.9.1
For
insurance firms , the Board must create specialised committees when and as such committees are needed. In addition to the Audit, Remuneration and Nominating Committees described elsewhere in this Module, these may include an Executive Committee to review and make recommendations to the whole Board on theinsurance firm's actions, or a Risk Committee to identify and minimize specific risks of theinsurance licensee's business.January 2011HC-1.9.2
Insurance brokers should consider the Rules in this Section as guidance.January 2011HC-1.9.3
For
insurance firms , the Board should establish a corporate governance committee of at least three independent members which should be responsible for developing and recommending changes from time to time in theinsurance licensee's corporate governance policy framework.Amended: January 2012
January 2011HC-1.9.4
The Board or a committee may invite non-directors to participate in, but not vote at committee meetings so that the committee may gain the benefit of their advice and expertise in financial or other areas.
January 2011HC-1.9.5
Board Committees must have:
(a) Written terms of reference, which are reviewed annually;(b) Adequate records of their meetings, such that key decisions and how they are arrived at can be traced; and(c) Appropriate membership, which addresses potential conflicts of interest.January 2011HC-1.9.6
Committees must act only within their mandates and therefore the Board must not allow any committee to dominate or effectively replace the whole Board in its decision-making responsibility.
January 2011HC-1.9.7
Committees may be combined provided that no conflict of interest might arise between the duties of such committees, subject to CBB prior approval.
January 2011HC-1.9.8
Every committee should have a formal written charter similar in form to the model charters which are set forth in Appendices A, B and C of this Module for the Audit, Nominating and Remuneration Committees.
January 2011HC-1.10 HC-1.10 Evaluation of the Board and of Each Committee
HC-1.10.1
At least annually the Board must conduct an evaluation of its performance and the performance of each committee and each individual director.
Amended: January 2012
January 2011HC-1.10.2
Insurance brokers should consider the Rules in this Section as guidance.January 2011HC-1.10.3
The evaluation process must include:
(a) Assessing how the Board operates, especially in light of Chapter HC-1;(b) Evaluating the performance of each committee in light of its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;(c) Reviewing each director's work, his attendance at Board and committee meetings, and his constructive involvement in discussions and decision-making; and(d) Reviewing the Board's current composition against its desired composition with a view toward maintaining an appropriate balance of skills and experience and a view toward planned and progressive refreshing of the Board.January 2011HC-1.10.4
While the evaluation is a responsibility of the entire Board, it should be organised and assisted by an internal Board committee and, when appropriate, with the help of external experts.
January 2011HC-1.10.5
The Board should report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.
January 2011HC-1.11 HC-1.11 Annual Board Review and Certification
HC-1.11.1
The Board must assess and document each year whether the internal corporate governance processes that it has implemented have successfully achieved their objectives, and consequently whether the Board has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.
January 2011HC-1.11.2
The requirements in Section HC-1.11 do not apply to
captive insurance firms , but should be considered as guidance.Amended: October 2014
January 2011HC-1.11.3
The results of the review referred to in Paragraph HC-1.11.1 must be summarised in a written certification, to be signed by all Board members, and sent to the CBB within 3 months of the financial year-end of the licensee. The Board must report any material deficiencies identified during the review, along with an action plan and timescales for their correction.
January 2011HC-1.11.4
The Board certification comprises a prescribed standard statement, to be signed by all Board members, attached to which should be a summary of the steps the Board has taken in carrying out the review; a summary of the results of that review, and a summary action plan (with timescales) for addressing any identified material deficiencies. The prescribed standard statement is included in Part B of Volume 3 (Insurance), under 'CBB Reporting Forms': see '
Directors ' High-Level Controls Certification' contained in the Insurance Firm Return (Form IFR) and the Insurance Intermediaries and Managers Return (Form IMR).January 2011HC-1.11.5
The Board's review should cover the following specific matters:
(a) That the Board has reassessed the licensee's objectives and plans, and has reviewed the licensee's corporate strategy document;(b) That the Board has reassessed the licensee's overall risk profile, and its mapping of risks and the control environment put in place to meet those risks (see Paragraph HC-6.3.4). The Board must comment whether the control environment remains effective and appropriate;(c) That the Board has assessed the licensee's internal controls, to confirm that these are based on established policies approved by the Board and provide reasonable assurance of the integrity and reliability of its financial records;(d) That the Board has assessed whether adherence to established internal limits and controls was continuously monitored;(e) That the Board has assessed that all new (or material changes to) significant policies, procedures and products introduced by the licensee since the last Board certification were appropriately reviewed and approved at the time;(f) That the Board has assessed that management and staff have complied with the licensee's corporate code of conduct (see Section HC-2.2); and(g) That in the period under review, the Board had received and reviewed the external auditor's management letter within six months of the (previous) financial year end, together with the licensee's audit committee and senior management comments on the letter and any proposed actions.January 2020
January 2011HC-1.11.6
With respect to HC-1.11.5 (g), a
Director 's certificate received (for example) no later than 31 March 2004, covering the year ending 31 December 2003, would need to certify that the management letter for the year ending 31 December 2002 was received and reviewed by the Board by 30 June 2003.January 2011HC-2 HC-2 Approved Persons Loyalty
HC-2.1 HC-2.1 Principle
HC-2.1.1
The
approved persons must have full loyalty to theinsurance licensee .January 2011HC-2.2 HC-2.2 Personal Accountability
HC-2.2.1
The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licensee, its
shareholders andpolicyholders .January 2011HC-2.2.2
In assessing compliance with Paragraph HC-2.2.1, the CBB will take into account all actions of the Board and its members. The interest of the licensee includes the licensee's continued compliance with all relevant Rules and Regulations, and the interests of
employees ,customers and otherstakeholders . The interest ofshareholders includes the current and future value of the licensee, its status as a going concern, transparency and disclosure of information to the market. The interest ofpolicyholders includes ensuring that the licensee fulfils its obligations under itspolicies and treats allpolicyholders fairly and pays equal regard to the interests of allpolicyholders and groups ofpolicyholders .January 2011HC-2.2.3
Each member of the board must understand that under the Company Law he is personally accountable to the
insurance licensee and the shareholders if he violates his legal duty of loyalty to theinsurance licensee , and that he can be personally sued by theinsurance licensee or the shareholders for such violations.Amended: January 2013
January 2011HC-2.2.4
An
insurance licensee's Board must establish and disseminate to allemployees andappointed representatives of the licensee a corporate code of conduct.January 2011HC-2.2.5
The requirements of Paragraph HC-2.2.4 do not apply to
captive insurance firms , but should be considered as guidance.Amended: October 2014
January 2011HC-2.2.6
The code of conduct must establish standards by giving examples or expectations of:
(a) Honesty;(b) Integrity;(c) Leadership;(d) Reliability; and(e) Professionalism.January 2011HC-2.2.7
The Board must establish and disseminate to
employees andappointed representatives policies and processes for the identification, reporting and prevention or management of potential conflicts of interest, including matters such as:(a)Related party transactions ;(b) The misuse of the licensee's assets; and(c) The use of privileged information for personal advantage ('insider trading').January 2011HC-2.2.8
Any transaction in which Board members or any member of management have potential conflicts of interest should either be proscribed or require formal documented approval by the Board, with measures taken to manage those conflicts (See also Paragraph HC-2.4.1).
January 2011HC-2.2.9
The Board must ensure that policies and procedures are in place to ensure that necessary
customer confidentiality is maintained.January 2011HC-2.2.10
The duty of loyalty includes a duty not to use property of the
insurance licensee for his personal needs as though it was his own property, not to disclose confidential information of theinsurance licensee or use it for his personal profit, not to take business opportunities of theinsurance licensee for himself, not to compete in business with theinsurance licensee , and to serve theinsurance licensee's interest in any transactions with a company in which he has a personal interest, such as inrelated party transactions .January 2011HC-2.2.11
For purposes of Paragraph HC-2.2.10, an
approved person should be considered to have a "personal interest" in a transaction with a company if:(a) He himself; or(b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or(c) Another company of which he is a director orcontroller ,is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)
January 2011HC-2.3 HC-2.3 Avoidance of Conflicts of Interest
HC-2.3.1
Each
approved person must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with theinsurance licensee .January 2011HC-2.3.2
Any Board member should absent himself from any discussion or decision-making that involves a subject where he is incapable of providing objective advice, or which involves a subject, transaction or proposed transaction where there is a potential conflict of interest.
January 2011HC-2.3.3
Bahraini insurance licensees must have in place a board approved policy on the employment of relatives ofapproved persons and a summary of such policy must be disclosed in the annual report of theBahraini insurance licensee .Amended: July 2016
April 2016HC-2.3.4
Overseas insurance licensees must have in place a policy on the employment of relatives ofapproved persons pertaining to their Bahrain operations.Added: July 2016HC-2.4 HC-2.4 Disclosure of Conflicts of Interest
HC-2.4.1
On an annual basis, each
approved person must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving theapproved person . Theapproved persons must understand that any approval of a conflicted transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.Amended: January 2013
January 2011HC-2.4.1A
The chief executive/general manager of the
Bahraini insurance licensee must disclose to the board of directors on an annual basis those individuals who are occupyingcontrolled functions and who are relatives of anyapproved persons within theBahraini insurance licensee .Amended: July 2016
April 2016HC-2.4.1B
The chief executive/general manager of the
overseas insurance licensees must disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupyingcontrolled functions and who are relatives of anyapproved persons within theoverseas insurance licensee .Added: July 2016HC-2.4.2
The Board of the
Bahraini insurance licensee should establish formal procedures for:(a) Periodic disclosure and updating of information by eachapproved person on his actual and potential conflicts of interest; and(b) Advance approval by directors or shareholders who do not have an interest in the transactions in which aninsurance licensee's approved person has a personal interest. The Board should require such advance approval in every case.Amended: July 2016
January 2011HC-2.5 HC-2.5 Disclosure of Conflicts of Interest to Shareholders
HC-2.5.1
The
insurance licensee must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.January 2011HC-3 HC-3 Audit Committee and Financial Statements Certification
HC-3.1 HC-3.1 Principle
HC-3.1.1
The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.
January 2011HC-3.2 HC-3.2 Audit Committee
HC-3.2.1
The Board must establish an audit committee of at least three directors of which the majority should be independent including the Chairman. The committee must:
(a) Review the company's accounting and financial practices;(b) Review the integrity of theinsurance licensee's financial and internal controls and financial statements;(c) Review theinsurance licensee's compliance with legal requirements;(d) Recommend the appointment, compensation and oversight of theinsurance licensee's external auditor; and(e) Recommend the appointment of the internal auditor.January 2011HC-3.2.2
The Audit Committee should ensure that the external auditor firm and its partners are truly independent of the licensee and have no financial or other relationship with the licensee. Audit findings should be used as an independent check on the information received from management about the licensee's operations and performance and the effectiveness of internal controls.
January 2011HC-3.3 HC-3.3 Audit Committee Charter
HC-3.3.1
The audit committee must adopt a written charter which shall, at a minimum, state the duties outlined in Paragraph HC-3.2.1 and the other matters included in Appendix A to this Module.
January 2011HC-3.3.2
A majority of the audit committee should have the financial literacy qualifications stated in Appendix A.
January 2011HC-3.3.3
The Board should adopt a "whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the program, concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.
January 2011HC-3.4 HC-3.4 CEO and CFO Certification of Financial Statements
HC-3.4.1
To encourage management accountability for the financial statements required by the directors, the
insurance licensee's CEO and chief financial officer must state in writing to the audit committee and the Board as a whole that theinsurance licensee's interim and annual financial statements present a true and fair view, in all material respects, of theinsurance licensee's financial condition and results of operations in accordance with applicable accounting standards.January 2011HC-4 HC-4 Appointment, Training and Evaluation of the Board
HC-4.1 HC-4.1 Principle
HC-4.1.1
The
insurance licensee must have rigorous procedures for appointment, training and evaluation of the Board.January 2011HC-4.2 HC-4.2 Nominating Committee
HC-4.2.1
The Board must establish a Nominating Committee of at least three directors which must:
(a) Identify persons qualified to become members of the Board of directors or Chief Executive Officer, Chief Financial Officer, Corporate Secretary and any otherapproved persons of theinsurance licensee considered appropriate by the Board, with the exception of the appointment of the internal auditor which shall be the responsibility of the Audit Committee in accordance with Paragraph HC-3.2.1 above; and(b) Make recommendations to the whole Board of directors including recommendations of candidates for Board membership to be included by the Board of directors on the agenda for the next annual shareholder meeting.January 2011HC-4.2.2
The committee must include only
independent directors or, alternatively, onlynon-executive directors of whom a majority isindependent directors and the chairman is anindependent director . This is consistent with international best practice and it recognises that the Nominating Committee must exercise judgment free from personal career conflicts of interest.January 2011HC-4.3 HC-4.3 Nominating Committee Charter
HC-4.3.1
The Nominating Committee must adopt a formal written charter which must, at a minimum, state the duties outlined in Paragraph HC-4.2.1 and the other matters included in Appendix B to this Module.
January 2011HC-4.4 HC-4.4 Board Nominations to Shareholders
HC-4.4.1
Each proposal by the Board to the shareholders for election or reelection of a director must be accompanied by a recommendation from the Board, a summary of the advice of the Nominating Committee, and the following specific information:
(a) The term to be served, which may not exceed three years (but there need not be a limit on reelection for further terms);(b) Biographical details and professional qualifications;(c) In the case of anindependent director , a statement that the Board has determined that the criteria ofindependent director have been met;(d) Any other directorships held;(e) Particulars of other positions which involve significant time commitments, and(f) Details of relationships between:(i) The candidate and theinsurance licensee , and(ii) The candidate and other directors of theinsurance licensee .HC-4.4.2
The chairman of the Board should confirm to shareholders when proposing re-election of a director that, following a formal performance evaluation, the person's performance continues to be effective and continues to demonstrate commitment to the role. Any term beyond six years (e.g. two three-year terms) for a director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the Board. Serving more than six years is relevant to the determination of a non-executive director's independence.
January 2011HC-4.4.3
Licensees must notify the CBB immediately on any change in board categorisation.Added: April 2021HC-4.5 HC-4.5 Induction and Training of Directors
HC-4.5.1
The chairman of the Board must ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction must include meetings with
senior management , visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.January 2011HC-4.5.2
All continuing directors must be invited to attend orientation meetings and all directors must continually educate themselves as to the
insurance licensee's business and corporate governance.January 2011HC-4.5.3
Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the
insurance licensee's business and industry, which may include periodic attendance at conferences and management meetings. The Nominating Committee shall oversee directors' corporate governance educational activities.January 2011HC-5 HC-5 Remuneration of Approved Persons
HC-5.1 HC-5.1 Principle
HC-5.1.1
The
insurance licensee must remunerateapproved persons fairly and responsibly.January 2011HC-5.2 HC-5.2 Remuneration Committee
HC-5.2.1
The Board must establish a remuneration committee of at least three directors which must:
(a) Review theinsurance licensee's remuneration policies for theapproved persons , which must be approved by the shareholders;(b) Make recommendations regardingremuneration policies and amounts forapproved persons to the whole Board, taking account of totalremuneration including salaries, fees, expenses and employee benefits; and(c) Recommend Board member remuneration based on their attendance and performance.January 2011HC-5.2.2
The committee may be merged with the nominating committee.
January 2011HC-5.3 HC-5.3 Remuneration Committee Charter
HC-5.3.1
The committee must adopt a written charter which must, at a minimum, state the duties in Paragraph HC-5.2.1 and other matters in Appendix C of this Module.
January 2011HC-5.3.2
The committee should include only
independent directors or, alternatively, onlynon-executive directors of whom a majority areindependent directors and the chairman is anindependent director . This is consistent with international best practice and it recognises that the remuneration committee must exercise judgment free from personal career conflicts of interest.January 2011HC-5.4 HC-5.4 Standard for all Remuneration
HC-5.4.1
Remuneration (including incentives, bonuses and other rewards) ofapproved persons must be sufficient enough to attract, retain and motivate persons of the quality needed to run theinsurance licensee successfully, but theinsurance licensee must avoid paying more than is necessary for that purpose.January 2011HC-5.4.2
Where remuneration is structured so as to link rewards to corporate and individual performance, criteria should avoid excessive focus on short-term profitability measures.
January 2011Alignment of All Staff Remuneration with Compliance with AML/CFT Requirements
HC-5.4.3
The performance evaluation and remuneration of senior management and staff of the
insurance licensee must be based on the achievement of the Key Performance Indicators (KPIs) relevant to ensuring compliance with AML/CFT requirements as specified in Paragraphs FC-2.1.4 and FC-2.1.5.Added: April 2020HC-5.5 HC-5.5 Directors' Remuneration
HC-5.5.1
The review of
Directors ' remuneration must be a standing item on theinsurance licensee's Annual General Meeting agenda, and must be considered byshareholders at every Annual General Meeting. Policies in respect ofDirectors ' remuneration (including pension and severance arrangements) and bonuses must be clearly disclosed in the annual financial statements.January 2011HC-5.5.2
Directors ' remuneration must comply with all applicable laws and Regulations, including the provisions contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law, cappingDirectors ' remuneration as a percentage of net profits.January 2011HC-5.5.3
Remuneration ofnon-executive directors must not include performance-related elements such as grants of shares, share options or other deferred stock-related incentive schemes, bonuses, or pension benefits.January 2011HC-5.6 HC-5.6 Senior Management Remuneration
HC-5.6.1
Remuneration ofsenior management must be structured so that a portion of the total is linked to theinsurance licensee's and individual's performance and aligns their interests with the interests of the shareholders.January 2011HC-5.6.2
Such rewards may include grants of shares, share options and other deferred stock-related incentive schemes, bonuses, and pension benefits which are not based on salary.
January 2011HC-5.6.3
If a
senior manager is also a director, hisremuneration as asenior manager must take into account compensation received in his capacity as a director.January 2011HC-5.6.4
All share incentive plans must be approved by the shareholders.
January 2011HC-5.6.5
All performance-based incentives should be awarded under written objective performance standards which have been approved by the Board and are designed to enhance shareholder and the
insurance licensee's value, and under which shares should not vest and options should not be exercisable within less than two years of the date of award of the incentive.January 2011HC-5.6.6
All policies for performance-based incentives should be approved by the shareholders, but the approval should be only of the plan itself and not of the grant to specific individuals of benefits under the plan.
Amended: January 2012
January 2011HC-6 HC-6 Management Structure
HC-6.1 HC-6.1 Principle
HC-6.1.1
The Board must establish a clear and efficient management structure.
January 2011HC-6.2 HC-6.2 Establishment of Management Structure
HC-6.2.1
The Board must approve and review at least annually the
insurance licensee's management structure and responsibilities.January 2011HC-6.2.2
The Board must appoint
senior management whose authority must include management and operation of current activities of theinsurance licensee , reporting to and under the direction of the Board. Thesenior management must include at a minimum:(a) ACEO ;(b) A chief financial officer;(c) A corporate secretary;and must also include such other
approved persons as the Board considers appropriate and as a minimum must include persons occupyingcontrolled functions as outlined in Paragraph AU-1.2.2.January 2011HC-6.3 HC-6.3 Titles, Authorities, Duties and Reporting Responsibilities
HC-6.3.1
The Board must adopt by-laws prescribing each
senior manager's title, authorities, duties and internal reporting responsibilities. This must be done with the advice of the Nominating Committee and in consultation with theCEO , to whom the othersenior managers should normally report.January 2011HC-6.3.2
These provisions must include but should not be limited to the following:
(a) TheCEO must have authority to act generally in theinsurance licensee's name, representing theinsurance licensee's interests in concluding transactions on theinsurance licensee's behalf and giving instructions to othersenior managers andinsurance licensee employees;(b) The chief financial officer must be responsible and accountable for:(i) The complete, timely, reliable and accurate preparation of theinsurance licensee's financial statements, in accordance with the accounting standards and policies of theinsurance licensee (see also HC-3.4.1); and(ii) Presenting the Board with a balanced and understandable assessment of theinsurance licensee's financial situation;(c) The corporate secretary's duties must include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and(d) The internal auditor's (see HC-6.5) duties must include providing an independent and objective review of the efficiency of theinsurance licensee's operations. This would include a review of the accuracy and reliability of theinsurance licensee's accounting records and financial reports as well as a review of the adequacy and effectiveness of theinsurance licensee's risk management, control, and governance processes.January 2011HC-6.3.3
The Board should also specify any limits which it wishes to set on the authority of the CEO or other
senior managers , such as monetary maximums which they authorise without separate Board approval.January 2011HC-6.3.4
In conjunction with the Board, the
Chief Executive Officer /General Manager must maintain a clear mapping of the risks faced by the business and document the organisational and other controls maintained to meet those risks.January 2011HC-6.3.5
In conjunction with the Board, the
Chief Executive Officer /General Manager must maintain a clear and appropriate apportionment of significant responsibilities amongst senior management.January 2011HC-6.3.6
The apportionment must be clear as to who has which responsibility, and must permit the business and affairs of the licensee to be adequately monitored and controlled by the Board, the
Chief Executive Officer /General Manager , and relevantheads of function .January 2011HC-6.3.7
The apportionment must also ensure appropriate segregation of duties where these are required for effective controls.
January 2011HC-6.3.8
The corporate secretary should be given general responsibility for reviewing the
insurance licensee's procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training.January 2011HC-6.3.9
At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the
CEO , both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to theCEO .January 2011HC-6.4 HC-6.4 Executive Management Committee
HC-6.4.1
Bahraini insurance firms must consider the need to establish an Executive Management Committee to support theChief Executive Officer /General Manager .January 2011HC-6.4.2
Insurance intermediaries andinsurance managers , unlike otherinsurance licensees , are not required to consider the need to operate an Executive Management Committee.January 2011HC-6.4.3
Executive Management Committees can facilitate proper corporate governance by ensuring that senior management discuss key issues affecting the licensee openly and collectively. Where an
insurance firm does not consider it necessary to create an Executive Management Committee, it must be prepared to give reasons for its decision to the CBB, and to explain what checks and balances will apply to executive management.January 2011HC-6.4.4
The Committee should comprise the
Chief Executive Officer /General Manager and appropriateheads of functions , such as the head of risk management, the Chief Finance Officer, the Chief Operations Officer, the head of underwriting and other key business divisions.January 2011HC-6.4.5
The Committee's responsibilities should include the oversight of day-to-day implementation of strategy, limits and procedures. It should also monitor the day-to-day performance of individual business lines and departments relative to targets, limits, and policies (in conjunction with other committees and functions, such as the Risk Committee or the Risk Management or Compliance functions).
January 2011HC-6.4.6
The Board is responsible for ensuring that there is a clear framework of delegated authorities and a clear demarcation of duties between the Board, the Executive Committee, the
Chief Executive Officer and other members of senior management.January 2011HC-6.5 HC-6.5 Internal Audit
HC-6.5.1
Bahraini insurance licensees must establish an internal audit function to monitor the adequacy of their systems and controls.Amended: October 2014
January 2011HC-6.5.2
The internal audit function should be independent of the
senior management , reporting to the Audit committee.January 2011HC-6.5.3
The CBB considers it best practice for
captive insurers to fall within the remit of the internal audit functions of their groups and be subject to periodic review, although no formal arrangements for internal audit covercaptive insurers .January 2011HC-6.5.4
Part or all of the internal audit function may be
outsourced , or provided at group level, subject to the requirements of Section RM-7.6. Amongst other things, these require licensees to retain responsibility for their internal audit programme, and that appropriate safeguards are built into the outsourcing contract. Furthermore, a licensee cannotoutsource its internal audit function to its externalauditor (with limited exceptions). Prior approval from the CBB is required for significantoutsourcing arrangements, including alloutsourcing of internal audit. A licensee's head of internal audit is acontrolled function and requires CBB approval prior to being appointed (see Section AU-1.2).January 2011HC-6.5.5
Internal audit functions must have terms of reference that clearly indicate:
(a) The scope and frequency of audits;(b) Reporting lines; and(c) The review and approval process applied to audits.January 2011HC-6.5.6
Paragraph HC-6.5.5 applies irrespective of whether the internal audit function is outsourced. Where it is
outsourced , the CBB would expect to see these matters addressed in the contract with theoutsourcing provider .January 2011HC-6.5.7
Internal audit functions must report directly to the Audit committee or, where none exists, to the Board. They must have unrestricted access to all the appropriate records of the
insurance licensee . They must have open and regular access to the Audit Committee, the Board, theChief Executive , and the licensee's externalauditor .January 2011HC-6.5.8
Internal audit functions must have adequate staff levels with appropriate skills and knowledge, such that they can act as an effective challenge to the business. Where the function is not outsourced, the
head of the function should be a senior and experiencedemployee . Internal audit functions must not perform other activities that compromise their independence.January 2011HC-6.5.9
The CBB would expect to see in place a formal audit plan that:
(a) Is reviewed and approved at least annually by the Audit Committee or, where none exists, the Board;(b) Is risk-based, with an appropriate scoring system; and(c) Covers all material areas of a licensee's operations over a reasonable timescale, including (where relevant) the process by which a licensee obtains professional actuarial expertise to develop and verify its pricing and reserving policies.January 2011HC-6.5.10
Internal Audit reports should also be:
(a) Clear and prioritised, with action points directed towards identified individuals;(b) Timely; and(c) Distributed to the Audit Committee or Board and appropriatesenior management .January 2011HC-6.5.11
Insurance licensees should also have processes in place to deal with recommendations raised by internal audit to ensure that they are:(a) Dealt with in a timely fashion;(b) Monitored until they are settled; and(c) Raised with senior management if they have not been adequately dealt with.January 2011HC-6.6 HC-6.6 Compliance
HC-6.6.1
Insurance licensees must take reasonable care to establish and maintain effective systems and controls for compliance with applicable requirements in the Kingdom's legislation and those set by the CBB, and those established under any other statute or regulator to which theinsurance licensee is subject.January 2011HC-6.6.2
Depending on the nature, scale and complexity of its business, an
insurance licensee should consider having a separate compliance function. A compliance function should:(a) Document its organisation and responsibilities;(b) Be appropriately staffed with competent individuals;(c) Have unrestricted access to the licensee's relevant records; and(d) Have ultimate recourse to the Board.January 2011HC-6.6.3
The compliance function may not be combined with the internal audit function or any other operational function as such combination may lead to a conflict of interest.
Added: April 2011HC-7 HC-7 Communication between Board and Shareholders
HC-7.1 HC-7.1 Principle
HC-7.1.1
The
insurance licensee must communicate with shareholders, encourage their participation, and respect their rights.January 2011HC-7.2 HC-7.2 Conduct of Shareholders' Meetings
HC-7.2.1
The Board must observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:
(a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;(b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;(c) Notices of meetings must encourage shareholders to attend shareholder meetings and, if not possible, to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");(d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;(e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;(f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;(g) The chairman of the meeting must encourage questions from shareholders, including questions regarding theinsurance licensee's corporate governance guidelines;(h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and(i) Disclosure of all material facts must be made to the shareholders by the Chairman prior to any vote by the shareholders.January 2011HC-7.2.2
The
insurance licensee should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).January 2011HC-7.2.3
The
insurance licensee should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.January 2011HC-7.2.4
An
insurance licensee should maintain a company website (see HC-8.2.1 for website disclosures). Theinsurance licensee should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. Theinsurance licensee may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, theinsurance licensee should grant a controlled access to such information to its shareholders.January 2011HC-7.2.5
In notices of meetings at which directors are to be elected or removed the
insurance licensee should ensure that:(a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and(b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.Amended: October 2012
January 2011HC-7.3 HC-7.3 Direct Shareholder Communication
HC-7.3.1
The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with
controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy withcontrollers . Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating theinsurance licensee's corporate governance (see also HC-1.4 for other duties of the chairman).January 2011HC-7.4 HC-7.4 Controllers
HC-7.4.1
In
insurance licensees with one or morecontrollers , the chairman and other directors must actively encourage thecontrollers to make a considered use of their position and to fully respect the rights of minority shareholders (see also HC-1.3 for other duties of the chairman).January 2011HC-8 HC-8 Corporate Governance Disclosure
HC-8.1 HC-8.1 Principle
HC-8.1.1
The
insurance licensee must disclose its corporate governance.January 2011HC-8.2 HC-8.2 Disclosure under the Company Law and CBB Requirements
HC-8.2.1
The requirements in this Section do not apply to
captive insurance firms , but should be considered as guidance.Amended: October 2014
January 2011HC-8.2.2
The Board must oversee the process of disclosure, including corporate governance, to all
stakeholders . The Board must ensure that the licensee's communications are fair, transparent, comprehensive and timely.January 2011HC-8.2.3
In each
insurance licensee :(a) The Board must adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;(b) Theinsurance licensee must publish the guidelines on its website, if it has a website (see HC-7.2.4);(c) At each annual shareholders' meeting the Board must report on theinsurance licensee's compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and(d) At each annual shareholders' meeting the Board must also report on further items listed in Appendix D. Such information should be maintained on theinsurance licensee's website or held at theinsurance licensee's premises on behalf of the shareholders.January 2011HC-8.2.4
The CBB may issue a template as a guide for an
insurance licensee's annual meeting corporate governance discussion.January 2011HC-8.2.5
The Board must outline in its annual report its criteria and materiality thresholds for the definition of 'independence'. The
Directors must be identified in the annual report as executive,non-executive , orindependent non-executive .January 2011HC-8.2.6
Licensees should refer to Module PD (Public Disclosure) regarding all specific disclosures required.
January 2011HC-9 HC-9 Takaful and Retakaful Companies
HC-9.1 HC-9.1 Principle
HC-9.1.1
Companies which refer to themselves as "Takaful or Retakaful" must follow the principles of Islamic Shari'a.
January 2011HC-9.2 HC-9.2 Shari'a Supervisory Board
HC-9.2.1
Takaful and Retakaful companies which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. In ensuring compliance with Shari'a principles, each Takaful or Retakaful
insurance licensee must establish a Shari'a Supervisory Board ('SSB') consisting of at least three Shari'a scholars and must comply with AAOIFI Governance Standard for Islamic Financial Institutions No.1 ('Shari's Supervisory Board: Appointment, Composition and Report').January 2011HC-9.2.2
The function of the
Shari'a Supervisory Board is to review the operations of the takaful company and ensure that these are compliant with the principles of the Shari'a. In doing so, theShari'a Supervisory Board is likely to provide guidance and advice to the takaful company's Board and management on all aspects of a takaful operation, with a particular focus on product design, the handling of claims and surpluses, the calculation and allocation of the operator's costs, the approval of investments and accounting issues.January 2011HC-9.2.3
In the case of
overseas insurance firms operating according to takaful principles, the requirement to appoint a Shari'a Supervisory Board in Paragraph HC-9.2.1 may be waived by CBB, if the firm has appointed an equivalentShari'a Supervisory Board at the parent entity level, of sufficient expertise and credibility.January 2011HC-9.2.4
An
insurance firm licensed to conduct insurance business according to takaful principles must comply with all other AAOIFI governance standards for Islamic Financial Institutions.January 2011HC-9.2.5
For
takaful firms , full compliance with AAOIFI Governance Standard No.1 is required. The CBB would actively encourage full compliance with all the AAOIFI governance standards but in so doing accepts that these standards themselves include not only standards but also guidance.January 2011HC-9.2.6
The office of Shari'a Board Member is a
controlled function : see Module AU (Authorisation).January 2011HC-9.2.7
The Shari'a Board requirements contained in Section HC-9.2 are additional to the other high-level control requirements contained in this Module.
January 2011HC-9.3 HC-9.3 Governance and Disclosure per Shari'a Principles
HC-9.3.1
Insurance firms which refer to themselves as "Takaful" or "Retakaful" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles.January 2011HC-9.3.2
In addition to its duties outlined in Chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the
insurance licensee's Corporate Governance Committee and the Shari'a Supervisory Board (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.January 2011HC-9.3.3
The Board shall set up a Corporate Governance Committee (see also Chapter HC-8). In this case, the Committee shall comprise at least three members to co-ordinate and integrate the implementation of the governance policy framework.
January 2011HC-9.3.4
The Corporate Governance Committee established under Chapter HC-9 shall comprise at a minimum of:
(a) Anindependent director to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;(b) A Shari'a scholar who is a SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues (if any), and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and(c) Anindependent director who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the Board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.January 2011HC-9.3.5
The Corporate Governance Committee shall be empowered to:
(a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and(b) Provide the Board of directors with reports and recommendations based on its findings in the exercise of its functions.January 2011HC-9.4 HC-9.4 Terms of Appointment and Competence of the Shari’a Supervisory Board (SSB)
SSB Competence/ Fit and Proper Criteria
HC-9.4.4
The Board of directors of the
insurance licensee must carry out a background check and consider the following criteria when assessing the fitness and propriety of individuals to serve on the SSB:a) Have a clean background, a good character and conduct by being recognised for honesty, integrity and good reputation in their professional business and/or financial dealings, and not previously been convicted of any moral turpitude, felony or criminal offence;b) Have competence, diligence, capability and soundness of judgement;c) Have strong proficiency in Arabic, as they need to be very conversant with the primary sources of the Shari’a;d) Have at least a bachelor degree (or its equivalent) in Islamic Shari’a;e) Have a certified degree in Fiqh al Muamalat (Islamic commercial jurisprudence) with strong understanding of Usul Al Fiqh (rules of Islamic jurisprudence);f) Have adequate understanding of Takaful/retakaful and accounting;g) Have accumulated overall experience of at least seven years in Shari’a related scholarly pursuits (e.g. teaching, research, fatawa issuance, etc).Added: October 2020HC-9.4.1
The appointment of the SSB must be made formally in writing, by way of a contract for service for a minimum period of three years.
Added: October 2020HC-9.4.2
Benefits and remuneration of the SSB must be set in aggregate by the general assembly.
Added: October 2020HC-9.4.3
Where the
Takaful /retakaful licensee fails to appoint the SSB within 3 months of the annual general meeting or to extend the term of the previous SSB, the CBB has the right to appoint a temporary SSB for which all costs related to the appointment will be borne by theTakaful /retakaful licensee in addition to any liabilities related to the delay in the appointment of the SSB.Added: October 2020HC-9.4.5
For purposes of Paragraph HC-9.4.1, at least one SSB member should have a fair understanding of the legal and regulatory framework applicable to the functions of the
insurance licensee .Added: October 2020HC-10 HC-10 Insurance Consultants, Insurance Managers, Insurance Aggregators and Captive Insurance Firms
HC-10.1 HC-10.1 The Board
HC-10.1.1
All
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should be headed by an effective, collegial and informed Board of Directors ('the Board').Amended: October 2019
January 2011Role and Responsibilities
HC-10.1.2
All directors should understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:
(a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and(b) The Board's fiduciary duties of care and loyalty to theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms and the shareholders (see HC-10.2).Amended: October 2019
January 2011HC-10.1.3
The Board's role and responsibilities include but are not limited to:
(a) The overall business performance and strategy for theinsurance consultants ,insurance managers orcaptive insurance firms ;(b) Causing financial statements to be prepared which accurately disclose theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' financial position;(c) Monitoring management performance;(d) Convening and preparing the agenda for shareholder meetings;(e) Monitoring conflicts of interest and preventing abusive related party transactions; and(f) Assuring equitable treatment of shareholders including minority shareholders.Amended: October 2019
January 2011HC-10.1.4
The directors are responsible both individually and collectively for performing these responsibilities. Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.
January 2011HC-10.1.5
When a new director is inducted, the chairman of the Board, assisted by company legal counsel or compliance officer, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC.
January 2011HC-10.1.6
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, hisremuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.Amended: October 2019
January 2011HC-10.1.7
The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.
January 2011Composition
HC-10.1.8
The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the
insurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' Memorandum of Association.Amended: October 2019
Amended: October 2014
January 2011HC-10.1.9
Potential
non-executive directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The Board should regularly review the time commitment required from eachnon-executive director and should require eachnon-executive director to inform the Board before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.January 2011Decision Making Process
HC-10.1.10
The Board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.
January 2011HC-10.1.11
The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.
January 2011HC-10.1.12
The Board should meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.
January 2011HC-10.1.13
The chairman should ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors should receive the same Board information. At the same time, directors have a legal duty to inform themselves and they should ensure that they receive adequate and timely information and should study it carefully.
January 2011Directors' Communication with Management
HC-10.1.14
The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.
January 2011HC-10.1.15
Non-executive directors should have free access to theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.Amended: October 2019
January 2011HC-10.2 HC-10.2 Approved Persons Loyalty
HC-10.2.1
The
approved persons shall have full loyalty to theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms .Amended: October 2019
January 2011Personal Accountability
HC-10.2.2
Each
approved person should understand that under the Company Law he is personally accountable to theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms and the shareholders if he violates his legal duty of loyalty to theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms , and that he can be personally sued by theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms or the shareholders for such violations.Amended: October 2019
January 2011HC-10.2.3
The duty of loyalty includes a duty not to use property of the
insurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms for his personal needs as though it was his own property, not to disclose confidential information of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms or use it for his personal profit, not to take business opportunities of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms for himself, not to compete in business with theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms , and to serve theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' interest in any transactions with the company in which he has a personal interest.Amended: October 2019
January 2011HC-10.2.4
For purposes of Paragraph HC-10.2.3, an
approved person should be considered to have a "personal interest" in a transaction with the company if:(a) He himself;(b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or(c) Another company of which he is a director or controller,is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)
January 2011Avoidance of Conflicts of Interest
HC-10.2.5
Each
approved person should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms .Amended: October 2019
January 2011HC-10.2.5A
Bahraini insurance consultants ,Bahraini insurance managers or Bahrainicaptive insurance firms should have in place a board approved policy on the employment of relatives ofapproved persons and a summary of such policy must be disclosed in the annual report of theinsurance consultant ,insurance manager ,insurance aggregators orcaptive insurance firm .Amended: October 2019
Amended: July 2016
April 2016HC-10.2.5B
Overseas insurance managers or overseas
captive insurance firms should have in place a policy on the employment of relatives ofapproved persons pertaining to their Bahrain operations.Added: July 2016Disclosure of Conflicts of Interest
HC-10.2.6
Each
approved person should inform the entire Board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure should include all material facts in the case of a contract or transaction involving theapproved person . Theapproved persons should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.January 2011HC-10.2.6A
The chief executive/general manager of the
Bahraini insurance consultants ,Bahraini insurance managers ,Bahraini insurance aggregators or Bahrainicaptive insurance firms should disclose to the board of directors on an annual basis those individuals who are occupyingcontrolled functions and who are relatives of anyapproved persons occupyingcontrolled functions within theinsurance consultant ,insurance manager ,insurance aggregators orcaptive insurance firm .Amended: October 2019
Amended: July 2016
April 2016HC-10.2.6B
The chief executive/general manager of the overseas insurance managers or overseas
captive insurance firms should disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupyingcontrolled functions and who are relatives of anyapproved persons within theoverseas insurance licensee .Added: July 2016HC-10.2.7
The Board of the
Bahraini insurance consultants ,Bahraini insurance managers ,Bahraini insurance aggregators or Bahrainicaptive insurance firms should establish formal procedures for:(a) Periodic disclosure and updating of information by eachapproved person on his actual and potential conflicts of interest; and(b) Board of Director's approval of any direct or indirect personal interest of anapproved person , in the contracts and actions in which the licensee is a party.Amended: October 2019
Amended: July 2016
January 2011Disclosure of Conflicts of Interests to Shareholders
HC-10.2.8
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should disclose to their shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and should disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.Amended: October 2019
January 2011HC-10.3 HC-10.3 Financial Statements Certification
HC-10.3.1
The Board shall have rigorous controls for financial audit and reporting, internal control, and compliance with law.
January 2011CEO and CFO Certification of Financial Statements
HC-10.3.2
To encourage management accountability for the financial statements required by the directors, the
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' CEO and chief financial officer should state in writing to the audit committee and the Board as a whole that theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' interim and annual financial statements present a true and fair view, in all material respects, of theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' financial condition and results of operations in accordance with applicable accounting standards.Amended: October 2019
January 2011HC-10.4 HC-10.4 Appointment, Training and Evaluation of the Board
HC-10.4.1
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should have rigorous procedures for appointment, training and evaluation of the Board.Amended: October 2019
January 2011Induction and Training of Directors
HC-10.4.2
The chairman of the Board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction should include meetings with
senior management , visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.January 2011HC-10.4.3
All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' business and corporate governance.Amended: October 2019
January 2011HC-10.4.4
Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' business and industry, which may include periodic attendance at conferences and management meetings. The Board shall oversee directors' corporate governance educational activities.Amended: October 2019
January 2011HC-10.5 HC-10.5 Remuneration of Approved Persons
HC-10.5.1
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should remunerateapproved persons fairly and responsibly.Amended: October 2019
January 2011HC-10.5.2
Remuneration ofapproved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms successfully, but theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should avoid paying more than is necessary for that purpose.Amended: October 2019
January 2011HC-10.6 HC-10.6 Management Structure
HC-10.6.1
The Board should establish a clear and efficient management structure.
January 2011Establishment of Management Structure
HC-10.6.2
The Board should appoint
senior management whose authority must include management and operation of current activities of theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms , reporting to and under the direction of the Board. Thesenior managers should include at a minimum:(a) A CEO;(b) A chief financial officer;(c) A corporate secretary; and(d) An internal auditor (see AU-1.2)and should also include such other
approved persons as the Board considers appropriate and as a minimum must include persons occupyingcontrolled functions as outlined in Paragraph AU-1.2.2.Amended: October 2019
January 2011Titles, Authorities, Duties and Reporting Responsibilities
HC-10.6.3
The Board should adopt by-laws prescribing each
senior manager's title, authorities, duties and internal reporting responsibilities. This should be done with the advice of the Nominating Committee, where applicable, and in consultation with theCEO , to whom the othersenior managers should normally report.January 2011HC-10.6.4
These provisions should include but should not be limited to the following:
(a) TheCEO should have authority to act generally in theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' name, representing theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' interests in concluding transactions on theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' behalf and giving instructions to othersenior managers andinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms employees;(b) The chief financial officer should be responsible and accountable for:(i) The complete, timely, reliable and accurate preparation of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' financial statements, in accordance with the accounting standards and policies of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms (see HC-10.3.2); and(ii) Presenting the Board with a balanced and understandable assessment of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' financial situation;(c) The corporate secretary's duties should include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and(d) The internal auditor's duties should include providing an independent and objective review of the efficiency of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' operations. This would include a review of the accuracy and reliability of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' accounting records and financial reports as well as a review of the adequacy and effectiveness of theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' risk management, control, and governance processes.Amended: October 2019
January 2011HC-10.6.5
The Board should also specify any limits which it wishes to set on the authority of the
CEO or othersenior managers , such as monetary maximums for transactions which they may authorise without separate Board approval.January 2011HC-10.6.6
The corporate secretary should be given general responsibility for reviewing the
insurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and trainingAmended: October 2019
January 2011HC-10.6.7
At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the
CEO , both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to theCEO .January 2011HC-10.7 HC-10.7 Communication between Board and Shareholders
HC-10.7.1
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should communicate with shareholders, encourage their participation, and respect their rights.Amended: October 2019
January 2011Conduct of Shareholders' Meetings
HC-10.7.2
The Board should observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:
(a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;(b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;(c) Notices of meetings must encourage shareholders to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");(d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;(e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;(f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;(g) The chairman of the meeting must encourage questions from shareholders, including questions regarding theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' corporate governance guidelines;(h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and(i) Disclosure of all material facts must be made to the shareholders.Amended: October 2019
January 2011HC-10.7.3
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).Amended: October 2019
January 2011HC-10.7.4
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.Amended: October 2019
January 2011HC-10.7.5
An
insurance consultant ,insurance managers ,insurance aggregators andcaptive insurance firms should maintain a company website. Theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. Theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, theinsurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should grant a controlled access to such information to its shareholders.Amended: October 2019
January 2011HC-10.7.6
In notices of meetings at which directors are to be elected or removed the
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should ensure that:(a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and(b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.Amended: October 2019
Amended: October 2012
January 2011Direct Shareholder Communication
HC-10.7.7
The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with
controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy withcontrollers . Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' corporate governance.Amended: October 2019
January 2011Controllers
HC-10.7.8
In companies with one or more
controllers , the chairman and other directors should actively encourage thecontrollers to make a considered use of their position and to fully respect the rights of minority shareholders.January 2011HC-10.8 HC-10.8 Corporate Governance Disclosure
HC-10.8.1
The
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms should disclose its corporate governance framework.Amended: October 2019
January 2011Disclosure under the Company Law
HC-10.8.2
In each
insurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms :(a) The Board should adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;(b) Theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms should publish the guidelines on its website, if it has a website (see HC-10.7.5);(c) At each annual shareholders' meeting the Board should report on theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and(d) At each annual shareholders' meeting the Board should also report on further items listed in Appendix D. Such information should be maintained on theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' website or held at theinsurance consultants ,insurance managers ,insurance aggregators orcaptive insurance firms' premises on behalf of the shareholders.Amended: October 2019
January 2011HC-10.8.3
The CBB may issue a template as a guide for
insurance consultants ,insurance managers ,insurance aggregators andcaptive insurance firms' annual meeting corporate governance discussion.Amended: October 2019
January 2011HC-10.9 HC-10.9 Captive Takaful Firms
HC-10.9.1
Companies which refer to themselves as "Islamic" should follow the principles of Islamic Shari'a.
January 2011Governance and Disclosure per Shari'a Principles
HC-10.9.2
Captive Takaful firms which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. Captive Takaful firms which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a principles, each captive Takaful firm should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.
January 2011Appendix A Appendix A Audit Committee
Committee Duties
The Committee's duties shall include those stated in Paragraph HC-3.2.1.
January 2011Committee Membership and Qualifications
The Committee shall have at least three members. Such members must have no conflict of interest with any other duties they have for the
insurance licensee .A majority of the members of the committee including the Chairman shall be
independent directors .The Board must satisfy itself that at least a majority of the committee has recent and relevant financial ability and experience, which includes:
(a) An ability to read and understand corporate financial statements including aninsurance licensee's balance sheet, income statement and cash flow statement and changes in shareholders' equity;(b) An understanding of the accounting principles which are applicable to theinsurance licensee's financial statements;(c) Experience in evaluating financial statements that have a level of accounting complexity comparable to that which can be expected in theinsurance licensee's business;(d) An understanding of internal controls and procedures for financial reporting; and(e) An understanding of the audit committee's controls and procedures for financial reporting.Amended: April 2011
January 2011Committee Duties and Responsibilities
In serving those duties, the Committee shall:
(a) Be responsible for the selection, appointment, remuneration, oversight and termination where appropriate of the external auditor, subject to ratification by theinsurance licensee's Board and shareholders. The external auditor shall report directly to the committee;(b) Make a determination at least once each year of the external auditor's independence, including:(i) Determining whether its performance of any non-audit services compromised its independence (the committee may establish a formal policy specifying the types of non-audit services which are permissible) and;(ii) Obtaining from the external auditor a written report listing any relationships between the external auditor and theinsurance licensee or with any other person or entity that may compromise the auditor's independence;(c) Review and discuss with the external auditor the scope and results of its audit, any difficulties the auditor encountered including any restrictions on its access to requested information and any disagreements or difficulties encountered with management;(d) Review and discuss with management and the external auditor each annual and each quarterly financial statements of theinsurance licensee including judgments made in connection with the financial statements;(e) Review and discuss and make recommendations regarding the selection, appointment and termination where appropriate of the head of internal audit and head of compliance and the budget allocated to the internal audit and compliance function, and monitor the responsiveness of management to the committee's recommendations and findings;(f) Review and discuss the adequacy of theinsurance licensee's internal auditing and compliance personnel and procedures and its internal controls and compliance procedures, and any risk management systems, and any changes in those;(g) Oversee theinsurance licensee's compliance with legal and regulatory requirements; and(h) Review and discuss possible improprieties in financial reporting or other matters, and ensure that arrangements are in place for independent investigation and follow-up regarding such matters.Amended: October 2012
January 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least four times a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.
The committee may meet without any other director or any officer of the
insurance licensee present. Only the committee may decide if a non-member of the committee should attend a particular meeting or a particular agenda item. Non-members who are not directors of theinsurance licensee may attend to provide their expertise, but may not vote. It is expected that the external auditor's lead representative will be invited to attend regularly but that this shall always be subject to the committee's decision.The committee shall report regularly to the full Board on its activities.
January 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, accounting or other advisors as it deems necessary or appropriate, without seeking the approval of the Board or management. The
insurance licensee shall provide appropriate funding for the compensation of any such persons.January 2011Committee Performance Evaluation
The committee shall prepare and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.
Amended: October 2012
January 2011Appendix B Appendix B Nominating Committee
Committee Duties
The committee's duties shall include those stated in Paragraph HC-4.2.1.
January 2011Committee Duties and Responsibilities
In serving those duties with respect to Board membership:
(a) The committee shall make recommendations to the Board from time to time as to changes the committee believes to be desirable to the size of the Board or any committee of the Board;(b) Whenever a vacancy arises (including a vacancy resulting from an increase in Board size), the committee shall recommend to the Board a person to fill the vacancy either through appointment by the Board or through shareholder election;(c) In performing the above responsibilities, the committee shall consider any criteria approved by the Board and such other factors as it deems appropriate. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate's experience with that of other Board members, and other factors;(d) The committee shall also consider all candidates for Board membership recommended by the shareholders and any candidates proposed by management;(e) The committee shall identify Board members qualified to fill vacancies on any committee of the Board and recommend to the Board that such person appoint the identified person(s) to such committee; and(f) Assuring that plans are in place for orderly succession of senior management.In serving those purposes with respect to officers the committee shall:
(a) Make recommendations to the Board from time to time as to changes the committee believes to be desirable in the structure and job descriptions of the officers including the CEO, and prepare terms of reference for each vacancy stating the job responsibilities, qualifications needed and other relevant matters;(b) Recommend persons to fill specific officer vacancies including CEO considering criteria such as those referred to above;(c) Design a plan for succession and replacement of officers including replacement in the event of an emergency or other unforeseeable vacancy; and(d) If charged with responsibility with respect toinsurance licensee's corporate governance guidelines, the committee shall develop and recommend to the Board corporate governance guidelines, and review those guidelines at least once a year.January 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.
January 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or search firms used to identify candidates, without seeking the approval of the Board or management. The
insurance licensee shall provide appropriate funding for the compensation of any such persons.January 2011Performance Evaluation
The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.
Amended: October 2012
January 2011Appendix C Appendix C Remuneration Committee
Committee Duties
The committee's duties shall include those stated in Paragraph HC-5.1.1.
January 2011Committee Duties and Responsibilities
In serving those duties the committee shall consider, and make specific recommendations to the Board on, both
remuneration policy and individualremuneration packages for theCEO and other senior officers. Thisremuneration policy should cover at least:(a) The following components:(i) Salary;(ii) The specific terms of performance-related plans including any stock compensation, stock options, or other deferred-benefit compensation;(iii) Pension plans;(iv) Fringe benefits such as non-salary perks; and(v) Termination policies including any severance payment policies; and(b) Policy guidelines to be used for determiningremuneration in individual cases, including on:(i) The relative importance of each component noted in a) above;(ii) Specific criteria to be used in evaluating an officer's performance.The committee shall evaluate the
CEO's performance in light of corporate goals and objectives and may consider theinsurance licensee's performance and shareholder return relative to comparableinsurance licensees , the value of awards toCEOs at comparableinsurance licensees , and awards to theCEO in past years.The committee should also be responsible for retaining and overseeing outside consultants or firms for the purpose of determining director or officer remuneration, administering remuneration plans, or related matters.
January 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.
January 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or compensation firms used to evaluate the compensation of directors, the
CEO or other officers, without seeking the approval of the Board or management. Theinsurance licensee's shall provide appropriate funding for the compensation of any such persons.January 2011Performance Evaluation
The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.
Amended: October 2012
January 2011Appendix D Corporate Governance Disclosure to Shareholders
The
insurance licensee shall disclose the following items to the shareholders, in addition to any disclosures required as per Module PD:Ownership of Shares
1. Distribution of ownership by nationality2. Distribution of ownership by size of shareholder3. Ownership by Government4. Names of shareholders owning 5% or more and, if they act in concert, a description of the voting, shareholders' or other agreements among them relating to acting in concert, and of any other direct and indirect relationships among them or with theinsurance licensee or other shareholdersBoard, Board Members and Management
1. Board's functions — rather than a general statement (which could be disclosed simply as the Board's legal obligations under the law) the 'mandate' of the Board should be set out2. The types of material transactions that require Board approval3. Names, their capacity of representation and detailed information about the directors, including directorships of other Boards, positions, qualifications and experience (should describe each director as executive or non-executive)4. Number and names of independent members5. Board terms and the start date of each term6. What the Board does to induct/educate/orient new directors7. Director's ownership of shares8. Election system of directors and any termination arrangements9. Director's trading ofinsurance licensee's shares during the year10. Meeting dates (number of meetings during the year)11. Attendance of directors at each meeting12. Aggregate remuneration to board members12A. The remuneration policy of theinsurance licensee for board members and senior management13. List ofsenior managers and profile of each14. Shareholding bysenior managers 15. Aggregate remuneration paid tosenior management 16. Details of stock options and performance-linked incentives available to executives17. Whether the Board has adopted a written code of ethical business conduct, and if so the text of that code and a statement of how the Board monitors compliance.Committees
1. Names of the Board committees2. Functions of each committee3. Members of each committee divided into independent and non-independent4. Minimum number of meetings per year5. Actual number of meetings6. Attendance of committees' members7. [This item was deleted in January 2012]8. Work of committees and any significant issues arising during the periodCorporate Governance
1. Separate section in the Annual Report2. Reference to Module HC and its principles3. Changes in Module HC that took place during the yearAuditors
1. The charters and a list of members of the Audit (including external and internal; financial and non-financial experts), Nominating and Remuneration Committees of the Board.2. Audit fees3. Non-Audit services provided by the external auditor and fees4. Reasons for any switching of auditors and reappointing of auditorsOther
1. Related party transactions2. Approval process for related party transactions3. Means of communication with shareholders and investors4. Separate report on Management Discussion and Analysis is included in the Annual Report — in particular, this should identify and comment on the management of principal risks and uncertainties faced by the business.5. Review of internal control processes and procedures6. Announcements of the results in the press should include at least the followings:(a) Balance sheet, income statement, cash flow statement, statement of comprehensive income and changes in shareholders' equity(b) Auditor(c) Auditor's signature date(d) Board approval dateSet out directors responsibility with regard to the preparation of financial statements
Conflict of Interest — any issues arising must be reported, in addition describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.
Board of Directors — whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution.
Amended: January 2012
Amended: April 2011
January 2011AA AA Auditors and Actuaries
AA-A AA-A Introduction
AA-A.1 AA-A.1 Purpose
Executive Summary
AA-A.1.1
This Module presents requirements that have to be met by
insurance licensees with respect to the appointment of externalauditors andactuaries (the requirement foractuaries is only applicable toinsurance firms ). This Module also sets out certain obligations that externalauditors andactuaries have to comply with, by virtue of their appointment byinsurance licensees .Amended: January 2007AA-A.1.2
This Module is issued under the powers given to the Central Bank of Bahrain ('the CBB') under Decree No. (64) of 2006 with respect to promulgating the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). It supplements Article 61 of the CBB Law, which requires
licensees to appoint an externalauditor acceptable to the CBB and Articles 72 to 74 dealing withactuaries .Amended: January 2007
Amended: October 2007Legal Basis
AA-A.1.3
This Module contains the CBB's Directive (as amended from time to time) relating to
auditors andactuaries and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable toinsurance licensees .Amended: January 2011
Amended: October 2007
Adopted: January 2007AA-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
Adopted: January 2007AA-A.2 AA-A.2 Module History
AA-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007AA-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Amended: January 2007AA-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes AA-3.1 01/10/05 Corrected reference to Form IFR and IMR AA-4.1 01/10/05 Added transition rule for requirement for reporting actuary for insurance firms whose long-term insurance business is restricted to group life policies having a maturity of less than or equal to 1 year. AA-4.3.2 01/07/06 Added a requirement that the Signing Actuary is subject to the approval of the CBB. AA-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive. AA-1.2.3 01/2007 Rule redrafted to clarify reporting obligation. AA-1.5 01/2007 Paragraphs AA-1.5.3 and AA-1.5.5 updated to reflect CBB Law requirements on auditor independence. AA-3.1.1 01/2007 Clarified that the external auditor's Agreed Upon Procedures are to be submitted to the CBB within four months from the insurance licensee's financial year end. AA-3.2 01/2007 Added a new section referring to the audit report required as per Module FC. AA-3A 01/2007 Added a new Chapter on Accounting Standards AA-4.1.7 01/2007 Clarified that the first three-year period referred to for the report of the signing actuary is for the period ending 31 December 2008. AA-1.3.1A 10/2007 Clarified the transition period for the rotation of audit partner. AA-4 10/2007 Amended Actuarial reports Chapter to reflect new definitions of Registered Actuary andSigning Actuary AA-2.3 01/2008 Corrected reference to Registered Actuary .AA-A.1.3 01/2011 Clarified legal basis. AA-3.2.1 10/2012 Clarified that an approved consultancy firm can also provide the report on compliance with financial crime rules required under Section FC-3.3. AA-1.5.2 04/2013 Changed Guidance to Rule so that insurance licensees may not outsource their internal audit function to the same firm that acts as their external auditor. AA-4 04/2014 Amended to be in line with updated actuarial requirements. AA-3.2.2 07/2021 Amended Paragraph. AA-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
AA-B AA-B Scope of Application
AA-B.1 AA-B.1 Insurance Licensees
AA-B.1.1
The contents of this Module — unless otherwise stated — apply to all
insurance licensees .AA-B.1.2
The requirements relating to
actuaries (Chapter AA-4), apply only toinsurance firms , and differentiate betweeninsurance firms undertakinglong-term insurance and those undertakinggeneral insurance .Amended: January 2007AA-B.2 AA-B.2 Auditors and Actuaries
AA-B.2.1
Certain requirements in this Module extend to
auditors andactuaries , by virtue of their appointment byinsurance licensees .Auditors andactuaries appointed byinsurance licensees must be independent (cf. Sections AA-1.4, AA-1.5and Paragraphs AA-4.2.3 and AA-4.2.4).Auditors andactuaries who resign or are otherwise removed from office are required to inform the CBB in writing of the reasons for the termination of their appointment (cf. Paragraphs AA-1.2.3 and AA-4.2.8). Other requirements are contained in Sections AA-1.3 (Audit partner rotation) and AA-3.1 (Auditor reports).Amended: January 2007AA-1 AA-1 Auditor Requirements
AA-1.1 AA-1.1 Appointment of Auditor
AA-1.1.1
In accordance with Article 61(a) of the CBB Law,
insurance licensees must obtain prior written approval from the CBB before appointing or re-appointing theirauditor .Amended: January 2007
Amended: October 2007AA-1.1.2
As the appointment of the
auditor normally takes place during the course of the firm's annual general meeting,insurance licensees should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated toshareholders . The CBB's approval of the proposedauditor does not limit in any wayshareholders' rights to subsequently reject the Board's choice.Amended: January 2007
Amended: October 2007AA-1.1.3
The CBB, in considering the proposed (re-)appointment of an
auditor , takes into account the expertise, resources and reputation of the audit firm, relative to the size and complexity of the licensee. The CBB will also take into account the track record of the audit firm in auditinginsurance licensees within Bahrain; the degree to which it has generally demonstrated independence from management in its audits; and the extent to which it has identified and alerted relevant persons of significant matters.Amended: January 2007AA-1.1.4
In the case of
overseas insurance licensees , the CBB will also take into account who acts as theauditor of theparent firm. As a general rule, the CBB does not favour different parts of an insurance group having differentauditors .Amended: January 2007
Amended: October 2007AA-1.2 AA-1.2 Removal or Resignation of Auditor
AA-1.2.1
Insurance licensees must notify the CBB as soon as they intend to remove theirauditor , with an explanation of their decision, or as soon as theirauditor resigns.Amended: January 2007Amended: October 2007
Amended: October 2007AA-1.2.2
Insurance licensees must ensure that a replacementauditor is appointed (subject to CBB approval as per Section AA-1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.Amended: January 2007AA-1.2.3
In accordance with the powers granted to the CBB under Article 63 of the CBB Law,
auditors ofinsurance licensees must inform the CBB in writing, should they resign or their appointment as auditor be terminated, within 30 calendar days of the event occurring, setting out the reasons for the resignation or removal.Amended: January 2007AA-1.3 AA-1.3 Audit Partner Rotation
AA-1.3.1
Unless otherwise exempted by the CBB,
insurance licensees must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.Amended: January 2007AA-1.3.2
Insurance licensees must notify the CBB of any change in audit partner.Amended: January 2007AA-1.3.1A
For purposes of Paragraph AA-1.3.1, the first five-year period referred to is for the period ending 31 December 2010 (Refer to Paragraph ES-2.4.3). Therefore, unless there has been a change in the partner appointed since the Rulebook was issued in May 2005, or if a company has been licensed since the Rulebook has been issued,
insurance licensees will need to have a new partner responsible for the audit engagement for the year 2011Added: October 2007AA-1.4 AA-1.4 Auditor Independence
AA-1.4.1
Article 61(d) of the CBB Law imposes conditions in order for the auditor to be considered independent. Before an
insurance licensee appoints anauditor , it must take reasonable steps to ensure that theauditor has the required skill, resources and experience to carry out the audit properly, and is independent of the licensee.Amended: January 2007AA-1.4.2
For an
auditor to be considered independent, it must, among things, comply with the restrictions in Section AA-1.5.Amended: January 2007AA-1.4.3
If an
insurance licensee becomes aware at any time that itsauditor is not independent, it must take reasonable steps to remedy the matter and notify the CBB of the fact.Amended: January 2007AA-1.4.4
If in the opinion of the CBB, independence has not been achieved within a reasonable timeframe, then the CBB may require the appointment of a new
auditor .Amended: January 2007
Amended: October 2007AA-1.5 AA-1.5 Licensee/Auditor Restrictions
Financial Transactions with Auditors
AA-1.5.1
Insurance licensees must not provideregulated insurance services to theirauditors , including entering into any contracts of professional indemnity insurance with theirauditors .Amended: January 2007Outsourcing to Auditors
AA-1.5.2
Insurance licensees may not outsource their internal audit function to the same firm that acts as their external auditor.Amended: April 2013
Amended: January 2007Other Relationships
AA-1.5.3
Insurance licensees and theirauditors must comply with the restrictions contained in Article 217(c) of the Commercial Companies Law (Legislative Decree No. (21) of 2001), as well as in Article 61(d) of the CBB Law.Amended: January 2007AA-1.5.4
Article 217(c) prohibits an
auditor from (i) being the chairman or a member of the Board ofDirectors of the company he/she audits; (ii) holding any managerial position in the company he/she audits; and (iii) acquiring any shares in the company he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, theauditor must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.Amended: January 2007
Amended: October 2007AA-1.5.5
Article 61(d) prohibits an
auditor from (i) being the chairman or a member of the Board ofDirectors of the company he/she audits; (ii) holding any managerial position in the company he/she audits; and (iii) acquiring any shares in the company he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, theauditor must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.Adopted: January 2007AA-1.5.6
The restriction in Paragraph AA-1.5.3 applies to
overseas insurance licensees as well asBahraini insurance licensees .Amended: January 2007AA-1.5.7
A partner, Director or manager on the engagement team of auditing an
insurance licensee may not serve on the Board or in acontrolled function of the licensee, for two years following the end of their involvement in the audit, without prior authorisation of the CBB.Amended: January 2007AA-1.5.8
Chapter AU-1.2 sets out the CBB's '
controlled functions ' requirements.Amended: January 2007Definition of 'Auditor'
AA-1.5.9
For the purposes of Section AA-1.5, 'auditor' means the partners, Directors and managers on the engagement team responsible for the audit of the
insurance licensee .Amended: January 2007AA-2 AA-2 Access
AA-2.1 AA-2.1 CBB Access to Auditors
AA-2.1.1
Insurance licensees must waive any duty of confidentiality on the part of theirauditor , such that theirauditor may report to the CBB any concerns held regarding material failures by theinsurance licensee to comply with CBB requirements.Amended: January 2007
Amended: October 2007AA-2.1.2
The CBB may, as part of its on-going supervision of
insurance licensees , request meetings with a licensee'sauditor . If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management orDirectors .Amended: January 2007
Amended: October 2007AA-2.2 AA-2.2 Auditor Access to Outsourcing Providers
AA-2.2.1
Paragraph RM-7.4.12 on
outsourcing agreements betweeninsurance licensees andoutsourcing providers requires licensees to ensure that their internal and externalauditors have timely access to any relevant information they may require to fulfil their responsibilities. Such access must allow them to conduct on-site examinations of theoutsourcing provider , if required.Amended: January 2007AA-2.3 AA-2.3 CBB Access to Actuaries
AA-2.3.1
Insurance licensees that appoint aRegistered Actuary orSigning Actuary in compliance with the requirements in Section AA-4.1 must waive any duty of confidentiality on the part of theactuary , such that he may report to the CBB any concerns held regarding material failures by theinsurance licensee to comply with CBB requirements.Amended: January 2007
Amended: January 2008AA-2.3.2
The CBB may, as part of its on-going supervision of
insurance licensees , request meetings with a licensee'sRegistered Actuary /Signing Actuary . If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management orDirectors .Amended: January 2007
Amended: October 2007
Amended: January 2008AA-3 AA-3 Auditor Reports
AA-3.1 AA-3.1 Review of Annual Returns
AA-3.1.1
Insurance licensees must arrange for theirauditor to review the licensee's annual return to the CBB. Theauditor must complete the prescribed form Agreed Upon Procedures (refer to Part B, Supplementary Information Appendices BR(i) and BR(ii)) attesting to his/her review, which must be submitted to the CBB by theinsurance licensee within four months of the financial year end of theinsurance licensee .Amended: January 2007
Amended: October 2007AA-3.1.2
Insurance firms are required to submit an Insurance Firm Return (Form IFR).Insurance intermediaries andinsurance managers are required to submit the Insurance Intermediary and Manager Return (Form IMR). Further details on the annual returns and other reporting requirements of the CBB, including the precise scope of theauditor's review and attestation, are contained in Module BR (CBB Reporting).Amended: January 2007AA-3.2 AA-3.2 Report on Compliance with Financial Crime Rules
AA-3.2.1
Insurance licensees must arrange for their externalauditor or a consultancy firm approved by the CBB as per Paragraphs FC-3.3.2 and FC-3.3.2A, to report on theinsurance licensee's compliance with the requirements contained in Module FC (Financial Crime), at least once a year.Amended: October 2012
Amended: October 2007
Adopted: January 2007AA-3.2.2
The report specified in Paragraph AA-3.2.1 must be in the form agreed by the CBB, and must be submitted to the CBB within six months of the licensee's financial year-end.
Amended: July 2021
Adopted: January 2007AA-3.2.3
Further information on the above requirement can be found in Section FC-3.3.
Adopted: January 2007
Amended: October 2007AA-3A AA-3A Accounting Standards
AA-3A.1 AA-3A.1 General Requirements
AA-3A.1.1
Insurance licensees must comply with International Financial Reporting Standards / International Accounting Standards ('IFRS/IAS') and, to the extent that they undertake Shari'a compliant activities, relevant standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).Adopted: January 2007AA-3A.1.2
Overseas insurance licensees that do not, at theparent company level, apply IFRS/IAS are still required under Paragraph AA-3A.1.1 to produce pro-forma accounts for the Bahrain branch in conformity with these standards.Adopted: January 2007AA-4 AA-4 Actuarial Reports
AA-4.1 AA-4.1 General Requirements
Obligation to Appoint an Actuary for Long-Term Insurance Business
AA-4.1.1
In accordance with Article 72(a) of the CBB Law, all
insurance firms planning to undertakelong-term insurance business must, no later than the date on which they start to carry out such business, appoint aRegistered Actuary orSigning Actuary , subject to CBB approval.Amended: January 2007
Amended: October 2007AA-4.1.2
For
insurance firms whoselong-term insurance business is restricted to group life policies, having a term of less than or equal to 1 year, and where thislong-term insurance business represents less than 5% of theinsurance firm's total gross premiums written, this business will be treated asgeneral insurance business and is subject to actuarial requirements as outlined in Paragraph AA-4.1.4.Amended: January 2007
Amended: October 2007AA-4.1.3
To secure CBB approval, the
actuary must satisfy the CBB's criteria forRegistered Actuary orSigning Actuary , contained in Paragraphs AA-4.2.1 to AA-4.2.12. Theactuary of aninsurance firm undertakinglong-term insurance business , except as provided for under Paragraph AA-4.1.2, must, on an annual basis, undertake an investigation to enable the preparation of the Financial Condition Report (FCR), as specified in Section AA-4.3.Amended: April 2014
Amended: October 2007
Amended: January 2007Obligation to Appoint an Actuary for General Insurance Business
AA-4.1.4
An
insurance firm that carries ongeneral insurance business must commission an actuarial opinion, once every two years, from aRegistered Actuary orSigning Actuary . Theactuary must satisfy the criteria in Paragraphs AA-4.2.1 to AA-4.2.12.Amended: April 2014
Amended: October 2007AA-4.1.5
The Board of the insurance firm carrying out long-term insurance business must commission annually an FCR and an insurance firm carrying out general insurance business must commission an FCR once every two years. A copy of this report must be provided to the CBB.
Amended: April 2014
Amended: October 2007
Amended: January 2007AA-4.1.6
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: January 2007AA-4.1.7
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Adopted: January 2007AA-4.2 AA-4.2 Types of Actuaries
AA-4.2.1
For purposes of Chapter AA-4, the CBB recognises two types of actuaries:
(a)Registered Actuaries as per Article 74 of the CBB Law; and(b)Signing Actuaries that areDirectors oremployees of theinsurance firm for which an actuarial report is prepared.Added: October 2007AA-4.2.2
The CBB’s authorisation requirements for
Registered Actuaries are contained in Module AU (Authorisation).Added: October 2007AA-4.2.3
A
Signing Actuary is acontrolled function and is subject to the CBB’s approval, as per Section AU-1.2, as anapproved person .Added: October 2007AA-4.2.4
All
actuaries authorised or approved by the CBB must hold appropriate professional qualifications from a relevant, recognised professional body.Added: October 2007AA-4.2.5
Fellows (or members of equivalent status) in good standing of the Society of Actuaries (USA), the Institute and Faculty of Actuaries (UK) or the American Academy of Actuaries, or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirement in Paragraph AA-4.2.4.
Added: October 2007CBB Approval Criteria for Registered Actuaries
AA-4.2.6
The
Registered Actuary must not be aDirector oremployee of theinsurance firm for which he/she is providing the FCR and must be authorised by the CBB in accordance with Article 74 of the CBB Law, to carry on the business of anactuary within the Kingdom of Bahrain.Amended: April 2014
Amended: October 2007
Amended: January 2007AA-4.2.2
The CBB's authorisation requirements for
Reporting Actuaries are contained in Module AU (Authorisation).Amended: January 2007AA-4.2.7
The
Registered Actuary must be independent of theinsurance firm .Amended: October 2007AA-4.2.8
For a
Registered Actuary to be considered independent, he, his spouse and dependant children must not be a related party to theinsurance firm .Amended: January 2007
Amended: October 2007AA-4.2.9
For the purpose of this Section, a related party of an
insurance firm includes:(c) An associate of acontroller as defined in Paragraph GR-5.2.2;(d) The extended family of acontroller including a father, mother, father-in-law, mother-in-law, brother, sister, brother-in-law, sister-in-law, or grandparent;(e) A corporate entity, whether or not licensed or incorporated in Bahrain, where any of the persons identified in Subparagraphs (c) and (d) is aDirector or would be considered acontroller were the definition ofcontroller set out in Paragraph GR-5.2.1 applied to that corporate entity; and(f) Anemployee of aninsurance firm that is related to theinsurance firm submitting the FCR required under this Chapter.Amended: April 2014
Added: October 2007CBB Approval Criteria for Signing Actuary
AA-4.2.10
The
Signing Actuary may be aDirector oremployee of the licensee concerned.Added: October 2007AA-4.2.11
Where the
Signing Actuary is aDirector oremployee of the licensee concerned, he occupies acontrolled function , and is subject to CBB approval as per Section AU-1.2.Added: October 2007AA-4.2.12
The
Signing Actuary must act independently of theinsurance firm in providing the FCR.Amended: April 2014
Added: October 2007Removal or Resignation of a Reporting Actuary
AA-4.2.5
Insurance firms must notify the CBB as soon as it intends to remove itsReporting Actuary , together with an explanation of its decision, or as soon as itsReporting Actuary resigns.Amended: January 2007AA-4.2.6
Insurance firms must ensure that a replacementReporting Actuary is appointed (subject to CBB approval as per Paragraph AA-4.1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.Amended: January 2007AA-4.2.7
If an
insurance firm fails to make a fresh appointment of aReporting Actuary in accordance with the provisions of Paragraph AA-4.2.6, theinsurance firm must not — until such an appointment is made — effect any new contract which constituteslong-term business without the written permission of the CBB.Amended: January 2007AA-4.2.8
An actuary who resigns or is otherwise removed from the office of
Reporting Actuary must, within 30 days of his resignation or removal, write to the CBB setting out the reasons for his resignation or removal.Amended: January 2007AA-4.3 AA-4.3 Content of Financial Condition Report (FCR)
AA-4.3.1
The FCR must provide an objective assessment of the overall financial condition of the
insurance firm . The report must also comply with the following conditions:(a) The actuary responsible for the FCR must comply with the relevant professional standards;(b) Where relevant, the FCR must include:(i) A business overview;(ii) An assessment of theinsurance firm 's recent experience and profitability, including as a minimum the experience for the year ending on the valuation date;(iii) An assessment of all insurance liabilities outlined under Chapter CA-5;(iv) An assessment of the adequacy of past estimates for all insurance liabilities, particularly where there has been a change in assumptions or in the valuation method adopted for previous valuations;(v) Where there has been a change in assumptions or in the valuation method from that adopted previously, the effect of those changes on the insurance liabilities and assets arising in respect of those liabilities;(vi) An explanation of the assumptions used in the valuation process including, without limitation, assumptions made as to inflation and discount rates, future expense rates and ,where relevant, future investment income;(vii) An assessment of the adequacy and appropriateness of data made available to the actuary by theinsurance firm ;(viii) A description of the procedures undertaken by the actuary to assess the reliability of the data provided;(ix) The model(s) used by the actuary;(x) The approach taken to estimate the variability of the estimate; and(xi) The nature and findings of the sensitivity analyses undertaken;(c) The establishment of the surplus or deficit on any conventional long-term insurance fund and in the case of a surplus, the amount that is proposed to be transferred to the shareholder fund and available for distribution;(d) The establishment of the surplus or deficit, if any, for all participants' funds forTakaful firms . In the case of surplus, the amount available for distribution must be specified;(e) For long-term insurance and Family Takaful, include an assessment of asset and liability management, including theinsurance firm 's investment strategy;(f) An assessment of current and future capital adequacy and a discussion of theinsurance firm 's approach to capital management;(g) An assessment of pricing, including adequacy of premiums;(h) An assessment of the suitability and adequacy of reinsurance/retakaful arrangements, including documentation of reinsurance/retakaful arrangements and the existence and impact of any limited risk transfer/sharing arrangements;(i) Where the implications of the report have an adverse impact on the financial condition of theinsurance firm , the report must include recommendations on how to address any shortcomings and eliminate any negative trends; and(j) Foroverseas insurance firms , the report must be prepared for Bahraini operations, but consideration must be given to the financial position of the head office.Amended: April 2014
Amended: October 2007
Amended: January 2007AA-4.3.1A
The signing actuary or registered actuary may rely on other expert opinions in order to address those matters required in the FCR that are outside of scope of the actuary's qualifications. Where such outside opinions are sought, these should be clearly identified in the report.
Added: April 2014AA-4.3.2
The report required under Article 72(a) of the CBB Law must accompany the Insurance Firm Return (Form IFR) submitted to the CBB and cover the period covered by that return, as required under Paragraph BR-1.1.22.
Amended: January 2007
Amended: October 2007AA-4.3.2A
The CBB may require a FCR on a more frequent basis than the requirement outlined. In addition, the CBB may appoint an actuary as an
appointed expert as outlined in Section BR-3.5 to conduct a special purpose review of the insurance firm's operations, risk management, financial affairs or other areas as specified by the CBB.Added: April 2014AA-4.3.3
In accordance with Article 73 of the CBB Law, the evaluation should include:
(a) A valuation of the liabilities of theinsurance firm attributable to itslong-term insurance business ;(b)The establishment of the surplus, if any, on anylong-term insurance funds that it is proposed be transferred toshareholders' funds and available for distribution; and(c) The establishment of the deficit, if any, on anylong-term insurance funds established by theinsurance firm .Amended: January 2007
Amended: October 2007AA-4.3.4
Where the
Registered Actuary's orSigning Actuary's investigation establishes a deficit on any fund or part of any fund, theinsurance firm concerned must immediately notify the CBB and ensure that remedial action is taken to make good the deficit.Amended: January 2007
Amended: October 2007AA-4.3.5
Possible remedial action to address the deficit noted in Paragraph AA-4.3.4 may include a transfer to be made from
shareholders' funds of sufficient assets to make good the deficit or a reduction in non-guaranteed bonuses.Amended: January 2007
Amended: October 2007AA-4.3.6
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: January 2007AA-4.3.7
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: January 2007Signing Actuary Criteria
AA-4.3.1
The
Signing Actuary may be a Director oremployee of the licensee concerned, an independent party, or an employee of a firm providing actuarial consulting services.Amended: January 2007AA-4.3.2
Where the
Signing Actuary is a Director oremployee of the licensee concerned, he must hold appropriate professional qualifications from a relevant, recognised professional body and is subject to approval by the CBB (ref AU-1.3.1). Where theSigning Actuary is an independent party or employee of a firm providing actuarial consulting services, he or his firm must be registered to carry on the business of anactuary in the Kingdom of Bahrain, in accordance with the requirements of Article 74 of the CBB Law.Amended: January 2007AA-4.3.3
Fellows (or members of equivalent status) in good standing of the Society of Actuaries (USA), the Institute and Faculty of Actuaries (UK) or the American Academy of Actuaries, or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirement in Paragraph AA-4.3.2.
General Insurance Business
AA-4.3.8
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007Qualified FCR
AA-4.3.9
While the
actuary is not required to check the data on which the report is based, he should disclose any material concerns in respect of data accuracy, integrity and sufficiency in the context of the work undertaken.Amended: October 2007AA-4.3.10
If, for whatever reason, the
actuary is unable to give an unqualified report, he must inform the CBB as soon as possible.Amended: January 2007
Amended: October 2007AA-4.3.6
The Directors of the
insurance firm must provide theSigning Actuary with the data and information required for the preparation of the actuarial evaluation and report. Theinsurance firm must advise theSigning Actuary of all known changes in internal methods or procedures that could materially affect the determination of reserves.AA-4.3.7
Claims development data provided to the
Signing Actuary must be reconciled to the accounting information forming the basis of the statutory accounts.Duties of the Insurance Firm
AA-4.3.11
The
Directors of theinsurance firm must provide theRegistered Actuary orSigning Actuary with the data and information required for the preparation of the FCR. Theinsurance firm must advise theRegistered Actuary orSigning Actuary of all known changes in internal methods or procedures that could materially affect the determination of reserves and financial condition.Amended: April 2014
Added: October 2007AA-4.3.12
For
general insurance business , claims development data provided to theRegistered Actuary orSigning Actuary must be reconciled to the accounting information forming the basis of the statutory accounts.Added: October 2007AA-4.3A AA-4.3A Role of Actuary in Takaful Firm
AA-4.3A.1
In addition to the requirements under Section AA-4.3, all Family
Takaful firms must submit to the CBB an annual FCR and all GeneralTakaful firms must submit an FCR once every two years from their actuary which must comply with the requirements outlined in this Section as well as in other parts of this Chapter in carrying out their actuarial duties.Added: April 2014Certification of Wakala Fees
AA-4.3A.2
Takaful firms must ensure their actuary certifies the Wakala fees being charged by the shareholder fund to the participants fund(s). The certified Wakala fee must also be approved by the Shari'a Supervisory Board.Added: April 2014AA-4.3A.3
The actuary must ensure that the contributions charged to the participants, must, at a minimum, cover the claims costs and Wakala fees.
Added: April 2014Participants' Fund(s) Underwriting Loss
AA-4.3A.4
Where a participants fund(s) incurs an underwriting loss, the
Takaful firm actuary must provide an explanation which outlines the reasons for such loss and the remedial steps being taken by theTakaful firm to address any deficit in the participants' fund(s).Added: April 2014Distribution of Surplus
AA-4.3A.5
In accordance with Section CA-8.5, any distribution of surplus from a participants' fund(s) must be recommended by the
Takaful firm 's actuary and must be based on a full valuation of liabilities as certified by the actuary and in line with audited financial statements.Added: April 2014Earmarked Assets
AA-4.3A.6
As outlined in Paragraph CA-8.4.4 and Section CA-8.4A,
earmarked assets are an integral component of the solvency and liquidity requirements of aTakaful firm . A separate amount ofearmarked assets must be allocated for each participants' fund, for each reporting period by estimating:(a) The likely impact of adjustments (deductions) of the participants' fund assets as per the admissibility rules (limits) under Chapter CA-4; and(b) The liquidity needs of the participants' fund.Added: April 2014AA-4.3A.7
The computed figure of the
earmarked assets for each participants' fund are allocated to theinsurance business amount of the respective fund to reduce the effect of the admissibility deductions on the participants' funds available capital. As outlined in Chapter CA-4, theinsurance business amount is used in the calculation of the participants' fund available capital to meet the solvency requirements.Added: April 2014AA-4.3A.8
Earmarked assets , and in particular cash and those assets converted to cash, are also used to provide the necessary liquidity to the participants' fund(s) as outlined in Section CA-8.4A and are separately allocated to meet the liquidity needs.Added: April 2014AA-4.3A.9
In light of the critical role of
earmarked assets in assessing solvency and addressing any liquidity shortfall in aTakaful firm , the actuary must carry out quarterly, or more frequently as required, appraisals of the solvency and liquidity status of the participants' fund(s). The actuary must determine and document the level at which the reassessment of earmarked assets is triggered.Added: April 2014AA-4.3A.10
The actuary's appraisals required under Paragraph AA-4.3A.9 are required to determine the impact of the admissibility deductions and liquidity needs in case of a cash deficit and to ensure that the
Takaful firm maintains a sufficient level ofearmarked assets to meet any solvency or liquidity requirements.Added: April 2014AA-4.3A.11
As a follow up to the required appraisals of solvency and liquidity requirements outlined under Paragraph AA-4.3A.9, the actuary must determine if the level of
earmarked assets meets the solvency and liquidity requirements and recommend to theTakaful firm any increase needed to theearmarked assets to comply with these requirements. The actuary's recommendation must also be approved by theTakaful firm 's board of directors.Added: April 2014AA-4.4 AA-4.4 Removal or Resignation of an Actuary
AA-4.4.1
An
insurance firm must notify the CBB as soon as it intends to remove itsactuary , together with an explanation of its decision, or as soon as itsactuary resigns.Added: October 2007AA-4.4.2
Insurance firms must ensure that a replacementactuary is appointed (subject to CBB approval as per Paragraph AA-4.1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.Added: October 2007AA-4.4.3
If an
insurance firm fails to make a fresh appointment of anactuary in accordance with the provisions of Paragraph AA-4.4.2, theinsurance firm must not – until such an appointment is made – effect any new contract which constituteslong-term insurance business without the written permission of the CBB.Added: October 2007AA-4.4.4
An
actuary who resigns or is otherwise removed from the office ofactuary must, within 30 days of his resignation or removal, write to the CBB setting out the reasons for his resignation or removal.Added: October 2007GR GR General Requirements
GR-A GR-A Introduction
GR-A.1 GR-A.1 Purpose
Executive Summary
GR-A.1.1
The General Requirements Module presents a variety of different requirements that are not extensive enough to warrant their own stand-alone Module, but for the most part are of general applicability. These include requirements on books and records; on the use of corporate and trade names; and on
controllers andclose links . Each set of requirements is contained in its own Chapter: a table listing these and their application to licensees is given in Chapter GR-B.Legal Basis
GR-A.1.2
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding general requirements applicable to
insurance licensees , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). This Module contains the requirements governing control in insurance licensees under Resolution No (27) of 2015. Requirements regarding transfer of business (see Chapter GR-4) are also included in this Module in line with Resolution No (15) of 2009. It also contains the minimum qualifications and fit and proper requirements forappointed representatives issued in 2009 under Resolution 11 in accordance with Article 74 of the CBB Law.Amended: October 2015
Amended: January 2011
Amended: October 2009
Added: January 2007GR-A.1.3
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007GR-A.2 GR-A.2 Module History
GR-A.2.1
This Module was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007GR-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007GR-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes GR-B.1 01/07/05 Clarified that GR-7 also applies to insurance brokers. GR-7.1 01/07/05 Corrected that cash deposit requirements also apply to insurance brokers and simplified the calculation of cash deposit required for insurance firms. GR-1.2 01/10/05 Clarified that transaction records must be maintained in Bahrain. GR-4.4 01/10/05 Corrected cross-reference. GR-6.1 01/10/05 Corrected references to Forms. GR-10.1 01/10/05 Clarified when evidence of professional indemnity coverage is to be provided and corrected cross-reference. GR-7.1 01/01/06 Clarified that insurance licensees originally licensed as exempt companies can opt to have their cash deposit maintained with the CBB. GR-7.1.2 01/04/06 Clarified that the requirement to maintain a cash deposit does not apply to insurance firms that are in run-off and whose license is restricted from entering into new contracts of insurance. GR-10.1.7 01/04/06 Clarified the meaning of the clause required dealing with an automatic extended reporting period. GR-A.1.2 01/2007 New Rule introduced, categorising this Module as a Directive. GR-B.1.1 01/2007 Clarified that Chapters GR-4 and GR-8 apply to all insurance licensees. GR-1.1 01/2007 Rule amended and Guidance added with respect to translation and archiving of books and records. GR-2.1.1 01/2007 Clarified the vetting of names for subsidiaries. GR-4 01/2007 This Chapter applies to all insurance licensees and was amended to be aligned with the requirements of the CBB Law. GR-5.1 01/2007 Minor changes to align controller requirements with the CBB Law. GR-5.2 01/2007 Clarification of definition of controller. GR-5.3 01/2007 Clarification of criteria for assessing suitability of controllers. GR-5.4 01/2007 Alignment of procedures for approving controllers with CBB Law. GR-7.1.1 01/2007 Reference to CBB Law on requirement for a cash deposit.. GR-7.1.3 01/2007 Paragraph deleted as now redundant since captive insurers are exempted from a cash deposit requirement as per GR-7.1.2. GR-7.2.1 01/2007 Rule deleted. GR-8 01/2007 This Chapter applies to all insurance licensees and was amended to be aligned with the requirements of the CBB Law. GR-10.1.13 01/2007 Clarified the format of the notice related to the professional indemnity coverage. GR-1.2.1 and 1.2.5 10/2007 Clarified the record retention period for customer and transaction records in line with Article 60 of the CBB Law. GR-10.1.1A 04/2008 Added Guidance concerning limitations on indemnification coverage. GR-3.1 04/2009 Clarified the rules governing the request for CBB no-objection on any dividend proposed. GR-A.1.2 10/2009 Added the legal requirements as per Article 74 of the CBB Law. GR-5.4.2 10/2009 Guidance amended to be consistent with wording under Article 53(a) of the CBB Law. GR-9 10/2009 Incorporated the requirements of Resolution 11 as per Article 74 of the CBB Law. GR-A.1.2 01/2011 Clarified legal basis GR-5.3 10/2011 Amended to be in line with other Volumes of the CBB Rulebook and to reflect the issuance of Resolution No.(43) of 2011. GR-8.1 10/2011 Clarified language on cessation of business to be in line with other Volumes of the CBB Rulebook. GR-B.1.1 04/2012 Amended to reflect the deletion of certain Paragraphs in Section GR-1.2. GR-1.2 04/2012 Amendments made to reflect the issuance of Module CL (Client Money). GR-6.1 04/2012 Clarified that the reporting requirements for close links are only applicable to insurance firms and insurance brokers. GR-2.2 10/2014 New Section added regarding publication of documents by the licensee. GR-A.1.2, GR-B.1.2 and GR-5 10/2015 Updated to reflect issuance of Resolution No. (27) of 2015 governing control in insurance licensees. GR-7.1 07/2016 Amended requirements for cash deposit. GR-8.1.14 10/2016 Added additional requirements for cessation of business to be in line with all Volumes. GR-5.1.5 01/2017 Consistency of notification timeline rule on controllers with other Volumes of the CBB Rulebook. GR-1.2.5 07/2017 Amended paragraph according to the Legislative Decree No. (28) of 2002. GR-1.2.6 07/2017 Deleted paragraph. GR-3.1.1A 10/2017 Added additional requirement to submit when requesting no-objection letter for proposed dividend. GR-1.1.2 10/2018 Amended Paragraph to be consistent with other Volumes. GR-5.1.1A 04/2019 Added a new Paragraph on exposure to controllers. GR-5.1.1B 04/2019 Added a new Paragraph on exposure to controllers. GR-1.2.5 01/2020 Amended Paragraph. GR-8.1.14 04/2020 Amended Paragraph. GR-9.1.13 04/2020 Amended Paragraph. GR-2.1.1 01/2022 Amended Paragraph on licensee legal and corporate name. GR-2.1.3 01/2022 Amended Paragraph on licensee change in legal name. GR-9 07/2023 Amended Chapter with new revised appointed representatives requirements. GR-3 01/2024 Amended Chapter on Dividends and Profit Repatriation. GR-A.2.3
This Module supersedes various articles contained in Ministerial Order No. 6 of 1990 regarding the issue of regulations for implementing legislative decree No. 17 of 1987 with respect to insurance companies and organisations. The specific articles in the Ministerial Order that have been cancelled by this Module are listed below:
Order No. 6 Article Ref. Module Ref. Subject 16, 29 GR-1 Books and Records 20 GR-4 Portfolio Transfers 12–15 GR-7 Statutory Deposits 20 GR-8 Suspension of business GR-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007GR-B GR-B Scope of Application
GR-B.1 GR-B.1 Insurance Licensees
GR-B.1.1
The requirements in Module GR (General Requirements) apply to
insurance licensees , as follows:Chapter Application to license categories Application to activities of overseas insurance licensees GR-1 Applies to all insurance licensees ; but GR-1.2.9 to GR-1.2.12 apply toinsurance brokers only.Applies to Bahrain branch business only. GR-2 Applies to all insurance licensees .Applies to Bahrain branch business only. GR-3 Applies to Bahraini insurance licensees except captives, who are exempted.Exempted. GR-4 Applies to all insurance licensees ; conditional exemptions for captives and reinsurers apply (cf. GR-4.2.2 and GR-4.4.4).Applies to Bahrain branch business only. GR-5 GR-5.1 to GR-5.4 apply to the whole firm. Only GR-5.5 applies. GR-6 Applies to all insurance licensees .Applies to the whole corporate entity. GR-7 Applies to insurance firms andinsurance brokers .Applies to Bahrain branch business only. GR-8 Applies to all insurance licensees ; captives may seek exemption from GR-8.1.5 and GR-8.1.6.Applies to Bahrain branch business only. GR-9 Applies to insurance firms only.Applies to Bahrain branch business only. GR-10 Applies to insurance brokers andinsurance consultants only.Applies to Bahrain branch business only. Amended: October 2015
Amended: April 2012
Amended: October 2007
Amended: January 2007GR-1 GR-1 Books and Records
GR-1.1 GR-1.1 General Requirements
GR-1.1.1
The requirements in Chapter GR-1 apply in full to
Bahraini insurance licensees . The requirements in Chapter GR-1 also apply tooverseas insurance licensees , but only with respect to the business booked in their branch in Bahrain and the records of that branch.GR-1.1.2
All
insurance licensees must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licensee, including records sufficient to verify the identity ofcustomers . These records must be retained for at least 10 years according to Article 60 of the CBB Law.Amended: October 2018
Amended: January 2007GR-1.1.3
For those
insurance firms granted grandfathering provisions as per Paragraph AU-1.1.15, separate books and records must be maintained in respect of both general andlong-term insurance business . The transactions relating to each kind of business must be maintained separately. Theinsurance firm must maintain such accounting and other records as necessary to identify all assets and liabilities in respect of each kind of business.Amended: January 2007GR-1.1.4
Unless otherwise agreed to with the CBB in writing, records must be kept in either English or Arabic. Any records kept in other languages must be accompanied by a certified English or Arabic translation. Records must be kept current. The records must be sufficient to allow an audit of the licensee's business or an on-site examination of the licensee by the CBB.
Amended: January 2007GR-1.1.4A
Translations produced in compliance with Rule GR-1.1.4 may be undertaken in-house, by an employee or contractor of the licensee, providing they are certified by an appropriate officer of the licensee.
Added: January 2007GR-1.1.5
For
captive insurers , the maintenance of books and records may be carried out by aninsurance manager . Should this be the case, thecaptive insurer must ensure that the CBB has access to these records at any time. In addition, these records must be sufficient to allow an audit or an on-site examination by the CBB of thecaptive insurer .Amended: January 2007GR-1.1.6
Records must be accessible at any time from within the Kingdom of Bahrain, or as otherwise agreed with the CBB in writing.
Amended: January 2007GR-1.1.7
Where older records have been archived, or in the case of records relating to overseas branches of
Bahraini insurance licensees , the CBB may accept that records be accessible within a reasonably short time frame (e.g. within 5 business days), instead of immediately. The CBB may also agree similar arrangements foroverseas insurance licensees , as well asBahraini insurance licensees , where elements of record retention and management have been centralised in another group company, whether inside or outside of Bahrain.Added: January 2007GR-1.2 GR-1.2 Customer and Transaction Records
Customer Records
GR-1.2.1
Insurance licensees must keep records with respect to allcustomer relationships that remain active or potentially active. These records must be in hard copy or in original form, and retained for at least ten years after acustomer relationship has terminated.Amended: October 2007GR-1.2.2
Customer records include original account opening and due diligence documentation including identification information, sufficient to confirm compliance with all statutory and regulatory Know Your Customer requirements (see Module FC).GR-1.2.3
The requirement in Paragraph GR-1.2.1 applies to all
customer facilities booked in Bahrain by the licensee or where acustomer relationship is administered from Bahrain. Licensees may not use record-keeping systems outside Bahrain forcustomer business booked in Bahrain, except for back-up purposes only.GR-1.2.4
For
captive insurance , where thecustomers are limited torelated companies , the due diligence requirement does not apply.Amended: January 2007Transaction Records
GR-1.2.5
Insurance licensees must keep completed transaction records for as long as they are relevant for the purposes for which they were made (with a minimum period in all cases of five years from the date when the transaction was completed) – see Module Section FC-7.1). Records of completed transactions must be kept whether in hard copy or electronic format as per the Legislative Decree No. (54) of 2018 with respect to Electronic Transactions “The Electronic Communications and Transactions Law”and its amendments.Amended: January 2020
Amended: July 2017
Amended: October 2007
Amended: January 2007GR-1.2.6
[This Paragraph has been deleted in July 2017].
Deleted: July 2017
GR-1.2.7
In the case of
Bahraini insurance licensees , the requirement in Paragraph GR-1.2.5 applies only to transactions relating to business booked in Bahrain by the licensee. It does not relate to transactions relating to business booked in overseasbranches orsubsidiaries of the licensee.Amended: January 2007Keeping of Separate Client Accounts
GR-1.2.9
An
insurance broker must, in connection with any premiums received in the course of its business, establish and maintain separateclient accounts separate from those used for its own funds.GR-1.2.9A
Specific Rules and guidance dealing with the holding of client money are contained in Module CL (Client Money).
Added: April 2012GR-1.2.10
An
insurance broker must not make withdrawals from itsclient accounts for any purposes other than those of theclient .GR-1.2.11
Payment of premiums to
insurance firms , or commissions (brokerage) to theinsurance broker's own accounts shall not be effected until the premiums to which these payments relate have been duly received from thatclient and credited to theclient account.GR-1.2.12
In respect of premiums booked in Bahrain, in relation to residents and non-residents of Bahrain, these accounts are to be maintained with a retail bank licensed to operate in the Kingdom of Bahrain.
Amended: January 2007GR-1.2.13
[This Paragraph was deleted in April 2012].
Deleted: April 2012GR-1.2.14
[This Paragraph was deleted in April 2012 and new guidance is now contained in Paragraph CL-1.1.9].
Deleted: April 2012GR-1.2.15
[This Paragraph was deleted in April 2012 and new guidance is now contained in Paragraph CL-1.1.10].
Deleted: April 2012GR-1.2.16
[This Paragraph was deleted in April 2012].
Deleted: April 2012GR-1.3 GR-1.3 Other Records
GR-1.3.1
Insurance licensees must maintain the following records in original form or in hard copy at their premises in Bahrain:(a) Internal policies, procedures and operating manuals;(b) Corporate records, including minutes ofshareholders' ,Directors' and management meetings;(c) Accounts, books, files and other records that adequately record all the business affairs of theinsurance licensee , and any other records that substantiate the value of the assets, liabilities and off-balance sheet activities of the licensee;(d) Correspondence with the CBB and records relevant to monitoring compliance with CBB requirements;(e) Reports prepared by theinsurance licensee's internal and external auditors; and(f) Employee training manuals and records.Amended: January 2007GR-1.3.2
In the case of
Bahraini insurance licensees , these requirements apply to the licensee as a whole, including any overseasbranches . In the case ofoverseas insurance licensees , all the requirements of Chapter GR-1 are limited to the business booked in theirbranch in Bahrain and the records of thatbranch (see GR-1.1.1).Overseas insurance licensees are thus not required to hold copies ofshareholders' andDirectors' meetings, except where relevant to thebranch's operations.Amended: January 2007GR-2 GR-2 Corporate and Trade Names
GR-2.1 GR-2.1 Vetting of Names
GR-2.1.1
Insurance licensees must obtain CBB’s prior written approval for any change in their legal name.Licensees must notify the CBB of any change in their corporate name at least one week prior to effecting the proposed change.Amended: January 2022
Amended: January 2007GR-2.1.2
GR-2.1.1 applies to
overseas insurance licensees only with respect to their Bahrainbranch .Amended: January 2007GR-2.1.3
In approving a change in a legal name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector. The CBB also seeks to ensure that names used by unregulated
subsidiaries do not suggest thosesubsidiaries are in fact regulated.Amended: January 2022
Amended: January 2007GR-2.2 GR-2.2 Publication of Documents by the Licensee
GR-2.2.1
Any written communication, including stationery, business cards or other business documentation published by the
licensee , or used by its employees (agents, representatives, financial advisers or introducers) must include a statement that thelicensee is regulated by the Central Bank of Bahrain, the type and category of license and the legal status. Additionally, written communication (stationery) should state the authorised and paid up capital of thelicensee . Alllicensees should comply with this requirement by 31st December 2014 at the latest.Added: October 2014GR-3 GR-3 Dividends
GR-3.1 GR-3.1 CBB Approval on Dividends
GR-3.1.1
Bahraini insurance licensees , other thancaptive insurers , must obtain CBB’s prior approval for any proposed cash or stock dividend before any public announcements or the Annual General Meeting.Amended: January 2024
Amended: January 2007
Amended: April 2009GR-3.1.1A
When submitting a request for CBB’s approval for proposed dividend, the request made by the
insurance licensee must:(a) Be made at a minimum 3 working days before the proposed announcement;(b) Include a copy of the draft audited or reviewed financial statements for the year to which the request for the proposed dividend pertains to;(c) Include the intended percentage and amount of proposed dividends;(d) The impact of proposed dividends on:
(i) The capital adequacy and solvency margin requirements as outlined in Module CA (Capital Adequacy) of Volume 3 CBB Rulebook before and after the proposed dividends;(ii) The cash flow position and shareholders’ equity level before and after the proposed dividends;(iii) Stress testing results evidencing that the proposed dividends would not lead to any breach of the capital adequacy and solvency margin requirements as outlined in Module CA (Capital Adequacy) of Volume 3 CBB Rulebook in the last financial year and the next two years under normal and stressed scenarios;(e) Satisfy the CBB of the adequacy of impairment provisions during the review of the annual/interim financial statements;(f) Ensure that any unrealised gains arising from assets or liabilities fair value assessment are excluded from net income in the determination of the proposed dividends, given that CBB does not permit distribution of unrealised profit;(g) Ensure that the amount of realised profits included in the retained earnings as at the year-end is sufficient to cover the proposed dividend amount; and(h) Ensure that any negative fair value on assets held at amortised cost do not have any material adverse impact on the capital and liquidity positions where such assets may need to be liquidated before maturity to satisfy any financial obligations, including Claims Payments.Amended: January 2024
Amended: October 2017
Added: April 2009GR-3.1.1B
To comply with the requirements of Subparagraph GR-3.1.1A (d)(i), the insurance licensee should complete and submit to the CBB the relevant sections of the Insurance Firm Return (Form IFR) or Insurance Brokers Return (IBR) pertaining to the capital adequacy and solvency margin requirements.
Amended: January 2024
Added: April 2009GR-3.1.2
[This Paragraph has been deleted in January 2024].
Amended: January 2024
Amended: January 2007
Amended: April 2009GR-3.1.3
[This Paragraph has been deleted in January 2024].
Amended: January 2024
Amended: January 2007
Amended: April 2009GR-3.2 Repatriation of Profits by Overseas Insurance Licensees
GR-3.2.1
Overseas insurance licensee must comply with the following when repatriating of profits to Head Office:(b) Satisfy the CBB of the adequacy of impairment provisions during the CBB’s review of the annual financial statements;(c) Ensure that any unrealised gains arising from assets or liabilities fair value assessment are excluded from net income in the determination of the repatriation;(d) Ensure that the amount of realised profits included in the retained earnings (unremitted profits due to head office) as at the year-end is sufficient to cover the proposed profit repatriation amount; and(e) Ensure that any negative fair value on assets held at amortised cost do not have any material adverse impact on the capital and liquidity positions where such assets may need to be liquidated before maturity to satisfy any financial obligations, including Claims Payments.Added: January 2024GR-4 GR-4 Business Transfers
GR-4.1 GR-4.1 CBB Approval
GR-4.1.1
In accordance with Article 66 of the CBB Law, an
insurance licensee must seek prior written approval from the CBB before transferring any of its business to a third party.Amended: January 2007GR-4.1.2
Rule GR-4.1.1 is intended to apply to circumstances where an
insurance licensee wishes to transfer all or part of its business to a third party. A business transfer is not the same as aninsurance firm ceding (reinsuring) some or all of itspolicyholder liabilities to a reinsurer. Reinsurance creates an additional set of rights and obligations between theinsurance firm and the reinsurer but does not change theinsurance firm's obligations to itspolicyholders nor does it create any direct obligations (to each other) between theinsurance firm's policyholders and theinsurance firm's reinsurer.Added: January 2007GR-4.1.3
In the case of a
Bahraini insurance licensee , Chapter GR-4 applies both to business booked in Bahrain and in the licensee’s overseasbranches . In the case of anoverseas insurance licensee , Chapter GR-4 applies only to business booked in the firm's Bahrainbranch .Amended: January 2007GR-4.1.4
In all cases, CBB approval to transfer business will only be given where:
(a) The transfer of business will not damage or otherwise prejudice the legitimate interests of the licensee’scustomers ;(b) The transferee is duly licensed to undertake the business which it is to receive; and(c) The CBB is satisfied that the transfer will not breach any applicable Laws and regulations, and would not create any supervisory concerns.Added: January 2007
Amended: October 2007GR-4.1.5
For purposes of Paragraph GR-4.1.1, a business transfer refers to a transfer of all the rights and obligations of one
insurance licensee to anotherinsurance licensee , so that thepolicyholders and reinsurers continue to be subject to the same terms and conditions as those originally agreed. Business transfers may enable licensees that have ceased writing certain lines of business to manage their affairs more effectively and be beneficial both to theinsurance licensee and thepolicyholders , particularly if theinsurance licensee that is assuming the business is financially stronger than theinsurance licensee transferring the business.Amended: January 2007GR-4.1.4
A portfolio transfer is not the same as an
insurance firm ceding (reinsuring) some or all of its policyholder liabilities to a reinsurer. Reinsurance creates an additional set of rights and obligations between theinsurance firm and the reinsurer but does not change theinsurance firm's obligations to itspolicyholders nor does it create any direct obligations (to each other) between theinsurance firm's policyholders and theinsurance firm's reinsurer.GR-4.1.5
Where the proposed transfer involves a transfer of obligations under
contracts of insurance in respect of risks situated inside the Kingdom of Bahrain, the transferee must be licensed to carry on insurance business in Bahrain.GR-4.1.6
In assessing the criteria outlined in Paragraph GR-4.1.4, the CBB will, amongst other factors, take into account the financial strength of the transferee; its capacity to manage the business being transferred; its track record in complying with applicable regulatory requirements; and (where applicable) its track record in treating
customers fairly. The CBB will also take into account the impact of the transfer on the transferor, and any consequences this may have for the transferor’s remainingcustomers .Amended: January 2007GR-4.2 GR-4.2 Procedure with Respect to Applications
GR-4.2.1
Insurance licensees seeking to obtain the CBB’s permission to transfer business must apply to the CBB in writing, in the form of a covering letter, together with supporting attachments. Unless otherwise directed by the CBB, the application must provide:
(a) Full details of the business to be transferred including a detailed list of all liabilities that will be transferred, including the name of the individualpolicyholder , where applicable, related outstanding liabilities and the jurisdiction where the insurance risk is situated;(b) The rationale for the proposed transfer;(c) If applicable, an assessment of the impact of the transfer on anycustomers directly affected by the transfer, and any mitigating factors or measures;(d) If applicable, an assessment of the impact of the transfer on the transferor’s remaining business andcustomers , and any mitigating factors or measures; and(e) Evidence that the proposed transfer has been duly authorised by the transferor (such as a certified copy of a Board resolution approving the transfer).Amended: January 2007GR-4.2.2
Subject to the CBB's review, the requirements of Paragraph GR-4.2.1 do not apply to the transfer of the portfolio from a
captive insurer or to a business transfer entirely comprising reinsurance business, where all of thepolicyholders affected by the transfer have given their consent.Amended: January 2007GR-4.2.3
Insurance licensees intending to apply for a transfer of business are advised to contact the CBB at the earliest possible opportunity, in order that the CBB may determine the nature and level of documentation to be provided and the need for actuarial or other expert opinion to be provided to support the application. Transfers of long-term business will in all cases require an actuarial evaluation to be provided to the CBB. An affectedpolicyholder is apolicyholder whose policy is included in the transfer, or his policy is with the transferor and the CBB has ruled, after consulting the transferor, that thepolicyholder's rights and obligations under the policy will or may be materially affected by the transfer.Amended: January 2007GR-4.2.4
The CBB will consider an application under Paragraph GR-4.1.1 if it is satisfied that:
(a) Any objections received to the application to transfer the business following its publication in the Official Gazette and in two daily newspapers in the Kingdom of Bahrain (one in Arabic and one in English) as required under Article 66(b) have been reviewed and resolved by the CBB;(b) Except in so far as the CBB has otherwise directed, a copy of the notice that has been sent to every affectedpolicyholder and every other person who claims an interest in a policy included in the proposed transfer (and has given written notice of his claim to the transferor);(c) Copies of a statement setting out particulars of the transfer, approved by the CBB, have been available for inspection at one or more places in Bahrain for at least 30 days, from the date of publication of the notice specified in GR-4.2.4(a); and(d) Where the proposed transfer includes any contract of direct insurance and the risk is situated in a jurisdiction other than Bahrain, a statement setting out particulars of the transfer, approved by the CBB, has been available for inspection at one or more places in that jurisdiction for at least 30 days, starting with the date of publication of the notice specified in sub- Paragraph GR-4.2.4 (a).Added: January 2007GR-4.2.5
The CBB notice referred to in Paragraph GR-4.2.4 (a) will include a statement that written representations concerning the transfer may be sent to the CBB within three months from the date of publication. The notice shall specify the period during which the
policyholder may exercise any right to cancel the policy. The CBB will not decide on the application until after considering any representations made to the CBB within the prescribed time period. In all cases, the costs of publication of this notice must be met by the transferor.Amended: January 2007GR-4.2.6
Where the risk is situated in a jurisdiction other than Bahrain, the law of the jurisdiction in which the risk is situated shall determine whether the
policyholder has a right to cancel the policy, and the conditions applicable to any such right.Added: January 2007GR-4.2.7
The CBB reserves the right to impose additional requirements if, in the opinion of the CBB, additional requirements are necessary to protect
policyholder interests. In all cases where requirements are imposed, the CBB shall state the reasons for doing so.Amended: January 2007GR-4.3 GR-4.3 Determination of Applications
GR-4.3.1
The CBB will not approve the transfer, under the terms of Paragraph GR-4.2.1, unless it is satisfied that:
(a) The transferee is authorised to carry onregulated insurance services in Bahrain or (where relevant) is authorised or otherwise permitted to carry onregulated insurance services in the jurisdiction where any overseas risks are situated;(b) Every policy included in the transfer evidences a contract which was entered into before the date of the application;(c) The transferee possesses the necessary margin of solvency, required by the regulatory authorities to which he is subject to, after taking the proposed transfer into account;(d) Where policies are being transferred from an overseasbranch of theinsurance licensee , or the transferee is an overseasinsurance licensee , the relevant overseas regulatory authority has been consulted about the proposed transfer, the law of that jurisdiction provides for the possibility of such a transfer, and the relevant supervisory authority in that jurisdiction has agreed to the transfer; and(e) There are no material adverse consequences from the transfer on the transferee or the security ofpolicyholders .Amended: January 2007GR-4.4 GR-4.4 CBB Decision
GR-4.4.1
In accordance with Article 67 (d), the CBB’s decision regarding the application for transfer made under Section GR-4.3, will be published as a notice in the Official Gazette and in two local news papers (one in Arabic and one in English). If the liabilities are located in a jurisdiction outside Bahrain, the CBB may also publish such notice in the jurisdiction in which the risk is situated. In all cases, the costs of publication of this notice must be met by the transferor.
Amended: January 2007GR-4.4.2
[This Paragraph was deleted in January 2007].
Amended: January 2007GR-4.4.3
[This Paragraph was moved to Section GR-4.2 in January 2007].
Amended: January 2007GR-4.4.4
The requirement in Paragraph GR-4.4.1 does not have to be met in respect of a transfer of business where the transferor is a Category C1
captive insurance firm .GR-4.4.5
Article 67(e) notes that where the application for business transfer has been turned down by the CBB or includes restrictions, the applicant may appeal to a competent court within 30 calendar days from the date of publication referred to in Paragraph GR-4.4.1.
Added: January 2007GR-5 GR-5 Controllers
GR-5.1 GR-5.1 Key Provisions for Bahraini Insurance Licensees
GR-5.1.1
Bahraini insurance licensees must obtain prior approval from the CBB for any of the following changes to theircontrollers (as defined in Section GR-5.2):(a) A newcontroller ;(b) An existingcontroller increasing its holding from 10% to 20%;(c) An existingcontroller increasing its holding from below 20% to 30%;(d) An existingcontroller increasing its holding from below 30% to 40%;(e) An existingcontroller increasing its holding to above 40% for licensees not listed on any exchange in Bahrain or abroad; and(f) An existingcontroller reducing its holding to below 10%.Amended: October 2015
Amended: January 2007GR-5.1.1A
Licensees must not incur or otherwise have an exposure (either directly or indirectly) to theircontrollers , includingsubsidiaries andassociated companies of suchcontrollers .Added: April 2019GR-5.1.1B
For the purpose of Paragraph GR-5.1.1A,
licensees that already have an exposure tocontrollers must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.Added: April 2019GR-5.1.2
Articles 52 to 56 of the CBB Law require notification to the CBB of all
controllers of licensees and of listed companies; it further gives the CBB the right to refuse approval ofcontrollers if deemed damaging to the interests of the market,customers , or in contravention of the criteria set by the CBB.Amended: January 2007
Amended: October 2007GR-5.1.3
[This Paragraph was deleted in October 2015.]
Deleted: October 2015
Amended: January 2007GR-5.1.4
Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB.
Amended: October 2015
Amended: January 2007GR-5.1.4A
Where the direct
controller of aBahraini insurance licensee is not theultimate parent undertaking of thelicensee , the CBB will require that Form 2 be completed by theultimate parent undertaking and that the details be provided of the structure of the group, clearly detailing the relationship between thelicensee and theultimate parent undertaking (e.g. by providing an organisational structure of the group).Added: October 2015GR-5.1.4B
Bahraini insurance licensees must immediately notify the CBB in case of any material change to the information provided in a Form 2 submitted for acontroller .Added: October 2015GR-5.1.4C
Where a controller is a legal person, any change in its shareholding must be notified to the CBB as the earlier of:
(a) When the change takes effect; and(b) When the controller becomes aware of the proposed change.Added: October 2015GR-5.1.5
If, as a result of circumstances outside the
Bahraini insurance licensee's knowledge and/or control, one of the changes specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, theinsurance licensee must notify the CBB no later than 15 calendar days from the date on which those changes have occurred.Amended: January 2017
Amended: October 2015
Amended: January 2007GR-5.1.5A
For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in
controller poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria forcontrollers , contained under Section GR-5.3.Added: October 2015GR-5.1.6
An approval of
controller is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.Amended: January 2007GR-5.1.7
Bahraini insurance licensees must submit, within 3 months of their financial year-end, a report on theircontrollers . This report must identify allcontrollers of the licensee, as defined in Section GR-5.2. This report is included as part of the CBB annual reporting requirements in Forms IFR or IBR (depending on the type of license issued).Amended: October 2015
Amended: January 2007GR-5.2 GR-5.2 Definition of Controller of a Bahraini Insurance Licensee
GR-5.2.1
A
controller of aBahraini insurance licensee is a natural or legal person who, either alone or with his associates:(a) Holds 10% or more of the issued and paid up capital in thelicensee orparent undertaking ; or(b) Is able to exercise more than 10% of the voting power over thelicensee or theparent undertaking .Amended: October 2015
Amended: January 2007GR-5.2.2
For the purposes of Paragraph GR-5.2.1, 'associate' includes:
(a) In the case of natural persons, a member of thecontroller's family ;(b) An undertaking of whichcontroller is aDirector ;(c) A person who is an employee or partner of acontroller ;(d) If thecontroller is a legal person, aDirector of thecontroller , asubsidiary of thecontroller , or aDirector of anysubsidiary of thecontroller .(e) Any other person or undertaking with which thecontroller has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in theinsurance licensee , or under which they undertake to act together in exercising their voting power in relation to theinsurance licensee .Amended: October 2015
Amended: January 2007
Amended: October 2007GR-5.2.3
In addition to the provisions of this Chapter, listed companies and their
controllers shall be bound by the CBB's regulatory requirements for capital markets stipulated in the CBB's Rulebook related to changes in the ownership of shares in listed companies. Foroverseas insurance licensees , Section GR-5.5 shall apply.Amended: October 2015
Amended: January 2007GR-5.2.4
For the avoidance of doubt, the management company of a
captive insurer is not automatically acontroller of the firm.Amended: January 2007GR-5.2.5
The restrictions set forth in this Chapter shall apply to any changes in the legality of the shares' ownership of the
controllers in thelicensees , or to the voting powers thecontrollers are entitled to in thelicensees . Failure to comply with such restrictions shall result in the imposition of penalties as indicated in Module EN (Enforcement) of the CBB Rulebook. The imposition of such penalties shall not affect the CBB's right to impose other penalties and to take any other administrative measures against thecontroller in accordance with the provisions of the Law including preventing thecontroller from exercising his voting right or transferring of shares.Added: October 2015GR-5.3 GR-5.3 Suitability of Controllers for Bahraini Insurance Licensees
GR-5.3.1
Bahraini insurance licensees must satisfy the CBB of the suitability of their proposedcontrollers .Amended: October 2015
Amended: October 2011
Amended: January 2007GR-5.3.1A
[This Paragraph was deleted in October 2015.]
Deleted: October 2015
Adopted: October 2011Natural Persons
GR-5.3.2
The percentage of direct or indirect control of a natural person in a
Bahraini insurance licensee must not exceed 30% of the issued and paid up capital. This limit does not apply toinsurance consultants nor toinsurance managers .Added: October 2015GR-5.3.3
In assessing the suitability of
controllers who are natural persons, the CBB will consider the following:(a) Whether the approval or refusal of acontroller is or could be detrimental to thelicensee , Bahrain's financial sector and the national interest of the Kingdom of Bahrain;(b) The legitimate interests of clients, creditors, non-controlling interests, and all other stakeholders of thelicensee ;(c) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(d) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(e) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;(f) The contravention of any financial services legislation or regulation;(g) Whether the person has ever been refused an authorisation ascontroller , a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;(h) Dismissal or a request to resign from any office or employment;(i) Disqualification by a court, regulator or other competent body, as aDirector or as a manager of a corporation;(j) Whether the person has been aDirector , partner or manager of a corporation or partnership which has gone into liquidation or administration or declared bankrupt or one or more of its partners or managers have been declared bankrupt;(k) The extent to which the person has been truthful and open with regulators;(l) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;(m) The track record as acontroller in another company or investor in a financial institution, whether in the Kingdom of Bahrain or abroad;(n) The financial resources of the person and the stability of their shareholding;(o) Existing Directorships or ownership of more than 20% of the issued or paid up capital in any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interests that such Directorships or ownership may imply;(p) The ability of the person to deal with existingshareholders and the Board in a constructive and co-operative manner; and(q) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings.Amended: October 2015
Amended: July 2007
Amended: October 2007Unregulated Legal Persons
GR-5.3.3A
The percentage of direct or indirect control of an unregulated legal person in a
Bahraini insurance licensee must not exceed 30% of the issued and paid up capital.Added: October 2015GR-5.3.4
In assessing the suitability of
controllers who are unregulated legal persons, the CBB will consider the following:(a) Whether their approval or refusal of acontroller is or could be detrimental to thelicensee , Bahrain's financial sector and the national interest of the Kingdom of Bahrain;(b) The legitimate interests of investors, creditors, non-controlling interests and all other stakeholders of thelicensee (c) The financial strength of thecontroller , its parent(s) and its subsidiaries, its implications for theinsurance licensee and the likely stability of thecontroller's shareholding in theinsurance licensee ;(d) Whether the unregulated legal person or any of its subsidiaries or any of its shareholders have ever been adjudged bankrupt, or failed to satisfy a judgement debt under a court order, or have defaulted on any debts, or entered into any arrangement with creditors in relation to the inability to pay due debts;(e) Thecontroller's jurisdiction of incorporation, location of Head Office, group structure andclose links , and the implications for theinsurance licensee as regards effective supervision of theinsurance licensee and potential conflicts of interest;(f) Thecontroller's (and other subsidiaries') propriety and general standards of business conduct, including the contravention of any laws or regulations related to financial services, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;(g) Any conviction related to fraud, misfeasance or other misconduct;(h) Whether the unregulated legal person or any of its subsidiaries has been subject to any disciplinary proceeding whether by court order any proceeding by a specialised body, and whether the unregulated legal person is sued in any court;(i) The extent to which thecontroller or its subsidiaries have been truthful and open with regulators and supervisors;(j) Whether the unregulated legal person has ever been refused an authorisation ascontroller , a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;(k) The track record as acontroller or investor in financial institutions;(l) The ability of the unregulated legal person to deal with existingshareholders and the Board in a constructive and co-operative manner;(m) Directorships in the Kingdom of Bahrain or elsewhere or ownership of more than 20% of the capital or voting rights of any financial institution, and the potential for conflicts of interest that such directorships or ownership may imply; and(n) Whether the unregulated legal person or any of its subsidiaries have ever entered into any arrangement with creditors in relation to the inability to pay due debts.Amended: October 2015
Amended: July 2007Regulated Legal Persons
GR-5.3.5
The percentage of direct or indirect control of a regulated legal person in a
Bahraini insurance licensee must not exceed 40% of the issued and paid up capital.Added: October 2015GR-5.3.6
The 40% limit referred to in Paragraph GR-5.3.5 does not apply to
Bahraini insurance licensees not listed on alicensed exchange or an exchange abroad, or to mergers or acquisitions which have been approved by the CBB.Added: October 2015GR-5.3.7
Subject to the discretion of the CBB, regulated financial institutions may be allowed to own or control holdings of voting capital of listed licensees in excess of the abovementioned 40% level, if such control is not detrimental to the
licensee , Bahrain's financial sector and the national interest of the Kingdom of Bahrain.Added: October 2015GR-5.3.8
Regulated financial institutions wishing to acquire more than 40% of the voting capital of a
Bahraini insurance licensee must observe the criteria set forth in Guidance GR-5.3.4 related to unregulated legal persons, in addition to the conditions set forth under Guidance GR-5.3.9.Added: October 2015GR-5.3.9
In assessing the suitability of
controllers who are regulated legal persons, the CBB will consider the following:(a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Committee on Banking Supervision Core Principles, or the IOSCO Core Principles or the IAIS Core Principles as well as the FATF Recommendations on Money Laundering and the financing of terrorism & proliferation;(b) Thehome supervisor of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of theBahraini insurance licensee ;(c) Thehome supervisor of the person must confirm to the CBB that it will require the person to consolidate the activities of the concernedBahraini insurance licensee for regulatory and accounting purposes if the case so requires;(d) Thehome supervisor of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for Large Exposures monitoring purposes;(e) Thehome supervisor of the person and the CBB must conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits; and(f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support thelicensee , should such letter be requested.Added: October 2015GR-5.4 GR-5.4 Approval Process for Bahraini Insurance Licensees
GR-5.4.1
Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, with the complete documentation requirements to the satisfaction of the CBB, the CBB will issue a written notice of approval or of refusal by registered mail, to the
Bahraini insurance licensee and the applicant. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.Amended: October 2015
Amended: July 2007GR-5.4.1A
The CBB may refuse an application for approval if the applicant does not meet the criteria set forth in Section GR-5.3. The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal.
Added: October 2015GR-5.4.2
Article 53 of the CBB Law allows the CBB up to 3 months in which to respond to an application, although the CBB aims to respond within 30 calendar days. Notices of refusal have to be approved by the concerned Executive Director of the CBB.
Amended: October 2015
Amended: October 2009
Amended: July 2007Appeal Process
GR-5.4.2A
The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination.
Added: October 2015GR-5.4.3
Where a person has become a
controller by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.Amended: July 2007GR-5.4.4
If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.
Adopted: July 2007GR-5.4.5
[This Paragraph was deleted in October 2015.]
Deleted: October 2015
Adopted: July 2007
Amended: October 2007GR-5.4.6
Bahraini insurance licensees are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to changes in theircontrollers , both through newcontrollers coming in or existingcontrollers ceasing to have control.Amended: October 2015
Amended: October 2007
Adopted: July 2007GR-5.4.7
The CBB may contact references and supervisory bodies in connection with any information provided to support an application for
controller . The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.Added: October 2015GR-5.4.8
In accordance with Paragraph EN-8.2.6, and where a
controller is a natural person, the CBB may, depending on the seriousness of a situation, impose enforcement measures, which may include disqualification from being acontroller of any licensed firm.Added: October 2015GR-5.5 GR-5.5 Key Provisions for Overseas Insurance Licensees
GR-5.5.1
In the case of
overseas insurance licensees , the branch must notify the CBB of any new significant ownership in excess of 50% of the issued and paid up capital of the concernedlicensee's directparent undertaking as soon as the branch becomes aware. Theoverseas insurance firm licensee must provide a copy of the relevant approval by thehome supervisor of the parent. The CBB will take the appropriate action in such case.Added: October 2015GR-5.5.2
In assessing the suitability of a
controller of the parent of anoverseas insurance licensee , the CBB will take into regard that the change in control poses no undue risks to thelicensee or its customers, and is not damaging to the interests of the market.Added: October 2015GR-5.5.3
Overseas insurance licensees must submit, within 3 months of their financial year-end, a report on theircontrollers . This report must identify allcontrollers of the branch, and details of the type of control.Added: October 2015GR-5.5.4
For
overseas insurance licensees , thecontroller is the directparent undertaking . Any material changes as outlined in Paragraph GR-5.5.1, to the control of the directparent undertaking must be filed through submission of an updated Form 2 to the CBB.Added: October 2015GR-6 GR-6 Close Links
GR-6.1 GR-6.1 Key Provisions
GR-6.1.1
Condition 3 of the CBB's licensing conditions specifies, amongst other things, that
insurance licensees must satisfy the CBB that theirclose links do not prevent the effective supervision of the licensee and otherwise pose no undue risks to the licensee. (See Paragraph AU-2.3.1).Amended: July 2007GR-6.1.2
Applicants for an insurance license must provide details of their
close links , as provided for under Form 1 (Application for a License). (See Paragraph AU-5.1.5).Amended: October 2007GR-6.1.3
Insurance firms andinsurance brokers must submit to the CBB, attached to their annual return and within 3 months of their financial year-end, a report on theirclose links . The report must identify all undertakings closely linked to the licensee, as defined in Section GR-6.2.Amended: April 2012
Amended: July 2007GR-6.1.4
Insurance licensees may satisfy the requirement in Paragraph GR-6.1.3 by submitting a corporate structure chart, identifying all undertakings closely linked to the licensee. In the case ofinsurance firms , the report is included as part of the Insurance Firm Return (Form IFR (C) or IFR (T)). In the case ofinsurance brokers , the report is included as part of the the Insurance Broker Return (Form IBR).Amended: April 2012
Amended: July 2007GR-6.1.5
Insurance licensees must provide information on undertakings with which they are closely linked, as requested by the CBB.Amended: July 2007GR-6.2 GR-6.2 Definition of Close Links
GR-6.2.1
An
insurance licensee ('A') has close links with another undertaking ('C'), if:(a) C is aparent undertaking of A;(b) C is asubsidiary of A;(c) C is aparent undertaking of asubsidiary of A;(d) C is asubsidiary of aparent undertaking of A;(e) C owns or controls 20% or more of the voting rights or capital of A; or(f) A, any of itsparent orsubsidiaries , or any of thesubsidiaries of itsparent , owns or controls 20% or more of the voting rights or capital of C.Amended: July 2007
Amended: October 2007GR-6.3 GR-6.3 Assessment Criteria
GR-6.3.1
In assessing whether an
insurance licensee's close links may prevent the effective supervision of the firm, or otherwise poses no undue risks to theinsurance licensee , the CBB takes into account the following:(a) Whether the CBB will receive adequate information from theinsurance licensee , and those with whom the licensee hasclose links , to enable it to determine whether the licensee is complying with CBB requirements;(b) The structure and geographical spread of the licensee, its group and other undertakings with which it hasclose links , and whether this might hinder the provision of adequate and reliable flows of information to the CBB, for instance because of operations in territories which restrict the free flow of information for supervisory purposes;(c) In the case of anoverseas insurance licensee , whether theinsurance licensee and its group will be subject to supervision on a consolidated basis (for example, if a financial resources requirement is determined for the group as a whole); and(d) Whether it is possible to assess with confidence the overall financial position of the group at any particular time, and whether there are factors that might hinder this, such as group members having different financial year ends orauditors , or the corporate structure being unnecessarily complex and opaque.Amended: July 2007GR-7 GR-7 Statutory Deposits and Compulsory Reserve
GR-7.1 GR-7.1 Requirement for a Cash Deposit
GR-7.1.1
Article 181 of the CBB Law governs the deposits required by
insurance licensees .Amended: July 2007
Amended: October 2007GR-7.1.2
Insurance firms , except forcaptive insurers andinsurance firms who are in run-off and whose license is restricted from entering into newcontracts of insurance as per Paragraph GR-8.1.3, must maintain a cash deposit with a retail bank licensed to do business in Bahrain, for the following amounts:(a) BD 50,000 for life insurance and/or savings and fund accumulation categories;(b) BD 75,000 for any insurance category of general insurance for all insurance categories; and(c) BD 150,000 for firms solely effecting reinsurance contracts.Amended: July 2007GR-7.1.3 [This Paragraph was deleted in January 2007].
Deleted: July 2007GR-7.1.4
Insurance brokers must maintain a cash deposit with a retail bank licensed to do business in Bahrain for the following amounts:(a) BD 2,500 for life insurance and savings and fund accumulation categories; and(b) BD 5,000 for general insurance for all insurance categories.Amended: July 2007GR-7.1.5
The cash deposit must be in the name of the
insurance firm orinsurance broker and for the order of the CBB. The cash deposit and accumulated interest (or profit) thereon may not be disposed of except by written permission of the CBB.Amended: July 2016
Amended: July 2007GR-7.1.6
The deposit and any of its accumulated interest (if any) may be moved to another retail bank licensed to do business in Bahrain, providing that prior written approval has been obtained from the CBB. When seeking CBB approval, the
insurance licensee must provide a valid reason for requesting the move to another retail bank.Amended: July 2016
Amended: July 2007GR-7.2 GR-7.2 Compulsory Reserve
GR-7.2.1 [This Paragraph was deleted in January 2007].
Deleted: July 2007GR-7.2.2
In accordance with the Bahrain Commercial Companies Law,
Bahraini insurance licensees must comply with the statutory requirements of this law requiring that 10% of annual profits be set aside as a statutory reserve. The requirements of the Bahrain Commercial Companies Law note that the balance of such reserve is to equal 50% of the paid-up capital of the company.Amended: July 2007GR-8 GR-8 Cessation of Business
GR-8.1 GR-8.1 CBB Approval
GR-8.1.1
As specified in Article 50 of the CBB Law, an
insurance licensee wishing to cease to provide or suspend any or all itsregulated insurance services , completely or at any of its branches and/or liquidate its business must obtain prior written approval from the CBB.Amended: October 2011
Amended: July 2007GR-8.1.2
If the
insurance licensee wishes to effect a business transfer, it must also comply with the requirements contained in Chapter GR-4.Amended: July 2007GR-8.1.3
In the case of a
Bahraini insurance licensee , Chapter GR-8 applies both to its business booked in Bahrain and in the licensee's overseasbranches . In the case of anoverseas insurance licensee , Chapter GR-8 applies only to business booked in the licensee's Bahrainbranch .Adopted: July 2007GR-8.1.4
Insurance licensees seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a covering letter together with any supporting attachments. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:(a) Full details of the business to be terminated;(b) The rationale for the cessation;(c) If applicable, an assessment of the impact of the cessation on anycustomers directly affected by the cessation, and any mitigating factors or measures;(d) If applicable, an assessment of the impact of the cessation on thelicensee's remaining business andcustomers , and any mitigating factors or measures;(e) Evidence that the proposed cessation has been duly authorised by thelicensee (such as a certified copy of a Board resolution approving the cessation);(f) How thelicensee proposes to cease business;(g) Notice of an Extraordinary Meeting setting out the agenda to discuss and approve the cessation, and inviting the CBB for such meeting;(h) Formal request to the CBB for the appointment of a liquidator acceptable to the CBB;(i) A cut-off date by which thelicensee will stop its operations;(j) If theinsurance licensee wishes to cease its whole business, confirmation that thelicensee will not enter into new business with effect from the cut-off date;(k) The audited accounts of thelicensee as of the last date on which it stopped operations. The commencement of the period covering these final accounts should be the beginning of the financial year of thelicensee ; and(l) The final liquidator's report of thelicensee .Amended: October 2011
Adopted: July 2007GR-8.1.5
Licensees intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for anauditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-8.1.4 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact oncustomers .Amended: October 2011
Adopted: July 2007GR-8.1.6
Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected
customers . The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.Adopted: July 2007GR-8.1.7
When the CBB has given its approval to an application to cease business, the
licensee must publish a notice of its intention to cease business in two local newspapers (one in Arabic, the other in English). Notices must also be displayed in the premises (including any branch offices) of the licensee concerned. These notices must be given not less than 30 calendar days before the cessation is to take effect, and must include such information as the CBB may specify. If theinsurance licensee had entered into directcontracts of insurance relating to risks situated in a jurisdiction other than Bahrain, a notice must also be published in two national newspapers in the jurisdiction concerned.Amended: October 2011
Amended: October 2007
Adopted: July 2007GR-8.1.8
If the
insurance licensee wishes to go into run-off or liquidate its business, the CBB will revise its license to restrict the firm from entering into newcontracts of insurance . Theinsurance licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged and that it may surrender its license.Amended: October 2011
Amended: July 2007GR-8.1.9
An
insurance firm in run-off must continue to meet its contractual and regulatory obligations topolicyholders .Amended: July 2007GR-8.1.5
Once the
insurance firm believes that it has discharged all its remaining contractual obligations topolicyholders , it must publish a notice in two national newspapers in Bahrain approved by the BMA (one being in English and one in Arabic), stating that is has settled all its dues and wishes to leave the market. If theinsurance firm had entered into direct contracts of insurance relating to risks situated in a jurisdiction other than Bahrain, a notice must also be published in two national newspapers in the jurisdiction concerned.GR-8.1.10
The notices referred to in Paragraph GR-8.1.7 must include a statement that written representations concerning the cessation of business may be sent to the CBB before a specified day, which shall not be earlier than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.
Amended: October 2011
Amended: July 2007GR-8.1.11
If no objections to the cessation of business are upheld by the CBB, then the CBB will issue a written notice of approval for the cessation of business and where the
insurance licensee is leaving the market such notice will also provide for the surrender of the license and for the return of theinsurance licensee's statutory deposit.Amended: July 2007GR-8.1.12
As per Article 49 of the CBB Law, the CBB shall publish its approval to cancel or amend a license in the Official Gazette as well as in two local daily newspapers (one in Arabic, and the other in English), once this decision has been implemented. The publication costs of these notices are to be met by the licensee concerned.
Adopted: July 2007
Amended: October 2007GR-8.1.13
Upon application, the CBB may grant exemptions to the disclosure requirements of Paragraphs GR-8.1.7 for
captive insurers . However, all other provisions of Chapter GR-8 apply in full tocaptive insurers .Amended: July 2007GR-8.1.14
Upon satisfactorily meeting the requirement set out in GR-8.1.4, the insurance licensee must surrender the original license certificate issued by the Licensing Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry, Commerce and Tourism.
Amended: April 2020
Added: October 2016GR-9 GR-9 Appointed Representatives
GR-9.1 Appointed Representatives
GR-9.1.1
Insurance firms must register itsappointed representatives with the CBB in accordance with Chapter AU-1.3A.Insurance brokers andinsurance consultants are not allowed to be appointed byinsurance firms to act asappointed representatives nor are they allowed to appointappointed representatives .Added: July 2023GR-9.1.2
An
appointed representative may only represent one Takaful firm and one conventional insurance firm. Anappointed representative may be a natural person, a CBB licensee or a commercial entity not licensed by the CBB who offers insurance products as a representative of alicensed insurance firm complementing the sale of its products and services.Added: July 2023GR-9.1.3
Insurance firms that appointappointed representatives take full responsibility for the actions of theirappointed representatives and must ensure the following:(a) Theappointed representatives and ‘designated individuals’ in the case of incorporated entities acting asappointed representatives have good conduct and have the experience and qualifications consistent with thelicensee’s internal policies relevant to employees undertaking similar functions;(b) Theappointed representatives do not subcontract any of the activities undertaken on behalf of theinsurance firm ;(c) Theappointed representatives do not approach clients for the renewal of policies originally sold through them;(d) Compliance with CBB law and relevant regulations by theirappointed representatives for the activities undertaken on thelicensee’s behalf;(e) The relationship between thelicensee and itsappointed representatives must be governed by an agreement that addresses, among other matters, the following:i. Adherence to thelicensee’s internal policies in respect ofcustomer safeguards including avoidance of conflicts of interest and adequate disclosures to customers regarding terms of the insurance policy;ii. Effective handling of customer complaints and prompt and timely escalation of the complaints to theinsurance firm and maintenance of records for the same;iii. The arrangements for receipt of premiums/contributions (see Paragraph GR-9.1.6);iv. Where a person acts as appointed representative for more than oneinsurance firm , it must ensure reasonable segregation of business and confidential data attributable to differentlicensed principals in order to mitigate conflicts of interest;v. Adequate recourse, legal or otherwise, to theappointed representative in case of its non-compliance with the CBB law and regulations; andvi. Access to the CBB, its appointed experts, theinsurance firm and its external auditors to all information and records relevant to the insurance activities undertaken by theappointed representatives on behalf of theinsurance firm .(f) Perform periodic reviews of the arrangements withappointed representatives with respect to their quality of service and compliance with CBB requirements.Added: July 2023GR-9.1.4
For purposes of Subparagraph GR-9.1.3 (a), the CBB recognises the following minimum or equivalent (as agreed with the CBB) qualifications for
appointed representatives :(a) For general insurance, the Award in General Insurance from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF); and(b) For long-term insurance, the Award in Financial Planning from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF).Added: July 2023GR-9.1.5
Paragraph GR-9.1.3 (a) does not apply to
appointed representatives who offer insurance products as a representative of alicensed insurance firm complementary to the sale of its products and services, e.g. travel agents, car dealers and retailers of goods. In such cases,licensees’ arrangements withappointed representatives should include alternative training needs.Added: July 2023GR-9.1.6
Insurance firms must ensure thatappointed representatives that are natural persons must not receive premiums/contributions directly from policyholders, and the amounts must be paid directly to theinsurance firms .Appointed representatives , other than natural persons must remit the premiums/contributions received no later than (15) calendar days from the date of the receipt of such amounts.Added: July 2023GR-10 GR-10 Professional Indemnity Coverage
GR-10.1 GR-10.1 Insurance Brokers and Insurance Consultants
GR-10.1.1
Insurance brokers andinsurance consultants must maintain professional indemnity coverage, acceptable to the CBB, with a minimum limit of indemnity for any one claim and in any one insurance period of 12 months.Insurance brokers andinsurance consultants must provide, upon request, evidence to the CBB of the coverage in force.Amended: July 2007GR-10.1.1A
In accordance with Paragraph EN-B.3.1,
insurance licensees may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in Module EN.Added: April 2008GR-10.1.2
The requirements for professional indemnity coverage will normally be met by the
insurance broker orinsurance consultant obtaining an insurance policy from aninsurance firm . However, upon written application to the CBB, coverage may be met by theinsurance broker orinsurance consultant depositing with a retail bank licensed to operate in the Kingdom of Bahrain, an amount, specified by the CBB, to be held in escrow against future claims. This amount will not be less than the minimum required policy limit.Amended: July 2007
Amended: April 2008GR-10.1.3
The minimum limit of indemnity is BD 100,000 for
insurance brokers and BD 75,000 forinsurance consultants .GR-10.1.4
Other than in the case of Paragraph GR-10.1.2, the maximum excess or deductible allowable under the policy shall be BD 15,000.
GR-10.1.5
Branches of
insurance brokers orinsurance consultants of a company incorporated under the laws of its territory of incorporation must provide evidence of professional indemnity coverage maintained by their company and specifically indicating that the coverage of the professional indemnity extends to the operations of the branch resident in Bahrain.GR-10.1.6
Unless the licensee has access to the professional indemnity cover meeting the minimum requirements of Paragraphs GR-10.1.3 and GR-10.1.4 provided to its
parent company, separate professional indemnity cover will need to be provided.Amended: July 2007GR-10.1.7
Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior approval of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.
Amended: July 2007GR-10.1.8
If an
insurance broker orinsurance consultant applies to the CBB for a voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage to continue in respect of any unreported claims arising from past sales or advice.Amended: July 2007GR-10.1.9
The CBB will not allow a voluntary surrender of authorisation to take effect until the
insurance licensee , in the opinion of the CBB, has discharged all its regulatory responsibilities to itscustomers . See also Section AU-5.5, on the cancellation of authorisation.Amended: July 2007GR-10.1.10
Except as provided for by Paragraph ES-2.5.3, professional indemnity coverage requirements must be met by
insurance brokers andinsurance consultants by 31 December 2005 (refer to ES-2.5.2).Amended: July 2007GR-10.1.11
Unincorporated
Bahraini insurance brokers licensed prior to 1 June, 2005 must meet the professional indemnity coverage requirements by 31 December 2006 (refer to ES-2.5.3).Amended: July 2007GR-10.1.12
Insurance brokers andinsurance consultants must prominently display in their premises a notice stating that they have in place professional indemnity coverage that meet the minimum requirements of the CBB and the period of coverage, such that claims relating to the period during which the policy was in force may subsequently still be reported.Amended: July 2007GR-10.1.13
The above notice may be either issued by the
insurance firm providing the coverage on behalf of theinsurance licensee , or by the licensee itself. The notice should specify the main features of the coverage maintained (or, where relevant, the amount of funds placed in escrow, in accordance with Paragraph GR-10.1.2). It should also specify the procedures for submitting a claim under the coverage maintained.Adopted: July 2007Business Standards
CA CA Capital Adequacy
CA-A CA-A Introduction
CA-A.1 CA-A.1 Purpose
CA-A.1.1
This Module presents requirements that have to be met by
insurance licensees , with respect to the level of capital they must maintain. Condition 5 of the Central Bank of Bahrain ('the CBB') Licensing Conditions (cf. Chapter AU-2.5) requiresinsurance licensees to maintain adequate financial resources, in excess of the minimum requirements specified in Module CA (Capital Adequacy).Amended: January 2007CA-A.1.2
The requirements specified in this Module vary according to the Category of
insurance licensee concerned, the volume of business undertaken and its inherent risk. The purpose of such requirements is to ensure thatinsurance licensees maintain levels of capital sufficient to absorb unexpected losses, within a reasonable confidence interval. The capital levels specified here, in other words, are not sufficient to absorb all unexpected losses.Insurance licensees are also required to make their own assessment of the prudent level of capital that they need to hold.Amended: January 2007CA-A.1.3
This Module covers requirements to be met by both conventional and Takaful insurers. Specific requirements for
Takaful firms are given in Chapter CA-8.Amended: January 2007
Amended: October 2008Legal Basis
CA-A.1.4
This Module contains the CBB's Directive (as amended from time to time) relating to the capital adequacy of
insurance licensees , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to allinsurance licensees .Amended: January 2011
Adopted: January 2007CA-A.1.5
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
Adopted: January 2007CA-A.2 CA-A.2 Module History
CA-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007CA-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Amended: January 2007CA-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes CA-1.2 01/07/05 Changes made to the definitions of Tier 1 and Tier 2. CA-4.1 01/07/05 Correction to cross-reference. CA-4.2 01/07/05 Clarified valuation of amounts receivable. CA-7.1 01/07/05 Minor correction to list. CA-8.2 01/07/05 Minor correction. CA-8.3 01/07/05 Minor correction. CA-8.4 01/07/05 Minor correction. CA-8.5 01/07/05 Minor correction. CA-1.2 01/10/05 Amended requirement for minimum paid-in capital to minimum Tier 1 capital and related transition rules; clarified the definition of Tier 1 capital with respect to reserves and appropriations; clarified definition of Tier 2 in relation to the investment fair value reserve; amended determination of capital available chart in line with other changes in Section CA-1.2. CA-2.1 01/10/05 Added class of short term medical for solvency calculation of premiums basis and claims basis. CA-4.2 01/10/05 Clarified the treatment of unlisted equity shares and deleted the reference to managed funds. CA-7.1 01/10/05 Corrected reference to Group Insurance Firm Return. CA-3.1 01/01/06 Clarified that rule applies to related parties, as defined in Glossary. CA-2.1.14 01/04/06 Clarified the calculation of the average gross claims incurred. CA-4.2.25 01/04/06 Corrected that receivables from contracts of insurance are also included under general asset valuation regulations. CA-6.1.6 01/04/06 Clarified the definitions of 'assets' and 'liabilities' for purposes of currency matching and localisation requirements. CA-1.2.8 and CA-1.2.21 01/07/06 Added minority interest as part of the components of Tier 1 and clarified excess tier 2 capital. CA-2.1.14 01/07/06 Clarified calculation of required solvency margin on the Claims basis. CA-4.3.2 01/07/06 Clarified category limits for assets linked to long-term liabilities. CA-8.4.3 01/07/06 Clarified definition of capital available for a takaful fund. CA-A.1.4 01/2007 New Rule introduced, categorising this Module as a Directive. CA-1.2.8 and 1.2.21 01/2007 Minority interest was deleted as part of Tier 1 capital as solvency test is performed on an unconsolidated basis. CA-1.2.21 01/2007 Deleted reference to negative reserves as no discounting is permitted that would give rise to negative reserves. Clarified that there should be a deduction for solvency margin deduction required for branches in other jurisdictions. Added a deduction for assets pledged or provided as collateral. CA-2.1.8A 01/2007 The required solvency margin for pure reinsurers, other than for the reinsurance of linked business, is to be calculated in accordance with Paragraph CA-2.1.12. CA-2.1.15 01/2007 The reference period for the calculation of average gross claims and met claims incurred is now limited to 3 years. The 7-year option has been deleted. CA-4.2.25 01/2007 Clarified that all amounts due under contracts of insurance and reinsurance that have been due for more than 6 months must be valued at nil. CA-1.2.1
and 1.2.210/2007 Minimum Tier 1 capital only applies to Bahraini insurance firms CA-4.2.25A 10/2008 Added a Paragraph to deal with the valuation of unearned reinsurance premiums. CA-8.4.6A 10/2008 Clarified treatment of income generated from the assets forming part of the free loan to the Takaful fund. CA-8.4.13 10/2008 Introduced Rules for transition period for newly established Takaful funds. CA-6.1.1 04/2009 Clarified non-application of localisation requirements to unit-linked products. CA-8.4.8 04/2009 Paragraph 8.4.8 deleted on funding of deficit for Family Takaful funds CA-1.2.4 10/2009 Paragraph amended to allow for the zillmer adjustment as outlined in Paragraph CA-5.1.24 CA-3.1 10/2009 Section amended to reemphasize the need for separate accounting funds for different lines of business and different funds. CA-5.1 10/2009 Various amendments in line with consultation document issued in July 2009. CA-A.1.4 01/2011 Clarified legal basis CA-1.3.1 and CA-1.3.1A 04/2012 Updated capital requirements for insurance brokers. CA-1.2.3,
CA-1.2.23,
CA-4.2.25,
CA-8.2,
CA-8.3,
CA-8.4,
CA-8.4A,
CA-8.504/2014 Various amendments to reflect consultation undertaken on the enhanced operational and solvency framework. Some changes are applicable to all insurance firms and some only applicable to Takaful firms. CA-1.3.1B 04/2023 Added a new Paragraph on minimum capital and liquid funds required for insurance aggregators. CA-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007CA-B CA-B Scope of Application
CA-B.1 CA-B.1 Bahraini Insurance Licensees and Overseas Insurance Licensees
CA-B.1.1
This Module applies to both
Bahraini insurance licensees andoverseas insurance licensees .CA-B.1.2
While the solvency requirements for
Bahraini insurance firms and foroverseas insurance firms are identical (as per Chapter CA-2), the calculation of thecapital available varies based on the legal structure of the licensee, i.e. whether it is a locally incorporated company or a branch operation.Amended: January 2007CA-B.1.3
Bahraini insurance firms must calculate theircapital available based on theshareholder's equity of the licensee (and other allowable elements of regulatory capital, as specified in Chapter CA-1).Overseas insurance firms must calculate theircapital available based on their auditednet assets , determined in accordance with accounting standards that would be applicable if they were a joint stock company incorporated in Bahrain.Amended: January 2007CA-B.2 CA-B.2 Single Insurance Entity and Consolidated Insurance Entity
Single Insurance Entity (Unconsolidated)
CA-B.2.1
Insurance licensees must apply the requirements of this Module as a single insurance entity, i.e. at the level of the unconsolidated company orbranch . Any insurance activities ofbranches ofBahraini insurance licensees are included in the single insurance entity and are not subject to separate capital and solvency requirements.Amended: January 2007Consolidated Insurance Entity
CA-B.2.2
Overall capital and solvency requirements must be calculated for the consolidated Bahrain group (including the Bahrain insurance parent and
subsidiaries ).Bahraini insurance licensees must in addition apply the requirements of this Module at the consolidated level.Amended: January 2007CA-B.2.3
For purposes of Paragraph CA-B.2.1, where
branches andsubsidiaries are operating in jurisdictions outside of Bahrain, and are subject to capital requirements in these other jurisdictions that are equivalent or more stringent than the Bahrain requirements, these licensees will be considered to be in compliance with the requirements of this Module.Amended: January 2007CA-B.2.4
In instances where
insurance licensees are uncertain as to the equivalency of the capital requirements of other jurisdictions where they operate, they should discuss these requirements with the CBB.Amended: January 2007CA-1 CA-1 Capital Requirements
CA-1.1 CA-1.1 General Requirements
CA-1.1.1
In accordance with Principle of Business 9,
insurance licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.CA-1.1.2
In the event that an
insurance licensee fails to meet the capital and solvency margin requirements outlined in this Module, it must, on becoming aware that it has breached these Rules, notify the CBB immediately and within 25 calendar days submit a plan to the CBB demonstrating how itscapital available will be restored and the timeframe for that restoration to occur.Amended: January 2007CA-1.1.3
Should the
insurance licensee fail to meet the requirements of this Module, the CBB may impose enforcement measures outlined in Module EN.Amended: January 2007CA-1.1.4
Unless otherwise indicated, all
insurance licensees must implement the requirements of Module CA, effective 31 December 2005 (Refer to ES-2.5.1).Amended: January 2007CA-1.2 CA-1.2 Calculation of Capital Available for Insurance Firms
CA-1.2.1
A
Bahraini insurance firm must maintain sufficient capital to enable it to meet at all times its insurance and other obligations. The minimum Tier 1 capital forBahraini insurance firms is BD 5 million, except for those firms whose business is limited toreinsurance .Bahraini insurance firms whose business is limited toreinsurance must have minimum Tier 1 capital of BD 10 million.Overseas insurance firms andcaptive insurers are not subject to a minimum Tier 1 capital but must comply with theRequired Solvency Margin andminimum fund , as defined in Chapter CA-2. In addition, allinsurance firms must at all times maintain acapital available in excess of the greater of theRequired Solvency Margin and theminimum fund , as defined in Chapter CA-2.Amended: January 2007
Amended: October 2007CA-1.2.2
Bahraini insurance firms licensed prior to 1 April 2005 that do not meet the requirements of Paragraph CA-1.2.1, will be required to meet the requirements for minimum Tier 1 capital by 31 December 2007. In addition, the requirements to maintain acapital available in excess of the greater of theRequired Solvency Margin andminimum fund must be met byinsurance firms by 31 December 2005.Insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.8, are grandfathered and not required to apply the requirements of Paragraph CA-1.2.1 (refer to ES-2.6.2).Amended: January 2007
Amended: October 2007CA-1.2.3
An
insurance firm must ensure that at all times itscapital available does not fall below theminimum fund . In the event that aninsurance firm's capital available does fall below theminimum fund , theinsurance firm must inject capital and must notify the CBB immediately. Further, theinsurance firm must cease to effect any newcontracts of insurance , including renewals of existing contracts unless explicitly permitted to do so by the CBB.Amended: April 2014
Amended: October 2007
Amended: January 2007Limitation on Valuation of Capital Instruments
CA-1.2.4
For the purposes of determining an
insurance firm's capital available , no value is attributed to any other instrument or resource of aninsurance firm other than those identified in Paragraphs CA-1.2.8, CA-1.2.12 and CA-5.1.24 without the consent in writing of the CBB. Without limiting the generality of this Rule, no value is attributed to any of the following:(a) Any implicit items (which relate to future profits,zillmerising and hidden reserves); and(b) The unpaid element of any issued shares some or all of which are not 'fully paid' shares.Amended: October 2009
Amended: January 2007Capital Available: Tier 1 and Tier 2
CA-1.2.5
An
insurance firm's capital available , for the purposes of this Module, comprises two tiers. Tier 1, or core capital, comprises the highest quality capital elements that fully meet all the essential characteristics of capital. Tier 2, or supplementary capital, comprises other instruments that, to varying degrees, fall short of the quality ofTier 1 capital but nonetheless contribute to the overall financial strength of theinsurance firm .Insurance firms may holdTier 2 capital in excess of the limits in Paragraph CA-1.2.7, but any such excess is not counted ascapital available for the purposes of the requirements in this Module.Amended: January 2007CA-1.2.6
The
capital available of aninsurance firm comprises the sum of its Tier 1 and Tier 2 capital resources, subject to the limits in Paragraph CA-1.2.7.Amended: January 2007CA-1.2.7
Total
Tier 2 capital cannot exceed 100% of totalTier 1 capital . LowerTier 2 capital of the type identified in Paragraph CA-1.2.12 (f), (g) and (h) cannot exceed more than 50% of totalTier 1 capital .Amended: January 2007Tier 1 Capital
CA-1.2.8
Tier 1 capital comprises:(a) Paid-up ordinary shares (net of treasury shares);(b)Share premium reserve ;(c) Perpetual non-cumulative preference shares.(d) All disclosed reserves brought forward, that are audited and approved by theshareholders , in the form of legal, general and other reserves created by appropriations of retained earnings, excluding fair value reserve;(e) Unappropriated retained earnings, excluding cumulative unrealised fair value gains, brought forward;(f) Audited current year's earnings net of unrealised fair value gains and before taxes; and(g) In the case of anoverseas insurance firm , the auditednet assets (excluding any unrealised fair value gains and thesurplus assets of long-term funds), determined in accordance with accounting standards that would be applicable if it were a joint stock company incorporated in Bahrain.Amended: January 2007CA-1.2.9
Tier 1 capital elements included in Subparagraph CA-1.2.8 (a) to (c) can only be so included if:
(a) It is issued by theinsurance firm ;(b) It is fully paid, and only that portion of the shares for which payment has been received is otherwise included; and(c) It:(i) Cannot be redeemed at all or can only be redeemed on a winding up of theinsurance firm ; or(ii) Is only redeemable at the option of theinsurance firm and complies with any conditions applicable to joint stock companies in Bahrain;(d) Any coupon is non-cumulative;(e) It is able to absorb losses;(f) It ranks for repayment upon winding up no higher than a share of a company incorporated under the Joint Stock companies law of Bahrain;(g) Coupons on it can only be paid out of accumulated realised profits;(h) No coupon is payable at a time when the insurer is in breach of Paragraph CA-1.2.1 and no coupon is payable to the extent that, after paying it, theinsurance firm would breach that Rule; and(i) The proceeds of issue are immediately and fully available to theinsurance firm .Amended: January 2007CA-1.2.10
Tier 1 capital has the following characteristics:(a) It is able to absorb losses;(b) It is permanent;(c) It ranks for repayment upon winding up after all other debts and liabilities; and(d) It has no fixed costs, that is, there is no inescapable obligation to pay dividends or interest.Amended: January 2007CA-1.2.11
An
insurance firm must not redeem any tier 1 instrument that it has included in itsTier 1 capital resources for the purpose of Chapter CA-1 unless it has notified the CBB of its intention at least one month before it does so.Amended: January 2007
Amended: October 2007Tier 2 Capital
CA-1.2.12
Tier 2 capital includes the following liabilities of aninsurance firm , to the extent permissible by Paragraph CA-1.2.7:(a) Interim net income, excluding 55% of any unrealised fair value gains arising from investments held to maturity as per IAS 39, reviewed by the externalauditors in accordance with International Standards on Auditing (ISA);(b) Perpetual cumulative preference shares;(c) Mandatory convertible notes and similar capital instruments;(d)Perpetual subordinated debt ;(e) Any other hybrid (debt/equity) capital instruments of a permanent nature;(f)Dated subordinated debt with anoriginal term of at least 5 years;(g) Limited life redeemable preference shares with anoriginal term of at least 5 years;(h) Any other similar limited life capital instruments with anoriginal term of at least 5 years; and(i) Investment fair value reserve (IAS 39) on investments held available for sale, discounted to 45%.Amended: January 2007CA-1.2.13
Tier 2 capital includes forms of capital that do not meet the requirements for permanency and absence of fixed servicing costs that apply toTier 1 capital .Tier 2 capital resources are split into upper and lower tiers, based on the permanency of the instruments. For example:(a) Capital which is perpetual (that is, has no fixed term) but cumulative (that is, servicing costs cannot be waived at the issuer's option, although they may be deferred — for example cumulative preference shares) may be included in upperTier 2 capital ; and(b) Capital which is dated, i.e. not perpetual (that is, it has a fixed term) and which may also have fixed servicing costs that cannot generally be either waived or deferred, such as subordinated debt, are included in lowerTier 2 capital . Such capital should normally be of a medium to long-term maturity (that is, an original maturity of at least five years).Amended: January 2007CA-1.2.14
Lower
Tier 2 capital instruments (ref CA-1.2.12 (f) to (h)), must have a minimum fixed term to maturity in excess of 5 years. During the last 5 years to maturity, a cumulative discount (or amortisation) factor of 20% per year must be applied to reflect the diminishing value of these instruments as a continuing source of strength.Amended: January 2007Tier 2: Hybrid Capital Instruments
CA-1.2.15
Hybrid capital instruments are instruments that combine the features of debt and equity in that they are structured like debt, but exhibit some of the loss absorption and funding flexibility features of equity.
CA-1.2.16
A hybrid capital instrument must meet the following conditions before it can be included in an
insurance firm's upperTier 2 capital resources:(a) It must meet the general conditions described in Paragraph CA-1.2.17;(b) It must have no fixed maturity date;(c) The contractual terms of the debt agreement must provide for theinsurance firm to have the option to defer any interest payment on the debt; and(d) The contractual terms of the debt agreement must provide for the loss-absorption capacity of the debt and unpaid interest, whilst enabling theinsurance firm to continue its business.Amended: January 2007CA-1.2.17
A hybrid capital instrument cannot form part of the capital resources of an
insurance firm unless it meets the following conditions:(a) The claims of the creditors must rank behind those of all unsubordinated creditors;(b) No amounts due may be payable:(c) The only events of default must be non-payment of any amount falling due under the terms of the instrument or the winding-up of theinsurance firm ;(d) The remedies available to the subordinated creditor in the event of non-payment or other breach of the written agreement or instrument must be limited to petitioning for the winding up of theinsurance firm or proving the debt in aliquidation of theinsurance firm ;(e) Any events of default and any remedy described in (d) must not prejudice the matters in (a) and (b);(f) In addition to the requirements about repayment in (a) and (b), the debt must not become due and payable before its stated final maturity date (if any) except on an event of default complying with (c);(g) The debt agreement or terms of the instrument are governed by the laws of Bahrain;(h) To the fullest extent permitted under the laws of the relevant jurisdictions, creditors must waive their right to set off amounts they owe theinsurance firm against subordinated amounts included in theinsurance firm's capital resources owed to them by theinsurance firm ;(i) The terms of the instrument must be set out in a written agreement that contains terms that provide for the conditions set out in (a) to (h);(j) The debt must be unsecured and fully paid up; and(k) Theinsurance firm has obtained an external legal opinion stating that the requirements in (a) to (j) have been met.Amended: January 2007CA-1.2.18
Subparagraph CA-1.2.17 (g) does not apply if the
insurance firm has obtained an external legal opinion confirming that a degree of subordination has been achieved under the law that governs the debt and the agreement that is equivalent to that which would have been provided under the laws of Bahrain.Amended: January 2007CA-1.2.19
An
insurance firm must not amend the terms of the debt and the documents referred to in Subparagraph CA-1.2.17 (i) unless:(a) At least one month before the amendment is due to take effect, theinsurance firm has given the CBB notice in writing of the proposed amendment; and(b) That notice includes confirmation that the legal opinion referred to in Subparagraph CA-1.2.17 (k) continues in full force and effect in relation to the terms of the debt and the documents as proposed to be so amended.Amended: January 2007CA-1.2.20
An
insurance firm must notify the CBB of its intention to repay a hybrid capital instrument that is included in its capital resources before its contractual repayment date (if any) at least six months before the date of the proposed repayment, providing details of how it will meet itscapital available requirement after such repayment.Amended: January 2007Determination of Capital Available
CA-1.2.21
Every
insurance firm must determine itscapital available in accordance with this Rule:Determination of Insurance Firm's Capital Available Tier 1 Capital Paid-up ordinary shares (net of treasury shares) Share premium reserve Perpetual non-cumulative preference shares All disclosed reserves brought forward, that are audited and approved by the shareholders , in the form of legal, general and other reserves created by appropriations of retained earnings, excluding fair value reserveUnappropriated retained earnings, excluding cumulative unrealised fair value gains, brought forward Audited current year's earnings net of unrealised fair value gains and before tax expenses Overseas Insurance Firms Only: audited net assets, excluding any unrealised fair value gains andsurplus assets in long-term funds.(A) Total Tier 1 Capital Tier 2 Capital — Upper Level Interim net income, excluding any unrealised fair value gains, reviewed by the external auditors in accordance with International Standards on Auditing (ISA)Perpetual cumulative preference shares Mandatory convertible notes and similar capital instruments Perpetual subordinated debt Other hybrid (debt/equity) capital instruments of a permanent nature Investment fair value reserve (IAS 39) and any unrealised fair value gains included in retained earnings, both discounted to 45%. (B) Total Tier 2 Capital — Upper Level Tier 2 Capital — Lower Level Limited life redeemable preference shares with an original term of at least 5 years.Dated subordinated debt with anoriginal term of at least 5 years.Any other similar limited life capital instruments with an original term of at least 5 years.(C) Total Tier 2 Capital — Lower Level: before excess deduction (D) Total Tier 2 Capital (B plus C) (E) Excess Tier 2 Capital — Lower Level = (C) − [(A) times 50%)] (if negative, excess is 0) (F) = (D) − (E) Total Tier 2 Capital — Lower Tier adjusted (G) Excess Tier 2 Capital = (F) − [(A) times 100%)] (if negative, excess is 0) (H) = (F) − (G) Total Tier 2 Capital Deductions from Capital Valuation asset differences Inadmissible assets by asset category Inadmissible assets in excess of counterparty limits Required margins of solvency for branches in other jurisdictions.Current year's losses, before any tax expenses Dividends paid and declared Assets pledged or provided as collateral where there is no offsetting liability. Tax expenses Other appropriations not included as charges to profit and loss statement (e.g. Directors' remuneration, donations) Other (I) Total Deductions from Capital (A)+(H)−(I) CAPITAL AVAILABLE Amended: January 2007CA-1.2.22
In Paragraph CA-1.2.21, under 'Deductions from Capital' the deductions for:
(a) Inadmissible assets by asset type; and(b) Inadmissible assets in excess ofcounterparty limits only apply to those amounts in respect of assets, other than those assets from linked long-term insurance.
Amended: January 2007CA-1.2.23
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: January 2007CA-1.3 CA-1.3 Capital Requirements for Insurance Brokers
CA-1.3.1
Bahrain insurance brokers must maintain at all times the greater of:(a) A minimumnet assets value of BD 50,000;(b) 4% offiduciary liabilities ; and(c) 4% of annual income fromglobal insurance broking activities .Amended: April 2012
January 2007CA-1.3.1A
For semi-annual reporting under Form IBRS (see Section BR-1.4A), with regards to Subparagraph CA-1.3.1(c), the calculation of the annual income must be done on a moving average year basis. As an example, for the reporting period ending 30th June 2011, annual income from global insurance broking activities covers the period of 1st July 2010 to 30th June 2011.
Added: April 2012CA-1.3.1B
Notwithstanding the requirements in Paragraph CA-1.3.1,
Insurance aggregators are required to maintain at all times a minimumnet assets value of BD 25,000 and adequate liquid funds representing 25% of operating expenses incurred in the preceding financial year at all times in the form of cash or liquid assets that can be converted to cash in the short-term to cover its operating expenses.Added: April 2023CA-1.3.2
There are no minimum capital and net asset requirements for
overseas insurance brokers . However, foroverseas insurance brokers , financial statements of theparent company must be submitted to the CBB for review, in order to assess the financial stability of the group on a global basis.Amended: January 2007CA-1.3.3
For purposes of Paragraph CA-1.3.1,
global insurance broking activities refers to annual income of a Bahrain incorporated brokerage firm including any income being generated by any of the firm's brokeragesubsidiaries and/orbranches operating in other jurisdictions.Amended: January 2007CA-1.3.4
In respect of licensees who were carrying out activities that fall within the definition of the regulated activity of
insurance broker prior to 1 April 2005, the requirements of Paragraph CA-1.3.1 will apply from 1 January 2007 (refer to ES-2.4.2 for transition rules).Amended: January 2007CA-1.3.5
For the purposes of this section, '
net assets ' means the excess of assets over liabilities. The minimum net assets value is to be determined by excluding all intangible assets and in accordance with accounting principles generally accepted in Bahrain.Amended: January 2007CA-1.3.6
The value of debtors taken into account as assets available to support financial requirements must not exceed the amount which the
insurance broker expects to receive net of any significant costs associated with making the recovery.CA-1.3.7
Insurance brokers must make adequate provisions for any debts which are unlikely to be received or recovered from the debtors.CA-1.4 CA-1.4 Capital Requirements for Insurance Consultants and Insurance Managers
CA-1.4.1
Insurance consultants andinsurance managers must possess financial resources commensurate with the scale and nature of their insurance consultancy or management activities.Amended: January 2007CA-1.4.2
In determining the adequacy of the financial resources of
insurance consultants andinsurance managers , the CBB will consider, amongst other things:(a) The volume of business undertaken by the licensee;(b) The licensee's capacity to meet its financial obligations towards allclients in a timely and professional manner; and(c) The licensee's future business plans considering the capital available to meet all obligations and additional sources of capital when and if required.Amended: January 2007CA-1.4.3
There are no minimum capital and net assets requirements applicable to
insurance consultants andinsurance managers . However, Section AU-2.5 (Licensing Conditions: Financial Resources) requires all licensees to maintain adequate financial resources and to conduct their business in a prudent manner.CA-2 CA-2 Solvency Margin Requirements
CA-2.1 CA-2.1 Solvency Margin Requirements
CA-2.1.1
Every
Bahraini insurance firm must calculate arequired solvency margin in accordance with the requirements in this Chapter. The solvency margin must include the operations of allbranches of theinsurance firm , whether these undertake operations within Bahrain or in another jurisdiction.Amended: January 2007
Amended: October 2007CA-2.1.2
Every
overseas insurance firm , other than apure reinsurer , must calculate a 'Bahrain Required Solvency Margin ' in accordance with the requirements in this Chapter.Amended: October 2007CA-2.1.3
All
overseas insurance firms , includingpure reinsurers , must provide an equivalent or substantially equivalent solvency margin calculation, submitted to a supervisor in another jurisdiction for the company as a whole, in accordance with Chapter CA-7. In instances wherepure reinsurers are not subject to supervisory requirements in another jurisdiction, they must calculate aRequired Solvency Margin in accordance with this Chapter for the company as a whole.Amended: January 2007
Amended: October 2007CA-2.1.4
For
insurance firms licensed prior to 1 April 2005 and allowed to carry on bothlong-term insurance business andgeneral insurance business (refer to Paragraph AU-1.1.15), theinsurance firm must calculate a separateRequired Solvency Margin or aBahrain Required Solvency Margin in respect of the two different types of insurance business and maintain separate solvency margins.Amended: January 2007
Amended: October 2007Minimum Fund
CA-2.1.5
For the purposes of this Module 'minimum fund' means for:
(a)Category 1 Insurer : BD 300,000;(b)Category 2 Insurer : BD 500,000;(c)Category 3 Insurer : BD 400,000;(d)Category 4 Insurer : The relevant minimum fund for Category 1 or 2 (depending on the type of general business underwritten) PLUS the Category 3 minimum. These amounts are to be maintained separately by theinsurance firm ;.(e)Category C1 Insurer: BD 75,000; and(f)Category C2 Insurer: BD 300,000.Amended: January 2007CA-2.1.6
For purposes of Paragraph CA-2.1.5, the following definitions apply:
(a)Category 1 insurer : aninsurance firm whose license is limited to any of the following types of insurance: fire; damage to property; and miscellaneous financial loss;(b)Category 2 insurer : aninsurance firm whose license includes any of the following types of insurance: marine cargo and marine hull; aviation; motor; engineering; liability; and any other general insurance class not specifically mentioned. These may only be in addition to any Category 1 activities;(c)Category 3 insurer : aninsurance firm whose license includes any of the following types of insurance: life insurance of all types; personal accident whose term is over 1 year; and savings fund accumulation insurance;(d)Category 4 insurer : aninsurance firm , licensed prior to 1 April 2005 and whose license includes any of the types of insurance specified in Category 3 and in Category 1 or 2, or both;(e)Category C1 insurer: an insurance firm whose business is restricted to insuring only the insurance risks (other thanliability risk ) of itsshareholder(s) or those ofsubsidiary orassociated companies of itsshareholder(s) ; and(f)Category C2 insurer: aninsurance firm whose business is restricted to insuring only the risks of itsshareholder(s) or ofsubsidiary orassociated companies of itsshareholder(s) and whose business may includeliability risks , subject to the CBB being satisfied that the activity, capital structure and management provide sufficient protection to potential third party claimants.Amended: January 2007Calculation of Solvency Margin
CA-2.1.7
The
Required Solvency Margin to be calculated by aninsurance firm subject to any of the requirements in Paragraphs CA-2.1.1 to CA-2.1.4 must be determined:Amended: January 2007CA-2.1.8
The
Bahrain Required Solvency Margin foroverseas insurance firms must be calculated by applying Paragraph CA-2.1.7, but only to business booked in the Bahrainoverseas insurance firm .Amended: January 2007CA-2.1.8A
The
Required Solvency Margin for companies whose business is limited toreinsurance , except forreinsurance of linked business, is to be calculated in accordance with Paragraph CA-2.1.12.Adopted: January 2007Long-term Insurance Business
CA-2.1.9
For
long-term insurance business thesolvency margin must be determined by taking the aggregate of the results arrived at by applying the calculations described in Paragraph CA-2.1.10 ('themathematical reserves basis calculation ') and Paragraph CA-2.1.11 ('thecapital sum at risk basis calculation '). Where the aggregate falls below theminimum fund , it must be substituted by the amount of theminimum fund .Amended: January 2007CA-2.1.10
The
mathematical reserves are defined as the provision made by an insurer to cover liabilities (excluding liabilities which have fallen due) arising under or in connection withlong-term insurance business . Themathematical reserves basis calculation for:(a)Traditional long-term insurance business must be either 2% ofmathematical reserves before deduction for reinsurance cessions or 4% ofmathematical reserves after deduction for reinsurance cessions whichever produces the higher result;(b) Themathematical reserves basis calculation forlinked long-term insurance business where the company bears an investment risk must be as in Subparagraph CA-2.1.10 (a); and(c) Themathematical reserves basis calculation forlinked long-term insurance business where the company bears no investment risk must be either 0.5% ofmathematical reserves before deduction for reinsurance cessions or 1% ofmathematical reserves after deduction for reinsurance cessions whichever produces the higher result.No negative value can be used as the
mathematical reserve under any policy.Amended: January 2007CA-2.1.11
The
capital sum at risk is defined as the benefit amounts payable as a consequence of the happening of the contingency covered by the policy contract less themathematical reserves in respect of the relevant contract. Thecapital sum at risk calculation is the greater of:(a) 0.15% of thecapital sum at risk before deduction for reinsurance cessions; or(b) 0.30% of thecapital sum at risk after deduction for reinsurance cessions.In either case no negative value can be used as the capital sum at risk under any policy.
Amended: January 2007General Insurance Business
CA-2.1.12
For
general insurance business , thesolvency margin must be determined by taking the higher of the two results arrived at by applying the calculations described in Paragraph CA-2.1.13 ('thepremium basis calculation ') and Paragraph CA-2.1.14 ('theclaim basis calculation '). Where the higher of the two results falls below theminimum fund , it must be substituted by the amount of theminimum fund .Amended: January 2007CA-2.1.13
The
premium basis calculation forgeneral insurance business is determined by applying the following formula:Gross Premium Written X Reinsurance Allowance X Risk Factor (for each class of business)
Where:
Gross Premium Written =
Premium written in the financial year (or annualised where the financial year is other than 12 months)
Reinsurance Allowance (Premium basis) = (calculated on total business)
the higher of 0.5 or (Total Net Premium Written /Total Gross Premium Written)
Risk Factor =
Class of insurance Risk Factor (general insurance) Risk Factor (Category C1 captive) Risk Factor (Category C2 captive) (a) Fire 15% 12% 12% (b) Damage to property 15% 12% 12% (c) Miscellaneous financial loss 15% 12% 12% (d) Marine cargo, marine hull 20% 20% 20% (e) Aviation 20% 20% 20% (f) Motor 20% 20% 20% (g) Engineering 20% 20% 20% (h) Liability 20% 20% (Category C2) 20% (i) Medical (short term ≤ 1 year) 20% 20% 20% (j) Other 20% 20% 20% Amended: January 2007CA-2.1.14
The
claim basis calculation forgeneral insurance business is determined by applying the following formula:Average Gross Claims Incurred in the reference period X Reinsurance Allowance X Risk Factor (for each class of business)
Where:
Average Gross Claims Incurred =
Gross Claims Incurred in the
reference period (see CA-2.1.15) divided by the number of years covered by thereference period (or annualised where any financial year in the reference period is other than 12 months)Reinsurance Allowance (Claim basis) = (calculated on total business)
the higher of 0.5 or (Total Average Net Claims Incurred in the
reference period /Total Average Gross Claims Incurred in thereference period )Risk Factor =
(a) Fire 20% (b) Damage to property 20% (c) Miscellaneous financial loss 20% (d) Marine cargo, marine hull 25% (e) Aviation 25% (f) Motor 25% (g) Engineering 25% (h) Liability 25% (i) Medical (short term ≤ 1 year) 25% (j) Other 25% Amended: January 2007CA-2.1.15
For the purposes of Paragraph CA-2.1.14 the
reference period for all classes of business must be the three most recent financial years up to and including the current financial year. In instances where theinsurance firm has been in business for less than three years, the claims basis calculation shall be equal to 0.CA-3 CA-3 Long-Term Insurance Business
CA-3.1 CA-3.1 Long-Term Insurance Business
CA-3.1.1
Where an
insurance firm carries onlong-term insurance business , includingtraditional long-term insurance business orlinked long-term insurance business or both:(a) It must maintain a separate account and separate books of accounts in respect of each kind of business and unit fund; and(b) The receipts of each kind of business must be entered in the account maintained for that business and must be carried to and form a separatelong-term insurance fund with an appropriate name.Amended: October 2009
Amended: October 2007
Amended: January 2007CA-3.1.1A
Where the bonus policy of the with-profits business explicitly mentions that the profit (or bonuses) are determined by the performance of the life fund, separate accounting for such funds must be maintained.
Adopted: October 2009CA-3.1.1B
The requirement in Paragraph CA-3.1.1A is to ensure that sources of profits arising from with-profits block of business will be distributed according to the agreed profit sharing mechanisms (which may include a proportion to the shareholders) and sources of profits arising purely from non-profits business will be allocated to shareholders.
Adopted: October 2009CA-3.1.2
An
insurance firm which carries onlong-term insurance business orlinked long-term insurance business must maintain such accounting and other records as are necessary for identifying:(a) The assets representing the fund maintained by it under Paragraph CA-3.1.1 above; and(b) The liabilities attributable to each kind of business which it carries on.Amended: January 2007CA-3.1.3
Other than the explicit exceptions included in Paragraphs CA-3.1.4 and CA-3.1.5 of this Module, an
insurance firm's long-term insurance business assets must only be applied for the purposes of itslong-term insurance business and must not be made available for any other purpose of theinsurance firm . This does not however prevent the reimbursement of expenditure borne by other assets (in the same or the preceding financial year) in discharging liabilities wholly or partly attributable to thelong-term insurance business .Amended: January 2007CA-3.1.4
Where an actuarial investigation shows that the value of the
long-term insurance business assets exceeds the amount of the liabilities attributable to thelong-term insurance business , the restriction does not apply to those assets that represent the excess.Amended: January 2007CA-3.1.5
Paragraph CA-3.1.3 above does not prevent an
insurance firm from exchanging, at fair market value,long-term insurance business assets for other assets of theinsurance firm .Amended: January 2007CA-3.1.6
A long-term
insurance firm must not enter into a financial transaction, and must take reasonable steps to ensure that anysubsidiary company orassociate company does not enter into such a transaction, with anyrelated party where the aggregate of the value of any assets and liabilities arising out of such transactions exceeds 5% of the total amount standing to the credit of the insurer'slong-term insurance funds .Amended: January 2007CA-3.1.7
An
insurance firm which carries onlong-term insurance business in Bahrain must have adequate arrangements for securing that transactions affecting assets of theinsurance firm (other than transactions outside of its control) do not operate unfairly between thelong-term insurance fund or funds and the other assets of theinsurance firm or, in a case where theinsurance firm has more than one 'identified fund', between those funds.Amended: January 2007CA-3.1.8
An identified fund means assets representing the
insurance firm's receipts from a particular part of itslong-term insurance business that can be identified as such by virtue of accounting or other records maintained by theinsurance firm .Amended: January 2007CA-3.1.9
Where the CBB imposes a financial penalty on an
insurance firm or requires aninsurance firm to compensatepolicyholders for any wrongful act of theinsurance firm (including any wrongful act committed by anappointed representative of theinsurance firm ) it must not pay that compensation or financial penalty from anylong-term insurance fund . Such penalties can only be paid out of theshareholder (or company) fund.Amended: January 2007CA-4 CA-4 Valuation and Admissibility of Assets
CA-4.1 CA-4.1 General Requirements
CA-4.1.1
The Asset Valuation Rules, being the Linked Asset Valuation Rules and/or General Asset Valuation Rules, as appropriate, relate to the determination of the value of all the assets of an
insurance firm subject to this Chapter.Amended: January 2007CA-4.1.2
Assets not covered in this Chapter are deemed to be
inadmissible assets for purposes of calculating thecapital available required under Paragraph CA-1.2.21 and theiradmissible value is deemed to be nil.Amended: January 2007CA-4.1.3
Where an
insurance firm has entered into any insurance contracts that are classified as alinked long term insurance business the value of the linked assets to the extent that they are held to match liabilities in respect of such business must be determined in accordance with the Linked Asset Valuation Rules (Paragraphs CA-4.3.1 to CA-4.3.4).Amended: January 2007CA-4.1.4
All other assets of an insurer subject to this Chapter must be valued in accordance with the General Asset Valuation Rules (Paragraphs CA-4.2.1 to CA-4.2.36).
Amended: January 2007CA-4.1.5
Where in all the circumstances of the case, any asset is actually of a lesser value than the amount calculated in accordance with prescribed Rules (that is either assets subject to the General Asset Valuation Rules or the Linked Asset Valuation Rules) such lesser value must be taken to be the value of the asset.
Amended: January 2007CA-4.1.6
The admissibility of assets for purposes of the General Asset Valuation Rules is determined based on the category of asset held and the
counterparty .Amended: January 2007CA-4.1.7
An
insurance firm must ensure that its liabilities under acontract of insurance , other than linked long-term business, are covered by assets of appropriate safety, yield and marketability having regard to the classes of business carried on by theinsurance firm .Amended: January 2007CA-4.1.8
Without prejudice to Paragraph CA-4.1.7, an
insurance firm must ensure that:(a) Excessive reliance is not placed onreinsurance or any particular reinsurer; and(b) That its investments are appropriately diversified, adequately spread and that excessive reliance is not placed on investments of any particular category, description, type orcounterparty .Amended: January 2007CA-4.2 CA-4.2 General Asset Valuation Rules
Asset Limits per Category of Assets
Investments in Non-Insurance Subsidiaries and Associates
CA-4.2.1
Investments in
subsidiaries andassociates that are not carrying outregulated insurance services as defined in Chapter AU-1.4, must be valued at an amount not exceeding theinsurance firm's proportionate share of thesubsidiary's orassociate's net asset value, determined as if thatsubsidiary orassociate applied these Rules in determining its net asset value.Amended: January 2007CA-4.2.2
The net asset value determined in Paragraph CA-4.2.1 must be reduced for any amounts that cannot be made available to the
insurance firm in the ordinary course of business. This includes but is not limited to:(a) Required solvency margins, base capital requirements or any other amounts required to be maintained in order to comply with regulatory requirements applicable to thesubsidiary orassociate in Bahrain or any other jurisdiction. This restriction applies to anysubsidiary orassociate (including banks and investment firms) subject to regulation in any jurisdiction;(b) Assets subject to currency control restrictions; and(c)Surplus assets in long-term insurance funds, as these assets belong to the long termpolicyholders .Amended: January 2007CA-4.2.3
Where a
subsidiary orassociate carries on a regulated activity either in Bahrain or any other jurisdiction, aninsurance firm may, with the consent of the CBB, determine the net asset value of thatsubsidiary orassociate (as specified in Paragraph CA-4.2.1) in accordance with the Rules applicable in the jurisdiction where that subsidiary orassociate has both its head office and principal supervisor.Amended: January 2007CA-4.2.4
In determining the net asset value of a
subsidiary orassociate (as specified in Paragraph CA-4.2.1) where thatsubsidiary orassociate is not carrying outregulated insurance services , if the value of any single asset under Paragraph CA-4.2.1 exceeds 5% of theinsurance business amount , theadmissible value of the said asset for the purpose of this Paragraph must be restricted to 5% of theinsurance business amount .Amended: January 2007Real Estate Assets
CA-4.2.5
Real estate assets such as land and buildings must be valued at market value as assessed by an
independent qualified valuer at a date no earlier than 3 years from the end of the financial year under consideration. Aninsurance firm may elect to usebook value where that value is less thanmarket value however where noproper valuation exists the value is deemed by this Module to be nil.Amended: January 2007CA-4.2.6
If the value of any single asset under Paragraph CA-4.2.5 exceeds 10% of the
insurance business amount , theadmissible value of the said asset for the purpose of this Paragraph must be restricted to 10% of theinsurance business amount .CA-4.2.7
The 10% admissibility test of Paragraph CA-4.2.6 is to be applied in total to both land and building, in instances where the realisable value of the asset is dependent on both the land and the building.
Debt Securities
CA-4.2.8
Debt securities (both fixed and variable interest securities) issued by, or guaranteed by, governments rated investment grade, or public authority with
investment grade security must be valued at:(a) In the case oflisted securities , the closing market quotation or the latest available market quotation;(b) In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and(c) In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.Amended: January 2007CA-4.2.9
There are no admissibility restrictions for fixed and variable interest securities meeting the requirements of Paragraph CA-4.2.8. However, admissibility restrictions pertaining to
counterparties may apply (CA-4.2.33).Amended: January 2007CA-4.2.10
Debt securities (both fixed and variable interest securities) not covered by Paragraph CA-4.2.8 must be valued at:
(a) In the case oflisted securities , the closing market quotation;(b) In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and(c) In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.Amended: January 2007CA-4.2.11
If the value of debt securities, other than those to which Paragraph CA-4.2.8 relates, (both fixed and variable interest securities), which are
listed securities , in any one company together with its associated companies exceeds 5% of theinsurance business amount , theadmissible value of the said assets for the purpose of this Chapter must be restricted to 5% of theinsurance business amount .Amended: January 2007CA-4.2.12
For debt securities (both fixed and variable interest) which are not
listed securities , if the value of those securities in any one company together with its associated companies exceeds 1.0% of theinsurance business amount theadmissible value of the said assets for the purpose of this Chapter must be restricted to 1.0% of theinsurance business amount .Amended: January 2007Equity Shares
CA-4.2.13
Equity shares that are
listed securities must be valued on the closing market quotation or the latest available market quotation.Amended: January 2007CA-4.2.14
If the value of equity shares, that are
listed securities , in any one company together with its associated companies exceeds 5% of theinsurance business amount theadmissible value of the said assets for the purpose of this Chapter must be restricted to 5% of theinsurance business amount .Amended: January 2007CA-4.2.15
Equity shares that are not
listed securities must be valued at the lower of:(a) The carrying value of these shares on the books of theinsurance firm ;(b) 75% of the net asset value for each share owned by theinsurance firm (based on the most recently available financial information); and(c) The amount which would reasonably be paid by way of consideration for an immediate transfer or assignment of the investment.Amended: January 2007CA-4.2.16
If the value of equity shares, that are not
listed securities , in any one company together with its associated companies exceeds 1.0% of theinsurance business amount , theadmissible value of the said assets for the purpose of this Chapter must be restricted to 1.0% of theinsurance business amount .Amended: January 2007Unit Trust or Mutual Funds
CA-4.2.17
Where the issuer can be required to purchase the units or other beneficial interests from the holder upon the holder giving notice of one month or less and the value of the holdings or other beneficial interests in any one
unit trust or mutual exceeds 5.0% of theinsurance business amount , theadmissible value of the said assets for the purpose of this Chapter must be restricted to 5.0% of theinsurance business amount .Amended: January 2007CA-4.2.18
Where the issuer is not required to purchase the units or other beneficial interests from the holder upon the holder giving notice of one month or less and the value of the holdings or other beneficial interests in any one
unit trust or mutual fund exceeds 1.0% of theinsurance business amount , theadmissible value of the said assets for the purpose of this Chapter must be restricted to 1.0% of theinsurance business amount .Amended: January 2007Traded Derivative Contract
CA-4.2.19
A traded
derivative contract that is alisted security , for a share or a debenture must be valued at the closing market quotation, and otherwise at the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof. If the value of the contracts in any one company or its connected companies exceeds 0.1% of theinsurance business amount , theadmissible value of the said assets for the purpose of this Chapter must be restricted to 0.1% of theinsurance business amount .Amended: January 2007Loan
CA-4.2.20
A loan secured by a policy of insurance issued by the company must be valued as the amount of the loan but not exceeding the amount payable on a surrender of the policy as at the date the policy is being valued.
CA-4.2.21
A loan to an individual or an unincorporated body of persons shall be valued at the lower of the outstanding amount of the loan and the amount that would reasonably be paid by way of consideration for an immediate assignment of the loan together with the benefit of any security held in respect thereof.
CA-4.2.22
Where paragraph CA-4.2.21 applies and the loan to any one individual or unincorporated body of persons is fully secured on assets whose value at least equals the amount of the loan and the loan exceeds 5% of the
insurance business amount , theadmissible value of the secured loan for the purpose of this Chapter must be restricted to 5% of theinsurance business amount .CA-4.2.23
Where Paragraph CA-4.2.21 applies and the loan to any one individual or unincorporated body of persons is not fully secured on assets whose value at least equals the amount of the loan and the loan exceeds 1% of the
insurance business amount , theadmissible value of the unsecured loan for the purpose of this Chapter must be restricted to 1% of theinsurance business amount .Other Assets
CA-4.2.24
Deposits and current account balances with
approved financial institutions must be valued at their full face value. Theadmissible value of these assets is their face value.CA-4.2.25
Amounts due under
contracts of insurance and reinsurance (either ceded or accepted), including salvage and subrogation rights, must be valued at the amounts that can reasonably be expected to be recovered. The exceptions being:(a) All debts (net of provisions) which have been due for more than 6 months, in which case they must be valued at nil;(b) Advance commission paid to intermediaries which must be valued at nil; and(c) Amounts that pertain to asubsidiary orassociate of theinsurance firm must be valued in accordance with Paragraph CA-4.2.4 above.Amended: April 2014
Amended: October 2007
Amended: January 2007CA-4.2.25A
The value of unearned reinsurance premiums is the value as determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate to
insurance firms .Inserted: October 2008CA-4.2.26
In the case of
general insurance business , the value of deferredacquisition costs is the value as determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate toinsurance firms .Amended: January 2007CA-4.2.27
The
admissible value of any cash holding is its face value.CA-4.2.28
Office machinery, furniture, motor vehicles, computer and other equipment belonging to the company must be valued at an amount not greater than its
book value . If the value of office machinery, furniture, motor vehicles computer and other equipment exceeds 3% of theinsurance business amount theadmissible value of the said assets for the purpose of this Chapter must be restricted to 3% of theinsurance business amount .Amended: January 2007CA-4.2.29
Life interests, reversionary interests and similar interests in property must be valued as the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
CA-4.2.30
Investments, except investments that are specifically covered above, must be valued in accordance with this Paragraph:
(a) If the investment is due, or will become due, within twelve months from the date at which the investment is being valued at (or would become so due if the company exercised some right), the amount which can reasonably be expected to be recovered in respect of the investment, taking due account of any security held in respect thereof;(b) Otherwise, the amount that would reasonably be paid by way of consideration for an immediate assignment of the debt together with the benefit of any security held in respect thereof.Amended: January 2007CA-4.2.31
Where Paragraph CA-4.2.30 applies to an investment in any one individual or unincorporated body of persons and the aggregate value of those investments (for that individual or unincorporated body of persons valued in accordance with Paragraph CA-4.2.30) exceeds 1% of the
insurance business amount , theadmissible value of those investments for the purpose of this Chapter must be restricted to 1% of theinsurance business amount .Amended: January 2007CA-4.2.32
Where Paragraph CA-4.2.30 applies to an investment in any one company and the aggregate value of those investments (for that company valued in accordance with Paragraph CA-4.2.30) exceeds 2.5% of the
insurance business amount the admissible value of those investments for the purpose of this Chapter must be restricted to 2.5% of the insurance business amount.Amended: January 2007Counterparty Exposure Limits
CA-4.2.33
The
admissible value forcounterparty exposure limit is:(a) Where thecounterparty is an individual or an unincorporated body of persons, 5% of theinsurance business amount ;(b) Where thecounterparty is a government of a jurisdiction, other than aZone A Country , GCC country, the Kingdom of Bahrain and any other jurisdiction approved by the CBB, the jurisdiction together with all the public bodies, local authorities or nationalised industries of that jurisdiction, 10% of theinsurance business amount ;(c) Where thecounterparty is a body corporate or group, and:(i) Thecounterparty is anapproved financial institution , 25% of theinsurance business amount or BD 1.5 million, whichever is the larger for all exposures including short term (3 months or less) deposits;(ii) Thecounterparty is anapproved financial institution , 10% of theinsurance business amount or such lower amount as theinsurance firm may decide for all exposures other than short term deposits; and(iii) Thecounterparty is not anapproved financial institution , 10% of theinsurance business amount for all exposures to thatcounterparty .Amended: April 2012
Amended: January 2007CA-4.2.34
For the purposes of Section CA-4.2, '
insurance business amount ' means 'general insurance business amount ' or 'long-term insurance business amount' as follows:(a) In terms ofgeneral insurance business , thegeneral insurance business amount is the value of the insurance firm's assets (other thanlong-term insurance business assets) and excluding reinsurance recoveries as determined in accordance with Chapter CA-4; and(b) In terms oflong-term insurance business , the long-term insurance business amount is the value of theinsurance firm's assets (other than those relating togeneral insurance business ) and excluding reinsurance recoveries and assets required to match property-linked liabilities in accordance with Chapter CA-4.Amended: January 2007CA-4.2.35
For purposes of Paragraph CA-4.2.34, the value of an
insurance firm's assets refers to the valuation assigned in this section, but does not refer to theadmissible value of these assets, i.e. after adjusting for category limits and counterparty limits.Amended: January 2007
Amended: October 2007CA-4.3 CA-4.3 Linked Asset Valuation Rules
CA-4.3.1
Assets to the extent that they are held to match liabilities in respect of linked long-term insurance must comprise of no other types of property of any description other than property meeting the descriptions set out in Paragraph CA-4.3.2 of this Module.
Amended: January 2007CA-4.3.2
Assets used to match linked long-term insurance liabilities must fall in one of the following categories:
(a) Real estate assets such as land and buildings (including any interest in land and buildings) each piece individually not exceeding 5% of linked long-term assets and 20% in aggregate;(b)Listed securities which are readily realisable, other than securities which are:
(i) Loans or deposits of the kinds mentioned in (c) or (d); and(ii)Derivative contracts ;(c) Loans which are fully secured by mortgage or charge on land (or any interest in land) each loan individually not exceeding 5% of linked long-term assets and 20% in aggregate and in relation to which the rate of interest and the due dates for the payment of interest and the repayment of principal can be fully ascertained from the terms of any agreement relating to the loan;(d) Loans to or deposits with anapproved financial institution ;(e) Holdings or other beneficial interests inunit trusts or mutual/managed funds which satisfies the following conditions:
(i) The property of the fund comprises property only consisting of the descriptions in this section;(ii) The units are readily realisable at a price which represents the net value per unit of the assets and liabilities of the fund; and(iii) The price at which the units may be bought and sold is published regularly;(f) Cash; and(g) Income due, or to become due, in respect of property of any of the descriptions in this section.Amended: April 2012
Amended: January 2007CA-4.3.3
All of the property described in Paragraph CA-4.3.2 must either be classified as 'Available for sale investments' and valued in accordance with International Accounting Standards or valued at their fair
market value .Amended: January 2007CA-4.3.4
The fair
market value of real estate assets held as linked long-term insurance assets must be themarket value as assessed by anindependent qualified valuer at a date no earlier than 12 months from the end of the most recent financial year.Amended: January 2007CA-5 CA-5 Valuation of Liabilities
CA-5.1 CA-5.1 Valuation of Liabilities
CA-5.1.1
The Valuation of Liabilities Rules apply with respect to the determination of the amount of liabilities of an
insurance firm .Amended: January 2007CA-5.1.2
Subject to the specific provisions of this Chapter, the amount of liabilities of an
insurance firm in respect itslong-term insurance business ,general insurance business and any other activities directly arising from that business must be determined in accordance with generally accepted accounting and actuarial concepts, using generally accepted methods appropriate forinsurance firms .Amended: January 2007CA-5.1.2A
Where an
insurance licensee writeslong term insurance with guaranteed level premiums, the reserving and solvency requirements must follow the requirements forlong term insurance . However, where a life policy or an extension of a life policy with has a policy term of less than or equal to one year, the valuation of these liabilities should follow the requirements of Paragraph CA-5.1.3 to CA-5.1.10.Adopted: October 2009General Insurance Business
CA-5.1.3
The amount of insurance liabilities that are
general insurance business liabilities must be determined in accordance with International Accounting Standards applicable to insurance business or until such a standard or standards come into effect, with the provisions of Paragraphs CA-5.1.4 to CA-5.1.10.Amended: January 2007CA-5.1.4
Unearned premiums and unearned commission income in respect of thegeneral insurance business must be calculated by a method which has due regard to the period of the policy and the incidence of risk throughout that period. Time apportionment of the premium over the period of policy cover is normally appropriate unless there is a marked unevenness in the incidence of risk over that period, in which case a basis which reflects the profile of risk must be used.Amended: January 2007CA-5.1.5
Where a time apportionment method is used that method must be at least as accurate as the '
24ths basis ' of premium income recognition, except for reinsurers for which transactions are only recorded every quarter where the method used must be at least as appropriate as the 1/8th basis. Where a time apportionment method is deemed inappropriate due to uncertainty in the period of insurance, such as for marine cargo, the method used must be disclosed in the actuarial report required as per Chapter AA-4.Amended: October 2009CA-5.1.6
Unearned reinsurance premiums ceded must be calculated on the basis of the principles specified in Paragraphs CA-5.1.4 and CA-5.1.5.
CA-5.1.7
Unexpired risk reserves (URR) should be calculated as the prospective estimate of expected future payments arising from future events insured under policies in force as at the valuation date and also include allowance for
insurance firm's expenses including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and must allow for any expected future premium refund. Where theunearned premium less unearned commission calculated in Paragraphs CA-5.1.4to CA-5.1.6 above is less than the unexpired risk reserves, the company must set up a suitable additional provision for unexpired risks to cover this deficiency (premium deficiency). This premium deficiency provisions must be calculated at a prudent level.Amended: October 2009
Amended: January 2007CA-5.1.7A
In calculating the URR as required under Paragraph CA-5.1.7, the actuary report must clearly disclose if the URR has been calculated on and individual class basis or on total company basis and must justify the approach taken in the adopted method.
Adopted: October 2009CA-5.1.8
Provision must be made for the expected ultimate cost of settlement of all claims incurred in respect of events up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid. This provision should be calculated at a prudent level. This should include a provision for claims reported, claims incurred but not reported (IBNR), claims incurred but not enough reserved (IBNER) and direct and indirect claims handling expenses such as investigation fees, loss adjustment fees, legal fees, labour charges and the expected internal costs that the insurer expects to incur when settling these claims. If a liability is known to exist but there is uncertainty as to its eventual amount, a provision should nevertheless be made.
Amended: October 2009
Amended: January 2007CA-5.1.8A
The IBNR includes the IBNER. The distinction between IBNR and IBNER is made for a consistent approach to matching of income and expenses.
Adopted: October 2009CA-5.1.9
The level of claims provisions must be set such that:
(a) No adverse run-off deviation is envisaged;(b) The provision is determined having regard to the range of uncertainty as to the eventual outcome for the category of business in question; and(c) In circumstances where there exists considerable uncertainty concerning future events, a degree of caution is exercised such that liabilities are not understated.(d) If it is less than the aggregate case-by-case provision for claims reported set up by the claims manager, theinsurance firm must disclose in writing to the CBB the justification for such a release of reserves.Amended: October 2009
Amended: January 2007CA-5.1.10
In determining the sufficiency of evidence and the ability to measure claims costs, an
insurance firm must take all reasonable steps to ensure that it has appropriate information with regard to its claims exposures.Long-term Insurance Business
CA-5.1.11
The amount of insurance liabilities which are
long-term insurance business liabilities must be determined in accordance with International Accounting Standards applicable to insurance business or until such a standard or standards come into effect, with the provisions of Paragraphs CA-5.1.12 to CA-5.1.33 below.Amended: January 2007CA-5.1.12
The determination of the amount of long-term liabilities (other than liabilities which have fallen due for payment before the valuation date) must be made on actuarial principles with due regard to the reasonable expectations of
policyholders and must make proper provision for all liabilities on prudent assumptions with appropriate margins for adverse deviation of the relevant factors.Amended: January 2007CA-5.1.13
The determination must take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking due credit for premiums payable after the valuation date.
CA-5.1.14
The determination must take into account all guarantees including but not limited to:
(a) Guaranteed benefits;(b) Guaranteed surrender values;(c) Guaranteed annuities or annuity options; and(d) Any other guarantees, commitments or options however described that theinsurance firm has contracted to provide to apolicyholder .Amended: January 2007CA-5.1.15
The determination must take into account all bonuses contractually added to each policy.
CA-5.1.16
The determination must take into account expenses including commission.
CA-5.1.17
Subject to Paragraphs CA-5.1.18, CA-5.1.19 and CA-5.1.20, the amount of the long-term liabilities must be determined separately for each contract by a prospective calculation.
CA-5.1.18
A retrospective calculation may be applied to determine the liabilities where a prospective method cannot be applied to a particular type of contract or benefit.
CA-5.1.19
Where necessary, additional amounts must be set aside on an aggregated basis for general risks that are not individualised.
CA-5.1.20
The method of calculation of the amount of liabilities and the assumptions used must not be subject to discontinuities from year to year arising from arbitrary changes and must be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.
CA-5.1.21
The distribution of surplus as bonus to
participating policies must consider the level of premiums under these contracts, the assets held in respect of these contracts and the custom and practice of the company in the manner and timing of the distribution of profits.CA-5.1.22
The liability under a contract (other than a linked long-term contract) must be calculated using the
net premium valuation method using rates of interest and rates of mortality ormorbidity considered appropriate by theactuary appointed as per the requirements of Paragraph AA-4.1.1, at a prudent level.Amended: October 2009
Amended: October 2007
Amended: January 2007CA-5.1.22A
The value of unit liabilities and non unit liabilities must be calculated separately for a unit linked policy. The value of unit liabilities is taken as the net asset value of the units at the valuation date. Non-unit liabilities must be valued by projecting future cash flows to ensure that all future outgoes can be met without recourse to additional capital support at any future time during the duration of the unit linked contracts at a prudent level.
Adopted: October 2009CA-5.1.23
Other suitable alternative methods may be employed where it can be demonstrated that the alternative methods employed result in reserves no less, in aggregate, than would result from the
net premium valuation method .CA-5.1.24
In order to take account of the
acquisition expenses , the net premium to be valued for the purpose of Paragraph CA-5.1.22 above may be increased by an amount not greater than the equivalent, taken over the whole period of premium payments and calculated according to the rates of interest and rate of mortality andmorbidity employed in valuing the contract, of 3.5 percent of therelevant capital sum under the contract.Amended: January 2007CA-5.1.25
The increased net premium as computed in Paragraph CA-5.1.24 must not exceed the premium actually payable by the
policyholder under the contract.Amended: January 2007CA-5.1.26
For the purposes of Paragraph CA-5.1.24 '
relevant capital sum ' means:(a) The sum assured at the date of valuation forwhole life assurances ;(b) The sum payable at the end of the contract term forendowment assurance contracts ;(c) The capitalised value of the annuity at the vesting date (or cash option if greater) for deferred annuities;(d) The sum assured or the value of the fund for linked long-term contracts whichever is less notwithstanding (a) to (c) above, where the value of the fund means the aggregate of the value allocated to the contract in the form of units or any other measure and the total amount of premiums remaining to be paid over the term of the contract.excluding in all cases any vested reversionary bonus and any capital sums for temporary assurances.
Amended: January 2007CA-5.1.27
The rate of interest employed for the valuation must be determined prudently with due regard to the yield on the existing assets attributable to the life business as well as the yields expected to be obtained on sums to be invested in the future.
CA-5.1.28
The amount of the liability in respect of any category of contracts must, where relevant, be determined on the basis of prudent rates of mortality and
morbidity which in the opinion of theactuary are appropriate for that category.Amended: January 2007
Amended: October 2007CA-5.1.29
Provision of expenses whether implicit or explicit must not be less than the amount required, on prudent assumptions, to meet the total cost that would be incurred in fulfilling the existing contracts if the company were to cease to transact new business twelve months from the valuation date. This provision must consider the company's actual expenses in the last twelve months before the valuation date and the expected level of inflation on future expenses.
CA-5.1.30
Provision must be made on prudent assumptions to cover any increase in liabilities caused by
policyholders exercising options under their contracts including options for guaranteed cash payments.Amended: January 2007CA-5.1.31
The liability under a contract for life business must not be less than zero.
CA-5.1.32
No allowance must be made in the valuation for the voluntary discontinuance of any contract if the amount of liability so determined is less than the corresponding amount without the allowance for voluntary discontinuance.
CA-5.1.33
The determination of the amount of long-term liabilities must take into account the nature and term of the assets representing those liabilities and the value placed upon them and must include prudent provision against the effects of possible future changes in the value of the assets on:
(a) The ability of the company to meet its obligations arising under contracts for long-term business as they arise, and(b) The adequacy of the assets to meet the liabilities as determined by this Chapter.Amended: January 2007CA-6 CA-6 Currency Matching and Localisation Requirements
CA-6.1 CA-6.1 Currency Matching and Localisation Requirements
CA-6.1.1
The provisions of this Chapter do not apply to:
(a) Insurance business carried on by aninsurance firm outside Bahrain;(b)Reinsurance business (unless it is facultative reinsurance written by an insurer who also carries on insurance business that is not reinsurance business); or(c) To unit-linked business.Amended: January 2007
Amended: April 2009CA-6.1.2
Where an
insurance firm's 'liabilities' in any particular currency exceed 10% of its total 'liabilities', theinsurance firm must hold sufficient 'assets in that currency' to cover at least 80% of its 'liabilities' in that currency.CA-6.1.3
For the purposes of Paragraph CA-6.1.2 'assets in that currency' is extended to include the currency itself (Currency A) and any other currency (Currency B) where Currency A is
officially linked to Currency B.Amended: January 2007CA-6.1.4
Where an
insurance firm carries on bothlong term insurance business andgeneral insurance business , the requirements of Paragraph CA-6.1.1 apply to the 'assets' and ' liabilities' of each kind of business separately.Amended: January 2007CA-6.1.5
Where a
contract of insurance expresses any 'liability' in terms of a particular currency, that 'liability' must be regarded as a 'liability' in that currency.CA-6.1.6
For the purposes of the Rules in this Chapter:
(a) Assets means admissible assets valued in accordance with Chapter CA-4 General Assets Valuation Rules;(b) Liabilities means provision, net of reinsurance recoveries, made by aninsurance firm to cover liabilities arising under (or in connection with)contracts of insurance , excluding those liabilities exempted by Paragraph CA-6.1.1;(c) References to assets in a currency (or similar expressions) are construed as references to 'assets' expressed in or capable of being realised (without exchange risk) in that currency; and(d) An 'asset' is capable of being realised (without exchange risk) in a currency if it is reasonably capable of being realised in that currency without risk that changes in exchange rates would reduce the cover of 'liabilities' in that currency.Amended: January 2007
Amended: October 2007CA-6.1.7
The currency of an
insurance firm's general insurance business liabilities must, for the purposes of Paragraph CA-6.1.2 be determined as follows:(a) Where the 'liabilities' are not expressed as 'liabilities' in terms of a particular currency, they must be treated as 'liabilities' in the currency of the country in which the risk is situated or, if theinsurance firm on reasonable grounds so decides, in the currency in which the premium payable under the contract is expressed;(b) Where a claim has been notified to aninsurance firm and theinsurance firm's 'liability' in respect of that claim is payable in a currency other than one which would result from the application of the above provisions, theinsurance firm must regard its 'liability' as a 'liability' in the currency in which theinsurance firm is actually obliged to pay it;(c) Where a claim is assessed in a currency that is known to theinsurance firm in advance but which is different from a currency that would result from the application of the above provisions, theinsurance firm may regard its 'liability' as a 'liability' in that currency.Amended: January 2007CA-6.1.8
'Assets' held pursuant to Paragraph CA-6.1.2 above must be held:
(a) If they cover 'liabilities' in Bahrain Dinars, in Bahrain;(b) If they cover 'liabilities' in any other currency, in Bahrain or in the country of that currency, unless they cover liabilities in Bahrain in which case they must be held in Bahrain.Amended: January 2007CA-7 CA-7 Whole Firm and Group Solvency
CA-7.1 CA-7.1 Whole Firm and Group Solvency
CA-7.1.1
In addition to the capital adequacy and solvency requirements imposed on
Bahraini insurance firms andoverseas insurance firms , the CBB may require whole firm and/or group solvency information. The requirement under this Chapter apply to the following categories:(a)Overseas insurance firms ;(b)Bahraini insurance firms withsubsidiaries andbranches , operating within Bahrain and/or in other jurisdictions; and(c)Bahraini insurance firms that are subsidiaries and whoseparent companies may or may not be aninsurance firm .Amended: January 2007CA-7.1.2
Captive insurers are exempted from the requirements to report on their group solvency position.Amended: January 2007CA-7.1.3
As part of the requirements of the Group Insurance Firm Return (Form GIFR) referred to in Section BR-1.3, the CBB may require an
insurance firm to provide:(a) A statement of the consolidated financial position of any group of which theinsurance firm is either the holding company, asubsidiary or abranch of that group; and(b) A statement of the solvency margin that would be determined by this Module if the group identified in part (a) of this Rule were a Bahrain authorisedinsurance firm .Amended: January 2007CA-7.1.4
In considering the application of Paragraph CA-7.1.3, the CBB will take into account where the balance of the insurance business is undertaken. Where a high-level of the business undertaken by the group is done from Bahrain, the requirements of CA-7.1.3 may apply.
Amended: January 2007CA-7.1.5
The consolidated financial position referred to in Paragraph CA-7.1.3 must be determined on the basis that the assets and liabilities of that group are valued in accordance with the requirements of this Module.
CA-7.1.6
An
insurance licensee subject to the requirements of Paragraph CA-7.1.3 may, with the consent of the CBB, provide equivalent or substantially equivalent solvency margin information submitted to a supervisor in another jurisdiction.Amended: January 2007CA-7.1.7
In addition to consolidated information on the group, for
Bahraini insurance firms , aggregate information detailing the solvency requirements of the major insurancesubsidiaries in the group must also be submitted to the CBB as part of the Group Insurance Firm Return.Amended: January 2007CA-7.1.8
Where the licensee's group or
parent reports its own solvency position to its regulatory authority (on a group or 'solo' basis) a copy of this calculation must be provided to the CBB within 30 calendar days from the due date to the other regulatory authority, in accordance with Paragraph RM-8.1.6.Amended: January 2007CA-8 CA-8 Takaful and Retakaful
CA-8.1 CA-8.1 General Capital Requirements
CA-8.1.1
This Chapter of CA applies only to those firms licensed to conduct the regulated activity of
Takaful andRetakaful .Amended: January 2007
Amended: October 2008CA-8.1.2
The specific Rules and Guidance in this Chapter are additional to Chapters CA-B to CA-7. The Rules and Guidance in Chapters CA-B to CA-7 apply to
Takaful firms unless those Rules have been specifically modified or waived by this Chapter.Amended: January 2007
Amended: October 2008CA-8.1.3
The CBB acknowledges that
Takaful/Retakaful insurance is different in some respects fromconventional insurance . The specific Rules and Guidance set out in this Chapter aim to allowTakaful firms to operate in Bahrain within the CBB's insurance regulatory regime on a basis consistent with that imposed on conventional insurers. That is, the CBB's regulatory regime does not favour one form of insurance over another, allowing for both types of structures,Takaful and conventional, to operate in a competitive environment.Amended: January 2007
Amended: October 2008CA-8.1.4
For the purposes of applying the rules in Chapters CA-B to CA-7 to
Takaful firms , references to 'long-term insurance business' should be read as 'family Takaful business' and 'general insurance business' should be read as 'general Takaful business'.Amended: January 2007
Amended: October 2008CA-8.2 CA-8.2 Basis of Operating a Takaful Business
Amended: October 2008CA-8.2.1
All
Takaful firms licensed in Bahrain must organise and operate their business according to the al Wakala model. Specifically, in exchange for the provision of management services to participants' fund(s), theshareholders of theTakaful firm must receive a specific consideration (Wakala fee). For the insurance assets invested on behalf of participants' funds, the Takaful operator must use the al Mudaraba model, and must receive a set percentage of the profits generated from the investment portfolio. No performance/incentive fees are allowed to be paid to the shareholders/Takaful operator of theTakaful firm ; the only fees that can be paid are the Wakala fees and the set percentage of the profits generated from the investment portfolio.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.2
The Wakala fee charged in respect of a Takaful contract must be directly proportional to the costs associated with establishing and maintaining that contract. Both the Wakala and Mudaraba fees must be clearly disclosed to the participants of the Takaful fund(s).
Amended: April 2014
Amended: October 2008
Amended: January 2007Wakala Fee
CA-8.2.2A
The Wakala fee must be a fixed upfront fee, which may be expressed as a percentage of contributions. The Wakala fee, once fixed, must not be adjusted during the reporting period, and must be clearly stated in the Takaful contract and agreed to by the participant.
Added: April 2014CA-8.2.2B
The Wakala fee must cover the total sum of the following components:
(a) The management expenses;(b) The distribution expenses including intermediaries' remuneration, agents' commission and other expenses involved in making Takaful products available to the public; and(c) A reasonable and appropriate margin of operational profit.Added: April 2014CA-8.2.2C
The Takaful operator must ensure that the management and distribution expenses referred to under Paragraph CA-8.2.2B are paid from the shareholders' fund and not from the participants' fund(s).
Added: April 2014CA-8.2.2D
The Wakala fee must be certified by the
Takaful firm's actuary (see Paragraph AA-4.3A.2) and must be considered and subsequently approved by the Shari'a Supervisory Board.Added: April 2014CA-8.2.3
The Takaful operators must establish an equitable basis for determining the consideration charged for managing Takaful business.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.3A
In the case of general Takaful contracts, it would normally be expected that the fee would be the same for all contracts of a particular duration, risk and type. In the case of
family Takaful , contracts that may be in force for several years, it would normally be the case that the consideration in the initial years would be relatively high due to the costs of establishing the contract but be substantially lower in later years reflecting only the costs of maintaining the contract.Added: April 2014Mudaraba Fee
CA-8.2.4
For the insurance assets invested on behalf of the participants' fund(s), the Takaful operator collects a Mudaraba fee based on a fixed percentage of the net investment income from the fund and approved by the Shari'a Supervisory Board.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.4A
Net investment income noted in Paragraph CA-8.2.4 refers to gross investment income less any investment expenses, but excluding any Mudaraba fee paid to the Takaful operator.
Added: April 2014Managing Operating Costs
CA-8.2.5
The Takaful operator must establish effective policies and procedures to manage the costs of the Takaful operations. In addition, the board of directors must ensure that effective controls are in place in order that the actual management and distributions expenses are in line with the Wakala fee and do not affect the viability of the Takaful operator.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.6
Only direct expenses related to claims or investments can be paid out of participants' fund(s). The direct expenses related to claims and investments, charged to the participants' fund(s) must be approved by the Shari'a Supervisory Board and must be limited to the amount of expenses incurred.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.7
The Shari'a Supervisory Board (SSB) is not expected to approve each and every claims related and/or investment related expenses. However, the policy established dealing with the direct expenses related to claims and investments, charged to the participants' fund(s), should be approved by the SSB.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.2.8
Paragraphs CA-8.2.5 to CA-8.2.7 are transitional provisions to enable existing
Takaful firms to discharge their obligations under pre-existing contracts according to the basis of operating the Takaful funds at the time participants entered into those contracts. Whilst it would be simpler to require all pre-existing contracts to be maintained in separate Takaful funds to those established for contracts written after these Rules come into effect, the CBB considers this may not be in the best interests of participants. It is for this reason that the transitional rules enableTakaful firms to either establish subfunds for pre-existing contracts or offer participants the option of switching their policies to the al Wakala model. Whilst ultimately it would be at the discretion of the Courts to decide, the CBB would generally be prepared to support Court applications as outlined in Paragraph CA-8.2.6 where more than 75% of participants (by number and value) had indicated their preparedness to switch to the al Wakala model.Amended: January 2007
Amended: October 2008CA-8.3 CA-8.3 Segregation of Funds
CA-8.3.1
Where an insurer carries out Takaful business:
(a) In the case offamily Takaful business, it must comply with Chapter CA-3 of the Capital Adequacy Module;(b) It must maintain separate books of account in respect of each kind of business;(c) It must maintain any additional books of account required by this Module for either its general Takaful orfamily Takaful business; and(d) The transactions relating to each kind of business must be maintained separately for that business and must be carried to and form a separate fund or funds.Amended: January 2007
Amended: October 2008CA-8.3.2
A
Takaful firm must maintain such accounting and other records as are necessary for:(a) Identifying the assets representing the fund or funds maintained by it under Paragraph CA-8.3.1 above for each kind of business that it carries on;(b) Identifying the liabilities attributable to fund or funds maintained by it under Paragraph CA-8.3.1 above for each kind of business that it carries on; and(c) Complying with the accounting standards established by the 'Accounting and Auditing Organisation for Islamic Financial Institutions' ('AAOIFI').Amended: January 2007
Amended: October 2008CA-8.3.3
Other than the explicit exceptions included in Paragraphs CA-8.3.4 and CA-8.3.5, a
Takaful firm's assets allocated to the participants' fund(s) must only be applied for the purposes of the fund to which it is attributed as required by Paragraph CA-8.3.2 and must not be made available for any other purpose of theTakaful firm . This does not however prevent the reimbursement of expenditures borne by theshareholders (in the same or the preceding financial year) in discharging liabilities wholly or partly attributable to a fund or funds.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.3.4
Paragraph CA-8.3.3 does not apply to the payment of management fees by the fund or funds to the Takaful manager even where the manager is the
shareholder provided that theShari'a Supervisory Board has approved those fees.Amended: January 2007
Amended: October 2008CA-8.3.5
Paragraph CA-8.3.3 does not prevent a
Takaful firm from exchanging, at fair market value, insurance business assets of any fund for other assets of the insurer including assets held by another fund or theshareholder .Amended: January 2007
Amended: October 2008CA-8.3.6
A
Takaful firm which carries on insurance business in Bahrain must have adequate arrangements for securing that transactions involving assets of theTakaful firm (other than transactions outside its control) do not operate unfairly between any of the participants' fund(s) and theshareholder assets of theTakaful firm or, in a case where theTakaful firm has more than one 'identified fund', between those funds.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.3.7
Where the CBB imposes a financial penalty on a
Takaful firm or requires aTakaful firm to compensate participants for any wrongful act of the firm (including any wrongful act committed by an appointed representative of the firm), it must not pay that compensation or financial penalty from any participants' fund(s) and it must not seek to have that compensation or financial penalty reimbursed as part of its management fees.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.3.8
The Rules in this Chapter in respect of the segregation of funds by a Takaful firm are similar to the Rules set out in Chapter CA-3 relating to long-term insurance business. In the case of a family participants' fund(s) this similarity is most pronounced. However, the Rules set out in Chapter CA-3 still apply even if the participants' fund(s) is a family participants' fund(s), in particular the requirement to separate linked
family Takaful business into a separate fund.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4 CA-8.4 Capital Adequacy and Solvency
CA-8.4.1
All
Takaful firms are subject to capital available and solvency requirements.Amended: April 2014
Amended: October 2008
Amended: January 2007Determination of Available Capital
CA-8.4.2
The determination of available capital eligible to meet the solvency requirements is the total of:
(a) The participants' fund(s) net admissible assets as defined under Paragraph CA-8.4.3 in all funds; and(b) The capital available of the shareholder fund as determined under Section CA-1.2, excluding any assets of the participants' fund(s).Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.3
Every participants' fund must calculate its net admissible assets to meet the solvency requirements of the Takaful firm. The admissible assets are calculated in accordance with Chapter CA-4 and are reduced by any of the participants' fund(s) liabilities (including any Qard Hassan payable to the shareholder fund) and excluding 55% of any unrealised gains to arrive at the net admissible assets.
Amended: April 2014
Amended: October 2008CA-8.4.4
For the purpose of calculating the admissible assets of the participants' fund(s) referred to under Paragraph CA-8.4.3, the
insurance business amount referred to in Paragraph CA-4.2.34 means:(a) In the case of general Takaful business, the general Takaful insurance business amount is the value of the general participants' fund(s)'s assets (other than family participants' fund(s) assets) and allocatedearmarked assets to the insurance business amount (see Paragraphs AA-4.3A.6 to AA-4.3A.11 for actuarial requirements) from the shareholder fund and excluding any reinsurance/retakaful recoveries as determined in accordance with Chapter CA-4; and(b) In the case offamily Takaful business, thefamily Takaful insurance business amount is the value of the family participants' fund(s)'s assets (other than general participants' fund(s) assets) and allocatedearmarked assets to the insurance business amount from the shareholder fund and excluding reinsurance/retakaful recoveries and assets required to match property-linked liabilities in accordance with Chapter CA-4.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.5
Any
earmarked assets used under Paragraph CA-8.4.4 must be adjusted to account for any Qard Hassan that may be granted as outlined under Paragraph CA-8.4A.2Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.6
For purposes of Paragraph CA-8.4.4,
earmarked assets must meet the following criteria:(a) Availability: the asset is available and can be called on demand to meet any liquidity requirement where a Qard Hassan may be extended (see Section CA-8.4A);(b) Permanency: the asset is not callable and cannot be withdrawn;(c) Free of encumbrances: the asset is free of any encumbrances or mandatory payments; and(d) Highly liquid: the asset must be readily convertible to cash equivalent to a minimum of 90% of its reported value on the shareholder's fund statement of financial condition.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.7
Earmarked assets must comply with the criteria outlined in Paragraph CA-8.4.6 and refer to the following allocated assets from the shareholder fund to the each of the participants' fund:(a) Cash and unencumbered current accounts with financial institutions;(b) Placements with financial institutions which can be liquidated within one month;(c) Readily marketable securities;(d) GCC government securities;(e) Other sovereign securities, other than in Paragraph CA-8.4.7(c) and Paragraph CA-8.4.7(d) above, up to one year maturity, carrying an S&P minimum rating of A (or equivalent); and(f) Accounts receivable due within one month, excluding any past due accounts.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.8
Earmarked assets from the shareholder fund must be allocated for each participants' fund in the calculation of the insurance business amount of each participants fund and as determined by the actuary under Paragraph AA-4.3A.7.Added: April 2014CA-8.4.6A
In cases where Paragraph CA-8.4.5 applies, any income generated from the assets forming part of the free loan, will be solely for the benefit of the Takaful fund, and should be recorded as investment income of the Takaful fund. The total investment income being generated by the Takaful fund will however be subject to a mudaraba fee as approved by the Shari'a Board.
Inserted: October 2008Solvency Requirements
CA-8.4.9
The solvency requirements only apply to the insurance activities of the participants' fund(s) and are calculated in accordance with Chapter CA-2 for each of the participants' fund(s). The solvency required is the total of the solvency requirements for all participants' funds.
Amended: April 2014
Amended: April 2009
Amended: October 2008
Amended: January 2007CA-8.4.10
Where the capital available as defined under Paragraph CA-8.4.2 does not meet the solvency requirements of Paragraph CA-8.4.9, a capital injection must be made by the shareholders to meet the solvency required.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.11
Should the
Takaful firm fail to meet itsrequired solvency margin , it will be restricted from writing any new Takaful business until such time as the Takaful firm is in compliance with thesolvency margin requirements.Amended: April 2014
Amended: October 2008
Amended: January 2007Other Requirements
CA-8.4.12
In cases where a Qard Hassan has been granted to the participants' fund(s), any income generated from the assets forming part of the Qard Hassan (free loan), will be solely for the benefit of the participants' fund, and should be recorded as investment income of the participants' fund. The total investment income being generated by the participants' fund will however be subject to a Mudaraba fee as approved by the Shari'a Board (see Paragraph CA-8.2.4).
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.13
A participants' fund is prohibited from providing any form of credit by way of loan, guarantee or other instrument to another participants' fund or to any other party, including but not limited to:
(a) The Takaful operator (i.e. theshareholder fund);(b) A person in acontrolled function ;(c) A participant (policyholder ) except as provided under Paragraph CA-8.4.14; and(d) Acontroller orclose link of theTakaful firm .Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.14
In the case of Family Takaful, a participant credit facility (policyholder loan) may be granted should the contract of insurance allow for such event to take place and the contract outlines the various conditions attached to such credit.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.4.15
The Rule under Paragraph CA-8.4.13 does not restrict the participants' funds from providing any form of commitment associated with investment projects/funds.
Added: April 2014CA-8.4.13A
Following the Takaful fund's first year of operation, the fund will be expected to meet the solvency margin requirements, but the calculation of its capital available (participants' equity) will still be subject to valuation rules but will not be subject to deductions resulting from inadmissible assets (by category or counterparty) as outlined in Section CA-4.2:
(a) For a period not exceeding 5 years from the start of the Takaful fund; or(b) When the asset base of the fund reaches a minimum asset level of BD 5 million,whichever of (a) or (b) occurs first.
Inserted: October 2008CA-8.4.13B
Once a Takaful fund has reached conditions (a) or (b) stated in Paragraph CA-8.4.13A, it will be expected to calculate its capital available as per Paragraph CA-1.2.21, including all deductions related to inadmissible assets due to category or counterparty limits.
Inserted: October 2008CA-8.4.13C
During the transition phase outlined in Paragraph CA-8.4.13A, while category and counterparty limits do not apply, proper diversification of the assets of the Takaful funds should be followed, focusing on low risk and income producing assets.
Inserted: October 2008Qard Hassan Transition Rules
CA-8.4.16
Where a Qard Hassan has been granted for solvency purposes under the Rules in place at that time, the amount of Qard Hassan will be written off and/or repaid over a period not exceeding 5 years and disclosed as an off-balance sheet item (see Paragraph PD-1.1.13A) and not included as part of available capital for solvency purposes.
Added: April 2014CA-8.4.17
Where Paragraph CA-8.4.16 applies, should the participants' fund for which the Qard Hassan was originally granted generate a surplus during the course of the write-off period, such surplus may be used to repay any part of the portion of the Qard Hassan that has not been written off, subject to the CBB's prior written approval.
Added: April 2014CA-8.4A CA-8.4A Liquidity of Participants' Funds
CA-8.4A.1
Where a participants' fund(s) has a cash deficit which results in its inability to meet its day to day expenses and obligations, a Qard Hassan must be extended immediately by the shareholder fund. The cash being sought by the participants' fund must be physically transferred from the shareholder fund to cover the cash deficit of the participants' fund.
Added: April 2014CA-8.4A.2
Where a Qard Hassan has been extended for liquidity purposes, the calculation of the
earmarked assets allocated to theinsurance business amount for the participants' fund(s) as outlined under Paragraph CA-8.4.4, must consider the impact of the reduction inearmarked assets .Added: April 2014CA-8.4A.3
Where the shareholders' fund of
Takaful firms provide Qard Hassan (free loan) to the participants' fund as available for the purposes of meeting a participants' fund's liquidity needs and where theearmarked assets are to be reassessed as a result, theTakaful firm must notify the CBB immediately.Added: April 2014CA-8.4A.4
Where a Qard Hassan has been granted for liquidity purposes, the statement of financial position of the shareholders' fund must reflect the reduction in
earmarked assets to fund the Qard Hassan as an asset and for the participants' fund(s), the amount of Qard Hassan must be shown as a liability. In addition, the CBB requires, as a minimum, that theTakaful firm include a specific note in the financial statements of theTakaful firm explaining the circumstances of the arrangement (Qard Hassan) and the implications for shareholders and participants.Added: April 2014CA-8.4A.5
Where a Qard Hassan has been extended, it must be repaid from future surpluses from the participants' fund(s).
Added: April 2014CA-8.4A.6
The Takaful operator must have a clear written policy on the mechanism to rectify the cash deficit of the participants' fund(s), duly approved by the Board. The policy must address the manner in which Qard Hassan will be repaid and specify Qard impairment testing mechanism. The Qard Hassan must be tested for impairment at least annually. Whenever there is a need for Qard Hassan, the Takaful operator must determine the time period for the repayment of Qard Hassan.
Added: April 2014CA-8.5 CA-8.5 Determining and Allocating Surplus or Deficit
CA-8.5.1
Every
Takaful firm must develop a policy for determining the surplus or deficit arising from Takaful operations, the basis of determining and allocating that surplus or deficit to the participants and theshareholders , and the method of transferring any surplus or deficit to the participants. The policy developed must consider all relevant AAOIFI standards including Financial Accounting Standard No. 13 'Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies'. The policy must be approved by the Shari'a Supervisory Board as well as the board of directors of theTakaful firm .Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.5.2
More than one policy may be developed where the
Takaful firm offers different types of insurance products. In any event, the company must have separate policies in respect of its general business and its long-term business and any surplus or deficit allocation must be in line with the policy developed under Paragraph CA-8.5.1.Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.5.3
On an annual basis, every
Takaful firm must determine any surplus or deficit arising on each separate participants' fund. The surplus distribution or remedial action for deficit reduction must be recommended by theactuary (see Paragraphs AA-4.3A.4 and AA-4.3A.5) and endorsed by the Shari'a Supervisory Board and the board of directors of theTakaful firm .Amended: April 2014
Amended: October 2008
Amended: October 2007
Amended: January 2007CA-8.5.4
The policy developed in accordance with Paragraph CA-8.5.1 must not be amended or changed without the approval of the Shari'a Supervisory Board.
Amended: April 2014
Amended: October 2008
Amended: January 2007CA-8.5.4A
Distribution of surpluses from the Participants' fund(s) is subject to the CBB's prior written approval.
Added: April 2014CA-8.5.5
No
Takaful firm is permitted to make any distributions to participants if either the participants' fund(s) does not, or through the payment of the distribution, would not meet all thecapital available and solvency requirements set out in Chapters 1 and 2 of the Capital Adequacy Module. In addition the surplus distribution must not cause adverse financial implications or a deficit in the participants' fund(s) and the Takaful operator must ensure that the participants' fund(s) is sufficiently liquid to cover any proposed surplus distribution.Amended: April 2014
Amended: October 2008
Amended: January 2007BC BC Business and Market Conduct
BC-A BC-A Introduction
BC-A.1 BC-A.1 Purpose
Executive Summary
BC-A.1.1
This Module presents requirements that have to be met by
insurance licensees with regards to their dealings withcustomers . Reinsurance business is exempted from the scope of these requirements.BC-A.1.2
The requirements contained in this Module aim to ensure that
insurance licensees deal with theircustomers in a fair and open manner, and address theircustomers' information needs.Amended: January 2007BC-A.1.3
The requirements build upon several of the Principles of Business (see Module PB (Principles of Business)). Principle 1 (Integrity) requires
insurance licensees to observe high standards of integrity and fair dealing, and to be honest and straightforward in their dealings withcustomers . Principle 7 (Customer Interests), requiresinsurance licensees to pay due regard to the legitimate interests and information needs of theircustomers , and to communicate with them in a fair and transparent manner.Amended: January 2007BC-A.1.4
The requirements contained in this Module are largely principles-based and focus on desired outputs rather than on prescribing detailed processes. This gives
insurance licensees flexibility in how to implement the basic standards prescribed in this Module.Amended: January 2007Legal Basis
BC-A.1.5
This Module contains the Central Bank of Bahrain's ('CBB') (as amended from time to time) Directive relating to business conduct and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2011
Added: January 2007BC-A.1.6
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007BC-A.2 BC-A.2 Module History
BC-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have been subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007BC-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007BC-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes BC-3.4 01/07/05 Clarified language of takaful disclosure. BC-A.1.5 01/2007 New Rule introduced, categorising this Module as a Directive. BC-A.1.5 01/2011 Clarified legal basis BC-2.11 and BC-4 10/2011 Replaced Complaints Section BC-2.11 with new Chapter BC-4 Customer Complaints Procedures. BC-4.2 and BC-4.3 01/2012 Minor corrections to correct typos and clarify language. BC-4.3.9 01/2012 Paragraph deleted as it repeats what is in Paragraph BC-4.3.7. BC-4.1.3A 10/2012 Added guidance on the appointment of the customer complaints officer. BC-4.7 07/2013 Additional details provided on reporting of complaints. BC-2.9 04/2016 Added requirements for insurance firms when dealing with medical insurance. BC-4.3.16 04/2020 Amended Paragraph adding reference to CBB consumer protection. BC-4.5.6 04/2020 Amended Paragraph adding reference to CBB consumer protection. BC-4.7.1 - BC-4.7.3 04/2020 Amended Paragraph adding reference to CBB consumer protection. BC-C 10/2020 Added a new Chapter on Provision of Financial Services on a Non-discriminatory Basis. BC-A.2.3 [Deleted]
Deleted: January 2007BC-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007BC-B BC-B Scope of Application
BC-B.1 BC-B.1 Insurance Licensees
BC-B.1.1
Except as noted in this section, the requirements in this Module apply to all
insurance licensees , with respect to theirdirect insurance activities carried on from the Kingdom of Bahrain with a person who is a resident of Bahrain ('domestic business ').Amended: October 2011BC-B.1.2
The requirements of this Module therefore apply to
insurance firms andinsurance intermediaries who are selling, intermediating or advising ondirect insurance contracts from their offices in Bahrain, with respect tocustomers who are resident of Bahrain. The requirements in this Module do not, therefore, apply todirect insurance activities carried on from overseas branches and subsidiaries ofBahraini insurance licensees , or to activities carried on with non-residents.BC-B.1.3
Reinsurance business is exempted from the requirements of this Module because the reinsurance market is limited to dealings between insurance market professionals.
BC-B.1.4
The activities of
insurance managers and operators of insurance exchanges do not fall within the scope of this Module. However, the CBB expects theinsurance manager to consider the requirements of this Module in relation to the service provided, on behalf of thecaptive insurer orinsurance firm , to its 'clients', namely insured members of the group.Amended: January 2007BC-B.1.5
Although the requirements of this Module apply in full to all
direct insurance activities in relation todomestic business , the CBB recognises that customers' needs vary. For example, because acaptive insurer is insuring the risks of its parent group, it would be acceptable for the level of sales documentation and written disclosure to be less than would be required for retailcustomers . Large corporatecustomers may also require less extensive written disclosures than retailcustomers . The requirements in this Module giveinsurance licensees the flexibility to adapt their processes to suit the different needs of differentcustomer types.Amended: January 2007BC-C BC-C Provision of Financial Services on a Non-discriminatory Basis
BC-C.1 BC-C.1 Provision of Financial Services on a Non-discriminatory Basis
BC-C.1.1
Insurance licensees must ensure that all regulated financial services are provided without any discrimination based on gender, nationality, origin, language, faith, religion, physical ability or social standing.Added: October 2020BC-1 BC-1 General Requirements
BC-1.1 BC-1.1 General Rules
BC-1.1.1
This Module applies to the
direct insurance activities of all licensees in relation todomestic business .BC-1.1.2
This Module aims to encourage high standards of business conduct, which are broadly applicable to all licensees, all types of
direct insurance business (i.e. excluding reinsurance), and all types ofcustomers . However, it is recognized that some types of licensees or business (such as captive insurance or commercial insurance) may present lower regulatory risks in relation to business conduct. For these types of business, the CBB therefore accepts that less detailed arrangements are likely to be sufficient to implement the principles contained in this Module. The CBB will monitor the regulatory performance of the market, and may in due course allow for specific exemptions or relaxations for certain types of business or licensees (see also BC-1.1.11 and BC-1.1.12).Amended: January 2007BC-1.1.3
Where packaged investment products include insurance elements, this Module applies to the insurance elements.
BC-1.1.4
It is recognised that investment products represent different features and risks that require separate regulatory treatment. Specific rules applying to business conduct in relation to investment products will be developed over time.
Amended: January 2007BC-1.1.5
All licensees must comply with the Insurance Code of Practice for business conduct with
customers , which sets out the minimum standards of good practice for market conduct in relation todirect insurance activities.BC-1.1.6
The Code comprises a number of overarching principles and a number of principles-based requirements rules in relation to the conduct of
direct insurance business withcustomers . The structure of the Insurance Code of Practice for Business Conduct withcustomers reflects the key stages and activities over the lifetime of thecustomer relationship for insurance products and services (see Illustration 1).Illustration 1: Structure of Insurance Code of Practice for Business Conduct
Amended: January 2007BC-1.1.7
Licensees must maintain compliance with the Code throughout the lifetime of their relationships with all of their
customers .BC-1.1.8
The Code focuses on desired outcomes, rather than prescribing in detail measures required to achieve those outcomes. Licensees therefore have the flexibility to design arrangements that implement the Code, in a way that suits the particular nature of their business.
BC-1.1.9
Insurance licensees must take responsibility for compliance with the Code of all persons carrying outdirect insurance activities on their behalf (including, but not limited to,appointed representatives andinsurance managers ).Amended: October 2007BC-1.1.10
Licensees must put in place appropriate measures across all their business operations and distribution channels to ensure compliance with the Code. Licensees must maintain adequate records to demonstrate compliance with the Code.
BC-1.1.11
The CBB will monitor compliance with the Code and standards of business conduct. If required, the CBB may develop more detailed rules and guidance to supplement the existing Code.
Amended: January 2007BC-1.1.12
The CBB will apply these requirements in a way that allows them to be adapted to fit the circumstances of licensees' businesses, to be achieved through a pragmatic approach to supervision. However, in exceptional circumstances, it may be appropriate for the CBB to consider and grant waivers where strict compliance would be unduly burdensome or would not achieve the purpose for which the requirement was intended. Each application for waiver will be considered on its individual merits. The fact that a waiver has been granted to a particular licensee should not be regarded as an indication that similar waivers will be issued to any other licensee.
Amended: January 2007BC-2 BC-2 The Insurance Code of Practice
BC-2.1 BC-2.1 Overarching Principles
BC-2.1.1
In the course of
direct insurance activities, licensees must:(a) Act with due skill, care and diligence in all dealings withcustomers ;(b) Act fairly and reasonably in all dealings withcustomers ;(c) Identifycustomers' specific requirements in relation to the products and services about which they are enquiring;(d) Ensure that any advice tocustomers is aimed at thecustomers' interests and based on adequate standards of research and analysis;(e) Provide sufficient information to enablecustomers to make informed decisions when purchasing insurance products and services offered to them;(f) Provide sufficient and timely documentation tocustomers to confirm that their insurance arrangements are in place and provide all necessary information about their products, rights and responsibilities;(g) Maintain fair treatment ofcustomers through the lifetime of their insurance products andcustomer relationships, and ensure thatcustomers are kept informed of important events;(h) Handle claims fairly and promptly;(i) Ensure that all information provided tocustomers is clear, fair and not misleading, and appropriate tocustomers' information needs; and(j) Take appropriate measures to safeguard any money and property handled on behalf ofcustomers and maintain confidentiality ofcustomer information.Amended: January 2007
Amended: October 2007BC-2.2 BC-2.2 Marketing and Promotion
BC-2.2.1
Licensees must ensure that all advertising and promotional material is clear, fair and not misleading.
BC-2.3 BC-2.3 Initial Customer Information about Service
BC-2.3.1
At the initial point of contact, before any contract is concluded between the
customer and theinsurance licensee , licensees must advisecustomers of the nature of the service they can offer and their relationship with thecustomer , including:(a) The types of services that can be provided;(b) The choice of products and services that can be offered; and(c) Whether the licensee acts on behalf of an insurer or insurers, or acts independently on behalf of thecustomer in arranging insurance.Amended: January 2007BC-2.4 BC-2.4 Identification of Customer Requirements
BC-2.4.1
Licensees must identify
customers' requirements by seeking fromcustomers such information about their circumstances and objectives as might reasonably be expected to be relevant in establishing their specific insurance needs in relation to the products and services about which they are enquiring.BC-2.5 BC-2.5 Advice and Recommendations
BC-2.5.1
Any recommendations made must be appropriate to the
customer's needs. The recommendation must include an explanation as to how the recommended product suits thecustomer's identified needs. Where more than one product is recommended as appropriate to thecustomer's needs, the recommendation must include an explanation of the differences in and relative costs in the alternative options.Amended: January 2007BC-2.5.2
In the case of compulsory insurance, such as third party motor liability insurance, the explanation of the product's suitability may be limited to a brief explanation of the obligation to hold such insurance, and the options available to satisfy the obligation.
BC-2.5.3
The objective of Paragraph BC-2.5.1 is to ensure that a
customer is provided with sufficient information with which to make an informed decision. Aninsurance firm is able to rely on thecustomer's explanation of his insurance needs and is not otherwise required to verify thecustomer's own assessment of his needs. Given thecustomer's stated needs, theinsurance firm must explain how the proposed contract(s) would meet those needs, and provide sufficient information regarding the different options so that thecustomer is able to make an informed decision.Amended: January 2007BC-2.6 BC-2.6 Customer Information before Commitment to the Contract
BC-2.6.1
Before
customers make their final commitment to enter into acontract of insurance , licensees must provide to thecustomer sufficient information on the key features of the product being proposed to enable thecustomer to make an informed purchasing decision, including:(a) The identity of theinsurance licensee ;(b) All the important details of cover and benefits;(c) Any significant or unusual restrictions or exclusions, conditions or obligations attaching to thecustomer ; and(d) The period of cover.Amended: January 2007
Amended: October 2007BC-2.6.2
Before
customers make their final commitment to enter into acontract of insurance , licensees must provide to thecustomer full details of costs of the insurance products and services being offered, including:(a) The level of insurance premiums, the periodicity of payment and any grace periods allowed for payment;(b) The consequences of discontinuing the payment of any premium; and(c) Any fees and charges other than the insurance premium.Amended: January 2007
Amended: October 2007BC-2.6.3
While an
insurance broker may not approach every possible underwriter for each risk, he should make reasonable efforts to make his selection from a panel ofinsurance firms . Aninsurance broker's submission of quotations should incorporate the reasons for recommending or choosing aninsurance firm .BC-2.6.4
Except for
clients with turnover exceeding BD 1 million per year, aninsurance intermediary must draw theclient's attention to the status of theinsurance firm : i.e. whether or not theinsurance firm is locally licensed (as aBahraini insurance firm oroverseas insurance firm ) and, if not, the reasons for recommending or choosing thatinsurance firm . In respect of theseclients , this advice must be delivered in writing.Amended: January 2007BC-2.6.5
An
insurance intermediary should recommend, in the first instance, a policy from a CBB licensed insurer (which, for the avoidance of doubt, may be anoverseas insurance firm ) that he considers best suited to the needs of hisclient , and offering ease of client service, claims handling, etc. Paragraph BC-2.6.4 covers the situation where aninsurance intermediary proposes use of an overseas insurer not licensed or incorporated in Bahrain, because of the lack of availability of local cover.Amended: January 2007BC-2.6.6
Insurance intermediaries acting on behalf ofcustomers in arranging their insurance must, on request, disclose the amount of commission payable to them from the insurance premium, and any other remuneration received for arranging the insurance contract.BC-2.6.7
Before
customers make a final commitment to enter into acontract of insurance , licensees must inform thecustomer of their key obligations and rights with regard to the transaction, including:(a) Thecustomer's duty of disclosure to theinsurance licensee ;(b) Cancellation rights and conditions;(c) The licensee's internal complaints procedure; and(d) The licensee's obligations in respect of this Code.Amended: January 2007
Amended: October 2007BC-2.6.8
There are no specific requirements prescribing
customers' cancellation rights or required standards of cancellation terms for insurance products andcustomers . It is expected that licensees will put in place cancellation terms that are fair, reasonable and appropriate with respect to theircustomers and the products provided, in line with the overarching principles requiring fair dealings withcustomers (see Paragraph BC-2.1.1). The CBB will monitor the regulatory performance of the market in this area, and may make amendments over time (see Paragraphs BC-1.1.11, BC-1.1.12).Amended: January 2007BC-2.7 BC-2.7 Confirmation of Cover and Policy Documentation
BC-2.7.1
On the conclusion of contracts, licensees must provide
customers with prompt written confirmation and details of the insurance that has been effected, including:(a) The date when cover starts and the period of cover;(b) Any certificates or documents which thecustomer is required to have by law;(c) Details of how thecustomer can make a claim, and their responsibilities in relation to making claims;(d) The address of the insurer to which all communications in respect of the policy should be sent; and(e) Proof of payment where applicable.Amended: January 2007BC-2.7.2
Licensees must provide full policy documentation promptly following the conclusion of contracts, unless this has already been issued with the confirmation of cover.
BC-2.8 BC-2.8 Service after the Point of Sale
BC-2.8.1
Licensees must respond to and administer
customers' requests for amendments to their insurance policies in a timely manner. In particular, licensees must:(a) Provide written confirmation of any changes/amendments to the policy;(b) Provide full details of any additional premium or charges to be paid by or returned to thecustomer ;(c) Provide any certificate or documentation which thecustomer is required to have by law;(d) Provide proof of payment of additional premium or charges where applicable; and(e) Remit any refunds of premiums or charges due tocustomers without undue delay.Amended: January 2007BC-2.9 BC-2.9 Claims
BC-2.9.1
In addition to the requirements under Paragraph BC-2.9.2, where licensees' insurance activities include the handling of claims, they must:
(a) Respond promptly when claims are first notified, and providecustomers with an explanation about how the claim will be handled and any actions required of thecustomer ;(b) Provide reasonable guidance tocustomers in pursuing their claim;(c) Consider and handle claims fairly and promptly, and keep thecustomer informed of progress;(d) Informcustomers in writing, with an explanation, if thelicensee is unable to deal with all or any part of the claim; and(e) Forward settlement of claims without undue delay, once settlement has been agreed.Amended: April 2016
Amended: October 2007
January 2007BC-2.9.2
Where an
insurance firm deals with medical insurance and handles all the claim processing activities directly, i.e. without using a TPA:(a) It must process and settle all medical claims with policyholders within 15 calendar days from the receipt of all necessary documents; and(b) It must process and settle claims from healthcare service providers within 30 calendar days from the receipt of all necessary documents from the healthcare service providers.April 2016BC-2.9.3
Insurance firms must comply with Paragraph BC-2.9.2 by 30th September 2016 at the latest.April 2016BC-2.10 BC-2.10 Renewal, Expiry and Cancellation
BC-2.10.1
Licensees must notify
customers of the renewal or expiry of their policy in time to allow thecustomer to consider and rearrange any continuing cover they may need, including:(a) Details of the renewal terms, if offered; and(b) Details of any changes to the cover, service orinsurance firm being offered.Amended: January 2007BC-2.10.2
On expiry or cancellation of insurance policies, at the request of the
customer , licensees must make available all documentation and information to which thecustomer is entitled in a timely manner.BC-2.11 BC-2.11 [This section was deleted in October 2011]
BC-2.11.1
[This paragraph was deleted in October 2011]
Deleted: October 2011BC-2.11.2
[This paragraph was deleted in October 2011]
Deleted: October 2011
Amended: January 2007BC-2.11.3
[This paragraph was deleted in October 2011]
Deleted: October 2011
Amended: January 2007BC-2.11.4
[This paragraph was deleted in October 2011]
Deleted: October 2011
Amended: January 2007BC-2.11.5
[This paragraph was deleted in October 2011]
Deleted: October 2011
Amended: October 2007
Amended: January 2007
BC-2.12 BC-2.12 Information Conditions
BC-2.12.1
Licensees must ensure that all information presented to
customers in accordance with this Code shall be clear, fair and not misleading, and comprehensible to thecustomer having regard to the complexity of the products and services being offered and thecustomer's knowledge.BC-2.12.2
Licensees must ensure that
customer information presented tocustomers in accordance with this Code is provided in an appropriate format with regard to the complexity of the product being discussed. In particular:(a) As a general rule, all information to be provided to thecustomer in accordance with this Code is to be in writing, on paper or other durable medium available and accessible to thecustomer . If the information is initially presented orally, supporting written information must be provided in addition;(b) In the case of telephone selling and other forms of selling where it is impractical to provide information to thecustomer in writing at the point of sale, information shall be provided to thecustomer in accordance with Subparagraph BC-2.12.2(a) immediately following conclusion of the contract; and(c) By way of derogation from Subparagraph BC-2.12.2(a), information may be provided orally without supporting written information where thecustomer requests it, or where immediate cover is necessary.Amended: January 2007BC-2.13 BC-2.13 Fair Treatment and Conflicts of Interest
BC-2.13.1
Licensees must avoid conflicts of interest, or if conflicts are unavoidable, must explain the position fully and manage the situation so as to avoid prejudice to any party. In particular, licensees who act on behalf of their
customers must not put their own interests above their duty to anycustomers for whom they act.BC-2.13.2
Insurance intermediaries must disclose in writing to theclient any relationship that he may have with aninsurance firm that he is recommending to hisclient and which may result in a potential conflict of interest including, but not limited to, disclosure in writing any association arising from commonshareholder /controller /Director .Amended: January 2007BC-2.14 BC-2.14 Confidentiality and Security of Customer Assets
BC-2.14.1
Licensees must ensure that any information obtained from
customers must not be used or disclosed except in the normal course of negotiating, maintaining or renewing insurance for thatcustomer , unless:(a) They have thecustomer's consent;(b) Disclosure is made in accordance with the licensee's regulatory obligations; or(c) The licensee is legally obliged to disclose the information.Amended: January 2007BC-2.14.2
Licensees must take appropriate steps to ensure the security of any money, documents, other property or information handled or held on behalf of
customers .BC-3 BC-3 Takaful Firms
BC-3.1 BC-3.1 General Requirements
BC-3.1.1
This Chapter applies only to those
insurance firms licensed to conduct insurance business under takaful principles.Amended: January 2007BC-3.1.2
The CBB acknowledges that the nature of takaful and the operation of a takaful business are not entirely equivalent to and in some respects different from a conventional insurance business. The specific requirements set out in this Chapter aim not only to allow
takaful firms to operate in Bahrain within the CBB's insurance regulatory regime on a basis consistent with conventional insurers but also to recognise some of the differences in takaful that are relevant to the way in which takaful business is carried on.Amended: January 2007
Amended: October 2007BC-3.2 BC-3.2 Restriction on the Use of Terms
BC-3.2.1
The use of the terms '
takaful ', 'retakaful ', 'general takaful' and 'family takaful ' may only be used to describe the products ofinsurance firms that are Islamic financial institutions within the meaning of the CBB Rulebook.Amended: January 2007
Amended: October 2007BC-3.2.2
For the purposes of this Module, references to
takaful shall be taken as including 'takaful ', 'retakaful ', 'general takaful' and 'family takaful '.Amended: January 2007
Amended: October 2007BC-3.2.3
The use of the term 'Islamic insurance' should be avoided and may never be used by a firm not licensed to conduct the regulated activity of
takaful .Amended: January 2007
Amended: October 2007BC-3.3 BC-3.3 Marketing and Promotion
BC-3.3.1
An
insurance firm may only offertakaful products if it is licensed to do so. Aninsurance intermediary may offer both conventional insurance andtakaful products but must provide clear information to enable consumers to make informed choices.Amended: October 2007BC-3.3.2
Any comparison between
takaful and conventional insurance products must draw thecustomer's attention to the principal differences between these products. These differences may include:(a) Whether there is a contractual right to claims or benefits or whether these are discretionary on the part of the firm;(b) The basis on which benefits and surpluses are allocated to, and between,policyholders and participants; and(c) Whether there is any future liability ofpolicyholders (or participants), individually or collectively, for deficits in thepolicyholders' (participants') funds.Amended: January 2007
Amended: October 2007BC-3.4 BC-3.4 Disclosure
BC-3.4.1
Takaful firms must provide participants andshareholders with clear information about the performance of their business. This information must, as a minimum, comply with relevant AAOIFI standards, in particular Standard 13 (Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies) and 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies).Amended: January 2007BC-3.4.2
Takaful firms must clearly disclose to participants the calculation (percentage) and amount of wakala fee and mudaraba share of profits paid by the takaful fund to the takaful operator.Amended: January 2007BC-4 BC-4 Customer Complaints Procedures
BC-4.1 BC-4.1 General Requirements
BC-4.1.1
All
insurance licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31st March 2012.Added: October 2011BC-4.1.2
Customer complaints procedures must be documented appropriately and their customers must be informed of their availability.
Added: October 2011BC-4.1.3
All
insurance licensees must appoint a customer complaints officer and publicise his/ her contact details at all departments and branches. The customer complaints officer must be of a senior level at theinsurance licensee and must be independent of the parties to the complaint to minimize any potential conflict of interest.Added: October 2011BC-4.1.3A
The position of customer complaints officer may be combined with that of compliance officer.
Added: October 2012BC-4.1.4
In the case of an
overseas insurance licensee , a local complaints officer must be present and must report all complaints to the head office complaints unit.Added: October 2011BC-4.2 BC-4.2 Documenting Customer Complaints Handling Procedures
BC-4.2.1
In order to make customer complaints handling procedures as transparent and accessible as possible, all
insurance licensees must document their customer complaints handling procedures. These include setting out in writing:(a) The procedures and policies for:(i) Receiving and acknowledging complaints;(ii) Investigating complaints;(iii) Responding to complaints within appropriate time limits;(iv) Recording information about complaints; and(v) Identifying recurring system failure issues; and(b) The types of remedies available for resolving complaints; and(c) The organisational reporting structure for the complaints handling function.Amended: January 2012
Added: October 2011BC-4.2.2
Insurance licensees must provide a copy of the procedures to all relevant staff, so that they may be able to inform customers. A simple and easy-to-use guide to the procedures must also be made available to all customers, on request, and when they want to make a complaint.Added: October 2011BC-4.2.3
Insurance licensees are required to ensure that claims forms and claim notification documents include a statement informing the customer of the availability of a simple and easy-to-use guide on customer complaints procedures in the event the customer is not satisfied with the services provided.Amended: January 2012
Added: October 2011BC-4.3 BC-4.3 Principles for Effective Handling of Complaints
BC-4.3.1
Adherence to the following principles is required for effective handling of complaints:
Added: October 2011Visibility
BC-4.3.2
"How and where to complain" must be well publicised to customers and other interested parties, in both English and Arabic languages.
Added: October 2011Accessibility
BC-4.3.3
A complaints handling process must be easily accessible to all customers and must be free of charge.
Added: October 2011BC-4.3.4
While an
insurance licensee's website is considered an acceptable mean for dealing with customer complaints, it should not be the only means available to customers as not all customers have access to the internet.Amended: January 2012
Added: October 2011BC-4.3.5
Process information must be readily accessible and must include flexibility in the method of making complaints.
Added: October 2011BC-4.3.6
Support for customers in interpreting the complaints procedures must be provided, upon request.
Added: October 2011BC-4.3.7
Information and assistance must be available on details of making and resolving a complaint.
Added: October 2011BC-4.3.8
Supporting information must be easy to understand and use.
Added: October 2011BC-4.3.9
[This Paragraph was deleted in January 2012].
Deleted: January 2012BC-4.3.10
Insurance licensees should incorporate the complaints procedure as a clause within the insurance policies provided to their customers.Added: October 2011Responsiveness
BC-4.3.11
Receipt of complaints must be acknowledged in accordance with Section BC-4.5 "Response to Complaints".
Added: October 2011BC-4.3.12
Complaints must be addressed promptly in accordance with their urgency.
Added: October 2011BC-4.3.13
Customers must be treated with courtesy.
Added: October 2011BC-4.3.14
Customers must be kept informed of the progress of their complaint.
Added: October 2011BC-4.3.15
If a customer is not satisfied with an
insurance licensee's response, theinsurance licensee must advise the customer on how to take the complaint further within the organisation.Added: October 2011BC-4.3.16
In the event that they are unable to resolve a complaint,
insurance licensees must outline the options that are open to that customer to pursue the matter further, including, where appropriate, referring the matter to the Consumer Protection Unit at the CBB.Amended: April 2020
Added: October 2011Objectivity and Efficiency
BC-4.3.17
Complaints must be addressed in an equitable, objective, unbiased and efficient manner.
Amended: January 2012
Added: October 2011BC-4.3.18
General principles for objectivity in the complaints handling process include:
(a) Openness:
The process must be clear and well publicised so that both staff and customers can understand.(b) Impartiality:(i) Measures must be taken to protect the person the complaint is made against from bias;(ii) Emphasis must be placed on resolution of the complaint not blame; and(iii) The investigation must be carried out by a person independent of the person complained about.(c) Accessibility:(i) Theinsurance licensee must allow customer access to the process at any reasonable point in time; and(ii) A joint response must be made when the complaint affects different participants.(d) Completeness:
The complaints officer must find the relevant facts, talk to both sides, establish common ground and verify explanations wherever possible;(e) Equitability:
Give equal treatment to all parties.(f) Sensitivity:
Each complaint must be treated on its merits and paying due care to individual circumstances.(g) Objectivity for personnel — complaints handling procedures must ensure those complained about are treated fairly which implies:(i) Informing them immediately and completely on complaints about performance;(ii) Giving them an opportunity to explain and providing appropriate support;(iii) Keeping them informed of the progress and result of the complaint investigation;(iv) Full details of the complaint are given to those the complaint is made against prior to interview; and(v) Personnel must be assured they are supported by the process and should be encouraged to learn from the experience and develop a better understanding of the complaints process;(h) Confidentiality:(i) In addition to customer confidentiality, the process must ensure confidentiality for staff who have a complaint made against them and the details must only be known to those directly concerned;(ii) Customer information must be protected and not disclosed, unless the customer consents otherwise; and(iii) Protect the customer and customer's identity as far as is reasonable to avoid deterring complaints due to fear of inconvenience or discrimination.(i) Objectivity monitoring:
insurance licensees must monitor responses to customers to ensure objectivity which could include random monitoring of resolved complaints.(j) Charges:
The process must be free of charge to customers;(k) Customer Focused Approach:(i)Insurance licensees must have a customer focused approach;(ii)Insurance licensees must be open to feedback; and(iii)Insurance licensees must show commitment to resolving problems.(l) Accountability:
Insurance licensees must ensure accountability for reporting actions and decisions with respect to complaints handling; and(m) Continual improvement:
Continual improvement of the complaints handling process and the quality of products and services must be a permanent objective of theinsurance licensees .Amended: January 2012
Added: October 2011BC-4.4 BC-4.4 Internal Complaint Handling Procedures
BC-4.4.1
An
insurance licensee's internal complaint handling procedures must provide for:(a) The receipt of written complaints;(b) The appropriate investigation of complaints;(c) An appropriate decision-making process in relation to the response to a customer complaint;(d) Notification of the decision to the customer;(e) The recording of complaints; and(f) How to deal with complaints when a business continuity plan (BCP) is operative.Added: October 2011BC-4.4.2
An
insurance licensee's internal complaint handling procedures must be designed to ensure that:(a) All complaints are handled fairly, effectively and promptly;(b) Recurring systems failures are identified, investigated and remedied;(c) The number of unresolved complaints referred to the CBB is minimized;(d) The employee responsible for the resolution of complaints has the necessary authority to resolve complaints or has ready access to an employee who has the necessary authority; and(e) Relevant employees are aware of theinsurance licensee's internal complaint handling procedures and comply with them and receive training periodically to be kept abreast of changes in procedures.Added: October 2011BC-4.5 BC-4.5 Response to Complaints
BC-4.5.1
An
insurance licensee must acknowledge in writing within the same day of receipt of customer written complaints for non-life insurance policies and within 5 business days of receipt of customer written complaints for life insurance policies.Added: October 2011BC-4.5.2
An
insurance licensee must respond in writing to a customer's complaint within one week of receiving non-life insurance policies complaint and within 2 weeks of receiving life insurance policies complaint, explaining their position and how they propose to deal with the complaint.Added: October 2011Redress
BC-4.5.3
An
insurance licensee should decide and communicate how it proposes (if at all) to provide the customer with redress. Where appropriate, theinsurance licensee must explain the options open to the customer and the procedures necessary to obtain the redress.Added: October 2011BC-4.5.4
Where an
insurance licensee decides that redress in the form of compensation is appropriate, theinsurance licensee must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.Added: October 2011BC-4.5.5
Where an
insurance licensee decides that redress in a form other than compensation is appropriate, it must provide the redress as soon as practicable.Added: October 2011BC-4.5.6
Should the customer that filed a complaint not be satisfied with the response received as per Paragraph BC-4.5.2, he can forward the complaint to the Consumer Protection Unit at the CBB within 30 calendar days from the date of receiving the letter from the
insurance licensee .Amended: April 2020
Added: October 2011BC-4.6 BC-4.6 Records of Complaints
BC-4.6.1
An
insurance licensee must maintain a record of all customers' complaints. The record of each complaint must include:(a) The identity of the complainant;(b) The substance of the complaint;(c) The status of the complaint, including whether resolved or not, and whether redress was provided; and(d) All correspondence in relation to the complaint. Such records must be retained by theinsurance licensee for a period of 5 years from the date of receipt of the complaint.Added: October 2011BC-4.7 BC-4.7 Reporting of Complaints
BC-4.7.1
An
insurance licensee must submit to the CBB's Consumer Protection Unit a quarterly report summarising the following:(a) The number of complaints received;(b) The substance of the complaints;(c) The number of days it took theinsurance licensee to acknowledge and to respond to the complaints; and(d) The status of the complaint, including whether resolved or not, and whether redress was provided.Amended: April 2020
Added: October 2011BC-4.7.2
The report referred to in Paragraph BC-4.7.1 must be sent electronically to Complaint@cbb.gov.bh.
Amended: April 2020
Added: July 2013BC-4.7.3
Where no complaints have been received by the licensee within the quarter, a 'nil' report should be submitted to the CBB’s Consumer Protection Unit.
Amended: April 2020
Added: July 2013BC-4.8 BC-4.8 Monitoring and Enforcement
BC-4.8.1
Compliance with these requirements is subject to the ongoing supervision of the CBB as well as being part of any CBB inspection of a
licensee . Failure to comply with these requirements is subject to enforcement measures as outlined in Module EN (Enforcement).Added: October 2011CL CL Client Money
CL-A CL-A Introduction
CL-A.1 CL-A.1 Purpose
Executive Summary
CL-A.1.1
This Module presents requirements that have to be met by
insurance brokers with regards to holdingclient money for which they are responsible.Amended: July 2023
April 2012CL-A.1.2
The Rules contained in this Module are aimed at ensuring proper protection of
client money to minimise the risk ofclient money being used byinsurance brokers and to prevent the commingling ofclient money with theinsurance brokers' assets.Amended: July 2023
April 2012Legal Basis
CL-A.1.3
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) on
client money , with respect toinsurance brokers , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable toinsurance brokers .Amended: July 2023
April 2012CL-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
April 2012Effective Date
CL-A.1.5
All
insurance brokers and where applicable,insurance firms , must comply with the requirements of this Module, effective 1st July 2012 (See ES-2.6AA2).Amended: July 2023
April 2012CL-A.2 CL-A.2 Module History
Evolution of Module
CL-A.2.1
This Module was first issued in April 2012 by the CBB. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.
April 2012Summary of Changes
CL-A.2.2
The most recent changes made to this Module are detailed in the table below:
Module Ref. Change Date Description of Changes CL-2.3.4 and CL-2.3.4A 07/2015 Rules amended on insurance broker commissions where an insurance broker is dealing with an international insurance/reinsurance broker. Full Module 07/2023 Deleted Appointed Representatives from Module. CL-B CL-B Scope of Application
CL-B.1 CL-B.1 Scope
CL-B.1.1
This Module, unless otherwise indicated, applies to all
insurance brokers licensed by the CBB that undertake the broking of insurance contracts (see Rule AU-1.4.10) and holdclient money .Amended: July 2023
April 2012CL-B.1.2
Client money is money of any currency that aninsurance broker receives and holds for its client when carrying on insurance mediation. It can include premiums/contributions and premium/ contribution refunds.Amended: July 2023
April 2012CL-B.1.3
Reference to
insurance firms throughout this Module apply toTakaful firms as well.April 2012CL-B.1.4
Paragraph CL-2.3.4 applies as well to
insurance firms .April 2012CL-B.1.5
[This Paragraph was deleted in July 2023].
Amended: July 2023
April 2012CL-1 CL-1 Client Money Protection
CL-1.1 CL-1.1 Client Money Protection Rules
Keeping Separate Client Accounts
CL-1.1.1
Where an
insurance broker receives payment from a client, it must maintain one or more premiums/contributions account that holdsclient money separate from its own money.Amended: July 2023
April 2012CL-1.1.2
Premiums/contributions collected in relation of a specific transaction must not be used to settle amounts due under another transaction.
April 2012CL-1.1.3
Payment of premiums/contributions to
insurance firms , or commissions (brokerage) to theinsurance brokers' own accounts must not be effected until the premiums to which these payments relate have been duly received from that client and credited to the client account.Amended: July 2023
April 2012CL-1.1.4
In respect of premiums/contributions booked in Bahrain in relation to residents and non-residents of Bahrain, these accounts are to be maintained with a retail bank licensed to do business in Bahrain.
April 2012CL-1.1.5
Insurance brokers must:(a) Provide the CBB with a written confirmation from a retail bank(s) licensed to do business in Bahrain, as in what capacity they are holding suchclient money. This confirmation must be provided to the CBB at the time of opening theclient money account and when there is a material change in the nature of the account; and(b) Instruct the bank(s) not to combine theclient money account (s) with any other account or to exercise any right or set-off or counterclaim against money in that account in respect of any sum owed to it on any other account of the insurance broker.Amended: July 2023
April 2012CL-1.1.6
[This Paragraph was deleted in July 2023].
Deleted: July 2023
April 2012CL-1.1.7
Client money must, upon receipt, be paid into a specifically designatedclient money account no later than the immediate business day after receipt. The monies in this account must form part of thefiduciary assets of theinsurance broker and must be held in custody for the client, where theinsurance broker acts as an agent with the client retaining full legal ownership of the funds.Amended: July 2023
April 2012CL-1.1.8
The following guidance material provides examples of circumstances under which monies may be deposited into or withdrawn from a client account.
April 2012CL-1.1.9
Amounts that may be deposited into a client account:
(a) Monies received from the client for the purpose of purchasing contracts of insurance; and(b) Monies received on behalf of the client from (re)insurance firms,insurance intermediaries and any other third parties relating to the refund of premiums/contributions to clients.April 2012CL-1.1.10
Amounts that may be withdrawn from a client account:
(a) Premium monies required to be paid on behalf of the client to (re)insurance firms or other insurance intermediaries for the purchase of contracts of insurance;(b) Monies drawn on a client's written authority in accordance with the insurance contract; or(c) Monies which may by mistake or accident have been paid into the account.April 2012CL-1.1.11
While the (re)
insurance broker may assist a policyholder or insurance firm in the claims settlement process, funds related to claims settlement must be remitted directly by the (re)insurance firm to the policyholder or insurance firm.April 2012CL-1.1.12
Every
insurance broker must maintain at least one income and expenses account with a retail bank licensed to do business in Bahrain.Amended: July 2023
April 2012CL-1.1.13
Insurance brokers are prohibited from:(a) Combining income and expenses account(s) with premiums/contributions; and(b) Transferring income and expenses account(s) to premiums/contributions account(s).Amended: July 2023
April 2012CL-1.2 CL-1.2 Record Keeping
CL-1.2.1
In accordance with Section GR-1.2,
insurance brokers must ensure that proper records, sufficient to show and explaininsurance brokers' transactions and commitments in respect of theirclient money , are maintained and demonstrate compliance with the provisions of this Module. These records must be retained for a period of a minimum of ten years after they are made, unless otherwise required by law.Amended: July 2023
April 2012CL-1.2.2
An
insurance broker that holdsclient money must:(a) Check its record-keeping andclient money procedures regularly; and(b) Subject its record-keeping andclient money procedures to an appropriate independent review (see Rule CL-1.3.3).Amended: July 2023
April 2012CL-1.2.3
Records of the
insurance broker must clearly show funds received and paid out allocated per client/transaction. For greater clarity, allclient money and receivables from clients are to be shown on the balance sheet asfiduciary assets and there must be an offsettingfiduciary liability , representing the amounts payable by the insurance broker to the insurance firm (See Rule CL-1.3.4).Amended: July 2023
April 2012CL-1.3 CL-1.3 CBB Reporting
CL-1.3.1
In accordance with Sections BR-1.2A and BR-1.4A,
insurance brokers must prepare and submit to the CBB an Insurance Broker Return (IBR) semi-annually. The 31st December IBR must be submitted by 28th February at the latest. The 30th June IBR must be submitted by 30th July at the latest.April 2012
Amended: April 2022CL-1.3.2
Insurance brokers must provide the CBB, within 3 months of the financial year end, the audited financial statements and the management letter from the externalauditor .April 2012CL-1.3.3
In accordance with Paragraph BR-1.5.4,
insurance brokers must provide the CBB, within 3 months of the financial year end, the Agreed Upon Procedure Report produced by the externalauditor , certifying that theinsurance broker among other things, is complying with the Rules of the Module CL (Client Money).April 2012Reporting of Fiduciary Assets and Liabilities
CL-1.3.4
Unremitted insurance premiums held in the
client money account , in accordance with Paragraph CL-2.2.4, and uncollected premiums from insureds must be recorded asfiduciary assets on the balance sheet of theinsurance broker .Fiduciary assets must have an offsettingfiduciary liability representing the total remittances to be made to the insurance firm.April 2012CL-2 CL-2 Holding of Client Money
CL-2.1 CL-2.1 Systems and Controls
CL-2.1.1
Insurance brokers must establish and maintain effective systems and controls to ensure the fulfillment of their fiduciary responsibilities towards their clients particularly protectingclient money .Amended: July 2023
April 2012CL-2.2 CL-2.2 Arrangements to Hold Client Money
CL-2.2.1
Except as otherwise indicated, in order to ensure adequate protection of
client money ,insurance brokers must follow one of two approaches or a mix of both for holdingclient money :(a) Transfer the risk from theinsurance broker to theinsurance firm(s) ; or(b) Segregateclient money intoclient money accounts that cannot be used to reimburse other creditors if aninsurance broker fails.Amended: July 2023
April 2012CL-2.2.2
For purposes of subparagraph CL-2.2.1 (a), funds paid directly to insurance firms must not be received by the
insurance broker .Amended: July 2023
April 2012CL-2.2.3
For purposes of Subparagraph CL-2.2.1 (a), a written agreement must be in place between the
insurance broker and theinsurance firm stating that premiums/ contributions — and if theinsurance firm wishes, premium refunds — are held by theinsurance firm .Amended: July 2023
April 2012CL-2.2.4
For purposes of Subparagraph CL-2.2.1 (b), any
client money , aninsurance broker that is a financial institution, receives and holds for aninsurance firm must be held in aclient money account , properly segregated from theinsurance broker's own funds.Amended: July 2023
April 2012CL-2.2.5
[This Paragraph was deleted in July 2023].
Deleted: July 2023
April 2012CL-2.3 CL-2.3 Brokerage and Premiums/Contributions Collection
CL-2.3.1
In instances when Subparagraph CL-2.2.1(b) applies, the
insurance broker is solely responsible for collecting premiums/contributions from clients and passing these toinsurance firms . Any refund premiums/contributions due frominsurance firms , theinsurance broker shall pass these to clients immediately upon receipt frominsurance firms .Amended: July 2023
April 2012CL-2.3.2
For life/family takaful participating with profit policies, the
insurance broker are prohibited from collecting premiums/contributions from clients. Premiums/contributions must be paid directly by the policyholders/participants to insurance/takaful companies.Amended: July 2023
April 2012CL-2.3.3
Other than noted in Paragraph CL-1.1.6,
insurance brokers must pay toinsurance firms premiums/contributions received no later than (15) calendar days from the date of the receipt of such amounts.Amended: July 2023
April 2012CL-2.3.4
Except as permitted under Paragraph CL-2.3.4A,
insurance brokers are prohibited from deducting their brokerage commission from the premiums/contributions account(s).Insurance brokers must be paid separately their brokerage commission from theinsurance firms after transferring the amounts due (premiums/contributions) toinsurance firms no later than (10) calendar days from the receipt of the premiums/contributions byinsurance firms .Amended: July 2023
Amended: July 2015
April 2012CL-2.3.4A
In instances where international insurance business is involved, where an
insurance broker is dealing with an international insurance/reinsurance broker, theinsurance broker may choose to deduct its commission from the premium/contribution account.Added: July 2015CL-2.3.5
For brokerage activities,
insurance brokers are prohibited from collecting additional charges (other than the quoted premiums/contributions) from clients.Amended: July 2023
April 2012CL-2.3.6
Insurance brokers can offer other services to the policyholder on behalf of the insurance firm, such as the issuance of policy documentation. Such other services should be dictated in a separate agreement between theinsurance broker and theinsurance firm ; however, such charges should not result in any additional fees to the policyholder.April 2012CL-2.4 CL-2.4 Premiums/Contributions Payments
CL-2.4.1
The
insurance broker must immediately notify in writing theinsurance firm /Takaful firm if theinsurance broker fails to collect the amount due from the concerned clients within the agreed premiums/contributions payment terms dictated by theinsurance firm .April 2012CL-2.4.2
Brokerage charged by
insurance brokers cannot exceed 15% of the premiums/contributions quoted byinsurance /Takaful firms for motor and medical classes of business of direct general insurance business.April 2012RM RM Risk Management
RM-A RM-A Introduction
RM-A.1 RM-A.1 Purpose
Executive Summary
RM-A.1.1
This Module provides detailed Rules and Guidance on risk management systems and controls requirements for
insurance licensees . It expands on certain high-level requirements contained in various High-Level Standards Modules. In particular, Section AU-2.6 of Module AU (Authorisation) outlines the systems and controls required as part of the licensing conditions and Principle 10 of the Principles of Business (ref. PB-1.10) requiresinsurance licensees to have systems and controls sufficient to manage the level of risk inherent in their business.Amended: January 2007RM-A.1.2
This Module obliges
insurance licensees to recognise the range of risks that they face and the need to manage these effectively. Their risk management systems should monitor and control all material risks. The adequacy of a licensee's risk management is subject to the scale and complexity of its operations, however. In demonstrating compliance with certain Rules, smaller licensees with very simple operational structures and business activities may require to implement less extensive or sophisticated risk management systems, compared to licensees with a complex and/or extensive customer base or operations.Legal Basis
RM-A.1.3
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) relating to risk management and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2011
Amended: October 2007
Added: January 2007RM-A.1.4
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007RM-A.2 RM-A.2 Module History
RM-A.2.1
This Module was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007RM-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007
Amended: October 2007RM-A.2.3
A list of recent changes made to this module is detailed in the table below:
Module Ref. Change Date Description of Changes RM-1.1 01/07/05 Correction to cross-reference. RM-6.1 01/07/05 Clarified wording of factors to consider for operational risks. RM-2.1 01/10/05 Clarified that the 25% notification for reinsurance exposure is to be applied based on a premium basis. RM-8.1 01/10/05 Corrected cross reference in RM-8.1.6. RM-1.1 01/01/06 Clarified CBB's requirements for insurance firms to carry out their own assessment of their capital needs. RM-2.1 01/01/06 Corrected cross-reference. RM-6.1 01/07/06 Added requirements for physical security measures and third party insurance to be put in place by insurance firms. RM-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive. RM-7.5.3 04/2008 Clarified that CBB prior approval is required for intra-group outsourcing. RM-7.2.1, 7.2.2 and 7.3.6 07/2008 Clarified that CBB prior approval is required for outsourcing arrangements. RM-7.5.7 04/2010 Added a Paragraph dealing with restrictions on intra-group outsourcing. RM-A.1.3 01/2011 Clarified legal basis RM-7.6 04/2013 Section amended on outsourcing of internal audit. RM-1.1 04/2014 Enhanced the requirements for the risk management function. RM-7.1.3 10/2017 Amended Paragraph to allow the utilization of cloud services. RM-7.1.5A 10/2017 Added a new Paragraph on outsourcing requirements. RM-7.2.1 10/2017 Amended Paragraph. RM-7.2.3 10/2017 Amended Paragraph. RM-7.2.6 10/2017 Amended Paragraph. RM-7.2.8 10/2017 Added a new Paragraph on outsourcing. RM-7.3.1 10/2017 Amended Paragraph. RM-7.3.2 10/2017 Amended Paragraph. RM-7.3.3 10/2017 Amended Paragraph. RM-7.3.6 10/2017 Amended Paragraph. RM-7.4.6 10/2017 Amended Paragraph. RM-7.4.13 10/2017 Amended Paragraph. RM-7.4.14 10/2017 Amended Paragraph. RM-7.4.20 10/2017 Amended Paragraph. RM-7.4.21 10/2017 Added a new Paragraph on security measures related to cloud services. RM-7.5.3 10/2017 Amended Paragraph. RM-7.5.4 10/2017 Amended Paragraph. RM-9 10/2019 Added a new Section on Cyber Security. RM-9 01/2022 New revised Chapter on Cyber Security Risk Management. RM-9.1.58 04/2022 Amended Paragraph on cyber security reporting. RM-9.1.59 04/2022 Amended Paragraph on the submission of the cyber security report. RM-7 07/2022 Replaced Chapter RM-7 with new Outsourcing Requirements. RM-9.1.22 10/2022 Amended Paragraph on email domains requirements. RM-9.1.22A 10/2022 Added a new Paragraph on additional domains requirements. RM-A.2.3 [Deleted]
Deleted: January 2007RM-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007RM-B RM-B Scope of Application
RM-B.1 RM-B.1 Scope
RM-B.1.1
Unless otherwise stated in a Rule, or exempted in writing by the CBB, the contents of this Module apply to
Bahraini insurance firms andBahraini insurance brokers on a consolidated basis, and tooverseas insurance firms andoverseas insurance brokers with respect to their operations either booked in or undertaken from Bahrain.Amended: January 2007RM-B.1.2
Because of the nature of their activities,
insurance brokers are not subject to Sections RM-4.1 (Market Risk) and RM-5.1 (Insurance Technical Risk).Amended: January 2007RM-B.1.3
The CBB will only consider granting an exemption to a Rule in this Module, where the
insurance firm concerned can demonstrate that it has equivalent systems and controls applied at the group or parent entity level, that achieve the same objective as the CBB requirement concerned. The purpose of such an exemption is to allow entity-wide or group-wide systems and requirements to be applied, where these achieve the same outcome: exemptions are therefore only likely to be given with respect tooverseas insurance licensees , and possibly Bahraini licensees that are part of an overseas group. Because of their general nature, exemptions will not be considered with regards to the requirements contained in Chapter RM-1 (Risk Management Systems and Controls).Amended: January 2007RM-B.1.4
For the purposes of Paragraph RM-B.1.1, 'consolidated basis' means including the branches and subsidiaries of the
Bahraini insurance firm orBahraini insurance broker , whether these are located inside or outside the Kingdom of Bahrain.Amended: January 2007RM-B.1.5
Unless otherwise stated in a Rule, or exempted in writing by the CBB, the contents of this Module apply to operators of insurance exchanges authorised to carry out insurance business in Bahrain.
Amended: January 2007RM-B.1.6
The contents of this Module do not apply to
insurance consultants ,insurance managers and toappointed representatives , because the nature of their activities only exposepolicyholders to limited financial risk.Amended: January 2007RM-B.1.7
While the business of
insurance managers is not subject to this Module, clients ofinsurance managers that areinsurance firms , such ascaptive insurers , are subject to the requirements of this Module. Theinsurance manager , in fulfilling its obligations to its clients, therefore needs to manage the affairs of its clients in accordance with the requirements of the Rulebook, including this Module.Amended: October 2007RM-B.1.8
An
insurance licensee's failure to establish, in the opinion of the CBB, adequate systems and controls will result in it being in breach of Condition 6 of the Licensing Conditions of Section AU-2.6 of Module AU (Authorisation). This failure may result in the CBB withdrawing or imposing restrictions on the license, or the licensee being required to inject more capital.Amended: January 2007RM-1 RM-1 General Requirements
RM-1.1 RM-1.1 Risk Management Systems and Controls
RM-1.1.1
A licensee must take reasonable care to establish and maintain effective systems and controls as are appropriate to its business to manage its risks. These policies must be documented and regularly reviewed.
RM-1.1.2
The licensee's identification, assessment, management and reporting of risks must consider (but is not limited to) the management of
credit ,liquidity ,market ,technical ,operational (includingoutsourcing ) andgroup risks, as outlined in Chapters RM-2 to RM-8.Amended: January 2007RM-1.1.3
As noted in Paragraph CA-A.1.2,
insurance firms must regularly carry out their own assessment of their capital needs, appropriate to their risk profile, and maintain a process for monitoring and maintaining their actual capital in line with their assessment.RM-1.1.4
For purposes of Paragraph RM-1.1.3, the CBB does not prescribe the detailed form of such assessment, in order to give
insurance firms flexibility to develop their own approaches. Where a firm's assessment suggests that a level of capital that should be held is higher than the minimum required per Chapter CA-2, the CBB would expect firms to hold capital in line with their assessment.Amended: January 2007RM-1.1.5
The licensee must determine if any additional risk categories, other than those referred to in Paragraph RM-1.1.2 and RM-1.1.3, are relevant to its business and therefore need to be addressed.
Amended: January 2007Risk Management
RM-1.1.6
In the case of incorporated
insurance firms andinsurance brokers , the Board of Directors must take responsibility for the establishment and oversight of effective risk management systems and controls.RM-1.1.7
In the case of
Bahraini insurance brokers that are unincorporated entities or single person companies, theGeneral Manager must take responsibility for the establishment and oversight of effective risk management systems and controls.Amended: October 2007RM-1.1.8
Additional requirements relating to Boards and senior management in terms of risk management and controls are specified in Module HC (High-Level Controls). The Board may delegate various functions and tasks, but retains ultimate responsibility. However, the CBB will also take into account the responsibility of the
Chief Executive Officer orGeneral Manager of a licensee, within the framework of delegated authorities laid down by the Board.Amended: January 2007
Amended: October 2007RM-1.1.9
In assessing the systems and controls framework, the CBB would expect the Board to be able to demonstrate that it provides suitable prudential oversight and establish a risk management system that includes setting and monitoring policies so that all major risks are identified, measured, monitored and controlled on an on-going basis. The risk management systems should be approved and periodically reviewed by the Board as outlined in Paragraph HC-1.1.5.
Amended: January 2007Risk Management Function
RM-1.1.10
The CBB requires that all
insurance firms establish an independent risk management function, staffed by a head of risk management, duly approved by the CBB in accordance with Paragraph AU-1.2.1.Added: April 2014RM-1.1.10A
Depending on the scale and complexity of their operations,
insurance brokers must consider establishing an independent risk management function.Amended: April 2014RM-1.1.10B
The risk management function must be independent of risk-taking units and must not have any conflict of interest with any other function. The risk management function must have direct access to the Board and must report to the Board and senior management.
Added: April 2014RM-1.1.11
Where there is a risk management function, the licensee must document the process by which it manages risks, and how it directly reports to the Board of directors on these risks.
Amended: April 2014RM-1.1.12
[This Paragraph was deleted in April 2014.]
Deleted: April 2014RM-2 RM-2 Credit Risk
RM-2.1 RM-2.1 Credit Risk
RM-2.1.1
Section RM-2.1 applies only to
insurance firms andinsurance brokers .RM-2.1.2
Insurance licensees must identify and manage theircredit risk across all their operations, and document their policies and procedures for achieving this in acredit risk policy. This policy must be regularly reviewed.Amended: January 2007
Amended: October 2007RM-2.1.3
Amongst other things, a licensee's
credit risk policy must identify the limits it applies to both individualcounterparties and categories ofcounterparty , how it monitors movements in counterparty risk and how it mitigates loss in the event of counterparty failure.Amended: October 2007RM-2.1.4
Credit risk is the risk that acounterparty will not meet its obligations in accordance with agreed terms, causing a financial loss. In the case of aninsurance firm ,credit risk will normally occur with:(a) Reinsurance counterparties;(b) Assets (e.g. stock, loans);(c) Derivatives; and(d) Insurance debtors (premiums due from insured persons and intermediaries).Amended: January 2007
Amended: October 2007RM-2.1.5
The licensee should consider these and other credit risk factors that may affect the licensee's solvency:
(a) The credit-worthiness of its reinsurers;(b) The financial effect of non-performance of the reinsurance; and(c) The financial effect of non-payment of premiums, by debtors such as intermediaries andpolicyholders .Amended: January 2007RM-2.1.6
In addition to considering the failure of
counterparties , the licensee should also consider scenarios such as increases in late payment and doubtful debt provisioning, and measures to mitigatecredit risks , such as premium payment warranties (whereby policy coverage only becomes effective on payment of premiums).Amended: October 2007RM-2.1.7
An
insurance firm must monitor its exposure, defined as sums insured, to an individual reinsurer and provide details of its reinsurance programme to the CBB. It must notify the CBB if its total aggregate exposure, on a premium basis, to one reinsurer (or group of related reinsurers) exceeds 25% of individual or aggregate risks and why it considers that this exposure does not pose acredit risk for which a provision should be made.Amended: January 2007RM-2.1.8
Paragraph RM-2.1.7 does not constitute a prohibition on exceeding this amount as the CBB recognises that there may be situations and types of reinsurance arrangements where
reinsurance in excess of this limit might be necessary. The CBB should however be notified of these cases, and the licensee should include an explanation of the reason why it believes that the excess exposure is an acceptablecredit risk .Amended: January 2007
Amended: October 2007RM-2.1.9
In addition to the requirements noted in Paragraph RM-2.1.7,
insurance firms must evaluate the credit worthiness of individual reinsurers at the time of ceding business and on an on-going basis.RM-2.1.10
The credit worthiness of reinsurers may be established by referring to ratings provided by international rating agencies, such as Standard & Poors or AM Best.
RM-2.1.11
An
insurance licensee must keep its exposure to individual assets or classes of assets within prudent levels, taking into account the relationship between counterparties, geographical and sectoral concentration, duration of exposures and the exposure to single loss events (e.g. regional economic downturns). Chapter CA-4 provides additional Rules in establishing limitations in the valuation of assets.Amended: January 2007RM-2.1.12
Specific
counterparty limits are contained in Paragraph CA-4.2.33.Amended: January 2007
Amended: October 2007RM-2.1.13
An
insurance licensee must take into account the risk of default in the valuation of its assets.RM-3 RM-3 Liquidity Risk
RM-3.1 RM-3.1 Liquidity Risk
RM-3.1.1
Section RM-3.1 applies only to
insurance firms andinsurance brokers .RM-3.1.2
Insurance licensees must identify and manage theirliquidity risk across all their operations, and document their policies and procedures for achieving this in aliquidity risk policy. This policy must be regularly reviewed.Amended: January 2007RM-3.1.3
Liquidity risk is the risk of not being able to meet liabilities when they fall due, even though a firm may still be solvent.Liquidity risk can result from claims falling due earlier than anticipated, higher than expected policy surrender or changes in mortality rates.RM-3.1.4
Liquidity risk ininsurance licensees relates to the management of their cash flow and the risk to their meeting short-term liabilities due to liquidity problems. The risks of matching of assets and liabilities, currency risk etc. are considered as part of insurance risk and are the subject of specific limits in Section CA-6.1.RM-3.1.5
Insurance licensees must also carry out stress testing to assess the resilience of their financial resources to any identified areas of materialliquidity risk . This stress testing may take into account the general characteristics, and licensee's experience, of the classes of business that it writes, any discounting of its claims provisions, and any mitigating factors that it considers relevant such as the ability to sell assets quickly and the options available to re-schedule the payments topolicyholders and othercounterparties .RM-3.1.6
Where the
insurance licensee considers that the nature of its assets or liabilities and the matching of its liabilities result in no significantliquidity risk exposure, it will not be expected to carry out stress testing. The CBB will expect it to document the reasons for its decision and be prepared to discuss these during an on-site visit.Amended: January 2007RM-3.1.7
When assessing
liquidity risk , theinsurance licensee should consider the extent of mismatch between assets and liabilities and the amount of assets held in highly liquid, marketable forms should unexpected cash flows lead to a liquidity problem. The price concession of liquidating assets is a prime concern when assessing suchliquidity risk and should be built into any assessment of capital adequacy.Amended: January 2007RM-3.1.8
Captive insurance firms are exempted from the specific requirement to undertake stress and scenario testing aimed at testing the resilience of their financial resources to specific areas of significant risk.Amended: January 2007RM-4 RM-4 Market Risk
RM-4.1 RM-4.1 Market Risk
RM-4.1.1
Section RM-4.1 applies only to
insurance firms .RM-4.1.2
Insurance licensees must identify and manage theirmarket risk across all their operations, and document their policies and procedures for achieving this in amarket risk policy. This policy must be regularly reviewed.Amended: October 2007RM-4.1.3
Market risk relates to the exposure of theinsurance licensee , to fluctuations in the market value, currency or yield of an asset.RM-4.1.4
A licensee's
market risk policy must identify its appetite formarket risk , systems for identifying, reporting and documentingmarket risk and mitigation factors in place.RM-4.1.5
Insurance firms (other than captives) must carry out stress testing to assess the resilience of their financial resources to any identified areas of materialmarket risk under reasonably foreseeable circumstances. This stress testing may take into account the rating and geographical spread of its assets, the duration of their maturity relative to the licensee's liabilities and the fluctuation of interest and currency rates.RM-4.1.6
The
insurance licensee should consider potentialmarket risk events that may affect its solvency. These include the following:(a) Reduced values of equities due to stock market falls, etc;(b) Variation in interest rates and the effect on the market value of investments;(c) A lower level of investment income than planned;(d) Inadequate valuation of assets;(e) The direct impact on the portfolio of currency devaluation, as well as the effect on related markets and currencies; and(f) The extent of any mismatch of assets and liabilities.Amended: January 2007RM-4.1.7
Chapter CA-4 contains Rules and Guidance relating to the valuation of assets and
counterparty limits . Chapter CA-6 contains Rules and Guidance relating to currency matching and localisation.Amended: January 2007RM-4.1.8
Where the
insurance licensee considers that the nature of its assets and the matching of its liabilities result in no significantmarket risk exposure (e.g. its investments consist entirely of cash and bank deposits), it will not be expected to carry out stress testing. The CBB will expect it to document the reasons for its decision and be prepared to discuss these during an on-site visit.Amended: January 2007RM-5 RM-5 Insurance Technical Risk
RM-5.1 RM-5.1 Insurance Technical Risk
RM-5.1.1
Section RM-5.1 applies only to
insurance firms .RM-5.1.2
An
insurance firm licensee must identify and manage itsinsurance technical risk across all its operations, and document its underwriting and claims policies for achieving this in anunderwriting policy .Amended: January 2007RM-5.1.3
Insurance
technical risk is the normal trading risk, arising out ofcontracts of insurance , that theinsurance licensee is exposed to in its day-to-day operations, and includes the technical and actuarial bases of calculation for premiums and technical provisions in both long-term and general insurance.Amended: January 2007
Amended: October 2007RM-5.1.4
An
insurance firm must document its underwriting and claims policies and review these at regular intervals.RM-5.1.5
The underwriting policy must be at a level of detail appropriate to the nature, magnitude and source of its business and must include (but is not limited to) a description of the following elements:
(a) Classes and sources of business to be written (including limits on concentrations of class, location andcounterparty );(b) Rating and pricing strategy and methodology;(c) The management of, and reserving for, claims;(d) Responsibilities and authority levels; and(e) Reinsurance protections, including any mismatch between the duration of the contracts and the underlying reinsurance protection.Amended: January 2007RM-5.1.6
The claims policy must be at a level of detail appropriate to the nature, magnitude and source of its business and must include (but is not limited to) a description of the following elements:
(a) Reporting (e.g. evidence required, appointment ofloss adjusters );(b) Scrutiny;(c) Authority levels;(d) Valuation;(e) Monitoring claims settlement, payments, reinsurance recoveries and subrogation; and(f) Provisioning of claims, including the bases and assumptions followed, authority levels, record-keeping and review.Amended: January 2007RM-5.1.7
Where necessary to demonstrate the adequacy of its financial resources under reasonably foreseeable deteriorations of its underwriting and claims positions, the
insurance firm must conduct stress testing under a range of foreseeable adverse scenarios.RM-5.1.8
In assessing the outcome of adverse scenarios on the future solvency position,
insurance firms must consider the impact of future further deterioration claims reserves (or, in the case of long- term business, the inadequacy ofmathematical reserves ) and future loss ratios being higher than past claims patterns would suggest.Amended: January 2007RM-5.1.9
Factors that licensees may consider appropriate in assessing the levels of underwriting risk include:
(a) The adequacy of the licensee's pricing structure;(b) The volatility of sales volumes (e.g. the risk of poor underwriting from over-rapid expansion);(c) The uncertainty of claims experience (and the length of the claims 'tail');(d) The share of premium paid to intermediaries;(e) The adequacy of the coverage of the reinsurance programme;(f) The impact of the licensee's inability to secure renewal of part of itsreinsurance at acceptable terms or at all;(g) The risk of unintended risks claims being covered (or not excluded) by policy wordings; and(h) The risk of mis-selling, for example, the number of complaints or disputed claims.Amended: January 2007
Amended: October 2007RM-5.1.10
Factors that
insurance licensees may consider appropriate in assessing the levels of claims risk include:(a) The frequency and size of large claims;(b) Possible outcomes relating to any disputed claims, particularly where the outcome is subject to legal proceedings;(c) The ability of the licensee to withstand catastrophic events, increases in unexpected exposures, latent claims or aggregation of claims;(d) The possible exhaustion of reinsurance arrangements, both on a per-risk and per-event basis;(e) The non-payment of outstanding claims due to the lack of coverage offered by thereinsurance purchased for underwritten risks (i.e. offsetting potential liabilities);(f) Social changes regarding an increase in the propensity to claim and to sue;(g) The impact of unanticipated legal judgements on claims and claims reserves;(h) Other social, economic and technological changes; and(i) The risk associated with dealing with a reinsurer, fronting 100% of the risks ceded.Amended: January 2007
Amended: October 2007RM-5.1.11
The CBB believes that
insurance firms need to consider carefully dealing with reinsurers fronting 100% of the risks that is ceded to them. The concern is that the reinsurer ceding 100% of the risk to a retrocessionaire has little incentive to adhere to proper standards of underwriting, due to it receiving a fee, based on maximizing volume of premium, at the expense of underwriting soundness. Fronting arrangements can result in abrupt cancellation by the assuming reinsurer and sometimes refusal to pay claims because of the lack of observation of the understandings with regard to business quality that were agreed upon when the arrangement was negotiated. Consequently, insurers may have to assume risks for which they believed to have covered through a proper reinsurance arrangement, should the reinsurer no longer honour the arrangement. The CBB will scrutinise carefully the management by firms of the risks associated with fronting, in the course of its supervision.Amended: January 2007RM-5.1.12
Additional factors that general insurers may consider appropriate in assessing the levels of claims risk include:
(a) The adequacy and uncertainty of the technical claims provisions, such as outstanding claims, IBNR and claims handling expense reserves;(b) The adequacy of other underwriting provisions, such as the provisions for unearned premium and unexpired risk reserves;(c) The appropriateness of catastrophe models and underlying assumptions used, such as possible maximum loss (PML) factors used; and(d) The effects of inflation.Amended: January 2007RM-5.1.13
Additional factors that long-term insurers may consider appropriate in assessing the levels of claims risk include future variations in investment returns and in mortality and
morbidity rates.RM-6 RM-6 Operational Risk
RM-6.1 RM-6.1 Operational Risk
RM-6.1.1
Section RM-6.1 applies only to
insurance firms andinsurance brokers RM-6.1.2
An
insurance licensee must identify and manage itsoperational risk across all its operations, and document its policies and procedures for achieving this in anoperational risk policy.RM-6.1.3
Operational risk is the risk to theinsurance licensee of loss resulting from inadequate or failed internal processes, people and systems, or from external events.RM-6.1.4
Insurance licensees must consider the impact ofoperational risks on their financial resources and solvency. In so doing,insurance licensees must consider the factors listed under Paragraph RM-6.1.5, and any other factors relevant to their business.Amended: January 2007RM-6.1.5
In assessing potential
operational risk , events that may affect the licensee's solvency include the following:(a) Risks to the licensee's resources and reputation from employees and agents (due to fraud, negligence etc);(b) Adequacy of management information;(c) Failure of information technology through breakdown, incompatibility of legacy systems and poor scalability, poor security, etc.;(d) Failure of processes and procedures;(e) Internal and external fraud;(f)Outsourcing risk (for more detail, see RM-7);(g) Resourcing levels;(h) Business continuity and disaster recovery; and(i) Reputational risks and the risk to the licensee's business from an undermining of consumer confidence in particular market segments, e.g. savings products.Amended: January 2007RM-6.1.6
Human failure may arise either from the loss of one or more key individuals, lack of competence or failure of an individual to follow procedures or observe authority levels.
RM-6.1.7
The
insurance licensee must identify those processes, systems and premises that are critical to its survival and continuing operations and must develop contingency plans ('business continuity planning') covering these areas. These plans must be regularly updated and tested.Amended: January 2007RM-6.1.8
An
insurance licensee should have the means to ensure that its statutory and regulatory responsibilities are effectively carried out, especially where the group is subject tomatrix management . More specifically, clear reporting lines and responsibilities need to be defined to minimize the risk that statutory and regulatory responsibilities are overlooked.RM-6.1.9
Insurance licensees must ensure that there is adequate succession planning and that the risks arising from the loss of key individuals are thereby contained.RM-6.1.10
The licensee's Board is responsible for ensuring the suitability and competence of employees for the assigned tasks, and for the adequacy of staffing levels. Depending on their size and scale of their activities,
insurance licensees should consider having in place a formal appraisal process and a training plan for professional members of staff. For employees that are members of professional bodies it may also be appropriate for this to be integrated with requirements of those bodies for Continuing Professional Education (CPE).RM-6.1.11
Insurance licensees must identify, manage and control the risks that arise from human failure, including employees and agents. These include inappropriate remuneration policies, health and safety and employment policies.RM-6.1.12
The licensee's business continuity planning, risk identification and reporting must cover reasonably foreseeable external events and their likely impact on the firm and its business portfolio.
Physical Security Measures
RM-6.1.13
Insurance licensees that deal directly with the public and maintain cash on their premises must put in place security measures to minimise the risk of theft or fraud.RM-6.1.14
Insurance licensees subject to Paragraph RM-6.1.13 must ensure that the maximum cash maintained at their premises at the end of each day is limited to BD10,000.RM-6.1.15
Insurance licensees subject to Paragraph RM-6.1.13 are required to install an alarm system for those premises that maintain cash.RM-6.1.16
Where appropriate,
insurance licensees may consider the need to maintain a trained security guard at their premises.Third Party Insurance
RM-6.1.17
Insurance licensees are required to have in place insurance coverage from an unrelated third party to cover potential losses arising from liability, theft, fire and other potential operational risk.RM-7 RM-7 Outsourcing Requirements
RM-7.1 RM-7.1 Outsourcing Arrangements
RM-7.1.1
This Chapter sets out the CBB’s approach to outsourcing by licensees. It also sets out various requirements that licensees must address when considering outsourcing an activity or function.
Amended: July 2022RM-7.1.2
In the context of this Chapter, ‘outsourcing’ means an arrangement whereby a third party performs on behalf of a licensee an activity which commonly would have been performed internally by the licensee. Examples of services that are typically outsourced include data processing, cloud services, customer call centres and back-office related activities.
Amended: July 2022RM-7.1.3
In the case of branches of foreign entities, the CBB may consider a third-party outsourcing arrangement entered into by the licensee’s head office/regional office or other offices of the foreign entity as an intragroup outsourcing, provided that the head office/regional office submits to the CBB a letter of comfort which includes, but is not limited to, the following conditions:
i. The head office/regional office declares its ultimate responsibility of ensuring that adequate control measures are in place; andii. The head office/regional office is responsible to take adequate rectification measures, including compensation to the affected customers, in cases where customers suffer any loss due to inadequate controls applied by the third-party service provider.Amended: July 2022
Amended: October 2017RM-7.1.4
The
licensee must not outsource the following functions:(i) Compliance;(ii) AML/CFT;(iii) Financial control;(iv) Risk management; and(v) Business line functions offering regulated services directly to the customers (refer to Regulation No. (1) of 2007 and its amendments for the list of CBB regulated services).Amended: July 2022
Amended: January 2007RM-7.1.5
For the purposes of Paragraph RM-7.1.4, certain support activities, processes and systems under these functions may be outsourced (e.g. call centres, data processing, credit recoveries, cyber security, e-KYC solutions) subject to compliance with Paragraph RM-7.1.7. However, strategic decision-making and managing and bearing the principal risks related to these functions must remain with the
licensee .Amended: July 2022
Amended: January 2007RM-7.1.6
Branches of foreign entities may be allowed to outsource to their head office, the risk management function stipulated in Subparagraph RM-7.1.4 (iv), subject to CBB’s prior approval.
Amended: July 2022
Added: October 2017RM-7.1.7
Licensees must comply with the following requirements:(i) Prior CBB approval is required on any outsourcing to a third-party outside Bahrain (excluding cloud data services). The request application must:a. include information on the legal and technical due diligence, risk assessment and detailed compliance assessment; andb. be made at least 30 calendar days before the licensee intends to commit to the arrangement.(ii) Post notification to the CBB, within 5 working days from the date of signing the outsourcing agreement, is required on any outsourcing to an intragroup entity within or outside Bahrain or to a third-party within Bahrain, provided that the outsourced service does not require a license, or to a third-party cloud data services provider inside or outside Bahrain.(iii)Licensees must have in place sufficient written requirements in their internal policies and procedures addressing all strategic, operational, logistical, business continuity and contingency planning, legal and risks issues in relation to outsourcing.(iv)Licensees must sign a service level agreement (SLA) or equivalent with every outsourcing service provider. The SLA must clearly address the scope, rights, confidentiality and encryption requirements, reporting and allocation of responsibilities. The SLA must also stipulate that the CBB, external auditors, internal audit function, compliance function and where relevant the Shari’a coordination and implementation and internal Shari’a audit functions of thelicensee have unrestricted access to all relevant information and documents maintained by the outsourcing service provider in relation to the outsourced activity.(v)Licensees must designate an approved person to act as coordinator for monitoring and assessing the outsourced arrangement.(vi)Licensee must submit to the CBB any report by any other regulatory authority on the quality of controls of an outsourcing service provider immediately after its receipt or after coming to know about it.(vii)Licensee must inform its normal supervisory point of contact at the CBB of any material problems encountered with the outsourcing service provider if they remain unresolved for a period of three months from its identification date.Amended: July 2022
Amended: January 2007RM-7.1.8
For the purpose of Subparagraph RM-7.1.7 (iv),
licensees as part of their assessments may use the following:a) Independent third-party certifications on the outsourcing service provider’s security and other controls;b) Third-party or internal audit reports of the outsourcing service provider; andc) Pooled audits organized by the outsourcing service provider, jointly with its other clients.When conducting on-site examinations,
licensees should ensure that the data of the outsourcing service provider’s other clients is not negatively impacted, including impact on service levels, availability of data and confidentiality.Amended: July 2022RM-7.1.9
For the purpose of Subparagraph RM-7.1.7 (i), the CBB will provide a definitive response to any prior approval request for outsourcing within 10 working days of receiving the request complete with all the required information and documents.
Added: July 2022RM-7.2 [This Section was deleted in July 2022]
RM-7.3 [This Section was deleted in July 2022]
RM-7.4 [This Section was deleted in July 2022]
RM-7.5 [This Section was deleted in July 2022]
RM-7.6 [This Section was deleted in July 2022]
RM-8 RM-8 Group Risk
RM-8.1 RM-8.1 Group Risk
RM-8.1.1
Section RM-8.1 applies only to
Bahraini insurance firms andBahraini insurance brokers .Amended: October 2007RM-8.1.2
An
insurance licensee must identify, manage and control risks to its activities arising from the activities and financial position of other members of itsgroup .RM-8.1.3
The CBB may impose additional restrictions on the
insurance licensee should it have reason to believe that other members of thegroup pose undue risk to theinsurance licensee . These restrictions, for instance, may try to limit the risk of financial contagion, by restricting financial transactions between the licensee and group members.Amended: January 2007
Amended: October 2007RM-8.1.4
For purposes of Section RM-8.1, the term
group refers to a person or firm who is:(a) Theparent of the licensee;(b) Asubsidiary of the licensee (including subsidiaries of subsidiaries); or(c) Asubsidiary of the licensee'sparent .Amended: January 2007RM-8.1.5
The Board is expected to request sufficient information of its group members to allow it to address group risks.
RM-8.1.6
Where the licensee's
group orparent reports its own solvency position to its regulatory authority (on a group or 'solo' basis), a copy of this calculation must be provided to the CBB within 30 calendar days from the due date to the other regulatory authority, in accordance with Paragraph CA-7.1.8.Amended: January 2007
Amended: October 2007RM-8.1.7
Where a licensee is part of a larger financial services group, it may rely on the systems and controls that the
group (or itsparent company) has put in place. The Board in these circumstances should establish what systems and controls are in place and should ensure that it is provided with sufficient and timely information on the solvency position of thegroup . This should be evidenced in the prudential records retained in Bahrain.Amended: January 2007
Amended: October 2007RM-8.1.8
In assessing group systems and controls, an
insurance licensee must give consideration to:(a) The likely impact of activities of thegroup on the compliance of the licensee with CBB requirements;(b) The effectiveness of linkages between group central functions and the licensee;(c) Potential conflicts of interest and methods of minimising them; and(d) The risk of adverse events of other group entities on the licensee, in particular due to financial weakness, crime or fraudulent behaviour.Amended: January 2007
Amended: October 2007RM-8.1.9
An
insurance licensee should not be subject to material influence by other entities of thegroup through informal or undocumented channels. The overall governance, high-level controls and reporting lines with thegroup should be clearly documented.Amended: October 2007RM-9 RM-9 Cyber Security Risk Management
RM-9.1 RM-9.1 Cyber Security Risk Management
Role of the Board and Senior Management
RM-9.1.1 RM-9.1.1
The Board of
insurance licensees must ensure that thelicensee has a robust cyber security risk management framework to comprehensively manage thelicensee ’s cyber security risk and vulnerabilities. The Board must establish clear ownership, decision-making and management accountability for risks associated with cyber-attacks and related risk management and recovery processes.Amended: January 2022
Added: October 2019RM-9.1.2 RM-9.1.2
Licensees must ensure that the cyber security risk management framework encompasses, at a minimum, the following components:a) Cyber security strategy;b) Cyber security policy; andc) Cyber security risk management approach, tools and methodology and, an organization-wide security awareness program.Amended: January 2022
Added: October 2019RM-9.1.3
The cyber security risk management framework must be developed in accordance with the National Institute of Standards and Technology (NIST) Cyber security framework which is summarized in Appendix A – Cyber security Control Guidelines. At the broader level, the Cyber security framework should be consistent with the
licensee ’s risk management framework.Amended: January 2022
Added: October 2019RM-9.1.4
Senior management, and where appropriate, the board
s, should receive comprehensive reports,covering cyber security issues such as the following:a. Key Risk Indicators/ Key Performance Indicators;b. Status reports on overall cyber security control maturity levels;c. Status of staff Information Security awareness;d. Updates on latest internal or relevant external cyber security incidents; ande. Results from penetration testing exercises.Amended: January 2022
Added: October 2019RM-9.1.5
The Board must ensure that the cyber security risk management framework is evaluated for scope of coverage, adequacy and effectiveness every three years or when there are significant changes to the risk environment, taking into account emerging cyber threats and cyber security controls.
Amended: January 2022
Added: October 2019RM-9.1.6
Insurance firms must establish a cyber security risk function, independent of the information technology (IT) department, which must report to an independent risk management function or an equivalent function within thelicensee . The cyber security risk management function must monitor and report on the status and maturity of relevant cyber security controls. Other insurance licensees may assign the responsibilities to a qualified Chief Information Security Officer (CISO) reporting to an independent risk management function or incorporate the responsibilities of cyber security risk into the risk management function.Overseas insurance licensees must be governed under a framework of cyber security risk management policies which ensure that an adequate level of oversight is exercised by the regional office or head office.Amended: January 2022
Added: October 2019RM-9.1.7
Licensees should ensure that appropriate resources are allocated to the cyber security risk management function for implementing the cyber security framework.Amended: January 2022
Added: October 2019RM-9.1.8
Licensees must ensure that the cyber security risk management function is headed by suitably qualified Chief Information Security Officer (CISO), with appropriate authority to implement the Cyber Security strategy.Amended: January 2022
Added: October 2019RM-9.1.9
Licensees may establish a cyber security committee that is headed by an independent senior manager from a control function (like CFO / CRO), with appropriate authority to approve policies and frameworks needed to implement the cyber security strategy, and act as a governance committee for the cyber security function. Membership of this committee should include senior management members from business functions, IT, Risk and Compliance.Amended: January 2022
Added: October 2019RM-9.1.10
The
senior management must be responsible for the following activities:(a) Create the overall cyber security risk management framework and adequately oversee its implementation;(b) Formulate an organisation-wide cyber security strategy and cyber security policy;(c) Implement and consistently maintain an integrated, organisation-wide, cyber security risk management framework, and ensure sufficient resource allocation;(d) Monitor the effectiveness of the implementation of cyber security risk management practices and coordinate cyber security activities with internal and external risk management entities;(e) Ensure that internal management reporting caters to cyber threats and cyber security risk treatment;(f) Prepare quarterly or more frequent reports on all cyber incidents (internal and external) and their implications on thelicensee ; and(g) Ensure that processes for identifying the cyber security risk levels across thelicensee are in place and annually evaluated.Amended: January 2022
Added: October 2019RM-9.1.11
The
senior management must ensure that:(a) Thelicensee has identified clear internal ownership and classification for all information assets and data;(b) Thelicensee has maintained an inventory of the information assets and data which is reviewed and updated regularly;(c) The cyber security staff are adequate to manage thelicensee ’s cyber security risks and facilitate the performance and continuous improvement of all relevant cyber security controls;(d) It provides and requires cyber security staff to attend regular cyber security update and training sessions (for example Security+, CEH, CISSP, CISA, CISM, CCSP) to stay abreast of changing cyber security threats and countermeasures.Amended: January 2022
Added: October 2019RM-9.1.12
With respect to Subparagraph RM-9.1.11(a), data classification entails analyzing the data the
licensee retains, determining its importance and value, and then assigning it to a category. When classifying data, the following aspects of the policy should be determined:a) Who has access to the data;b) How the data is secured;c) How long the data is retained (this includes backups);d) What method should be used to dispose of the data;e) Whether the data needs to be encrypted; andf) What use of the data is appropriate.The general guideline for data classification is that the definition of the classification should be clear enough so that it is easy to determine how to classify the data. In other words, there should be little (if any) overlap in the classification definitions. The owner of data (i.e. the relevant business function) should be involved in such classification.
Amended: January 2022
Added: October 2019Cyber Security Strategy
RM-9.1.13
An organisation-wide cyber security strategy must be defined and documented to include:
(a) The position and importance of cyber security at thelicensee ;(b) The primary cyber security threats and challenges facing thelicensee ;(c) Thelicensee ’s approach to cyber security risk management;(d) The key elements of the cyber security strategy including objectives, principles of operation and implementation approach;(e) Scope of risk identification and assessment, which must include the dependencies on third party service providers;(f) Approach to planning response and recovery activities; and(g) Approach to communication with internal and external stakeholders including sharing of information on identified threats and other intelligence among industry participants.Amended: January 2022
Added: October 2019RM-9.1.14
The cyber security strategy should be communicated to the relevant stakeholders and it should be revised as necessary and, at least, once every three years. Appendix A provides cyber security control guidelines that can be used as reference to support the
licensee ’s cyber security strategy and cyber security policy.Amended: January 2022
Added: October 2019Cyber Security Policy
RM-9.1.15
Licensees must implement a written cyber security policy setting forth its policies for the protection of its electronic systems and client data stored on those systems, which must be reviewed and approved by thelicensee's senior management, as appropriate, at least annually. The cyber security policy areas including but not limited to the following must be addressed:(a) Definition of the key cyber security activities within thelicensee , the roles, responsibilities, delegated powers and accountability for these activities;(b) A statement of thelicensee ’s overall cyber risk tolerance as aligned with thelicensee ’s business strategy. The cyber risk tolerance statement should be developed through consideration of the various impacts of cyber threats including customer impact, service downtime, potential negative media publicity, potential regulatory penalties, financial loss, and others;(c) Definition of main cyber security processes and measures and the approach to control and assessment;(d) Policies and procedures (including process flow diagrams) for all relevant cyber security functions and controls including the following:(a) Asset management (Hardware and software);(b) Incident management (Detection and response);(c) Vulnerability management;(d) Configuration management;(e) Access management;(f) Third party management;(g) Secure application development;(h) Secure change management;(i) Cyber training and awareness;(j) Cyber resilience (business continuity and disaster planning); and(k) Secure network architecture.Amended: January 2022
Added: October 2019Approach, Tools and Methodology
RM-9.1.16 RM-9.1.16
Licensees must ensure that the cyber security policy is effectively implemented through a consistent risk-based approach using tools and methodologies that are commensurate with the size and risk profile of thelicensee . The approach, tools and methodologies must cover all cyber security functions and controls defined in the cyber security policy.Amended: January 2022
Added: October 2019RM-9.1.17
Licensees should establish and maintain plans, policies, procedures, process and tools (“playbooks”) that provide well-defined, organised approaches for cyber incident response and recovery activities, including criteria for activating the measures set out in the plans and playbooks to expedite thelicensee’s response time. Plans and playbooks should be developed in consultation with business lines to ensure business recovery objectives are met and are approved by senior management before broadly shared across thelicensee . They should be reviewed and updated regularly to incorporate improvements and/or changes in thelicensee .Licensees may enlist external subject matter experts to review complex and technical content in the playbook, where appropriate. A number of plans and playbooks should be developed for specific purposes (e.g. response, recovery, contingency, communication) that align with the overall cyber security strategy.Added: January 2022Prevention Controls
RM-9.1.18
A
Licensee must develop and implement preventive measures across all relevant technologies to minimise thelicensee ’s exposure to cyber security risk. Such preventive measures must include, at a minimum, the following:(a) Deployment of End Point Protection (EPP) and Endpoint Detection and Response (EDR) including anti-virus software and anti-malware programs to detect, prevent, and isolate malicious code;(b) Use of firewalls for network segmentation including use of Web Application Firewalls (WAF), where relevant, for filtering and monitoring HTTP traffic between a web application and the Internet, and access control lists to limit unauthorized system access between network segments;(c) Rigorous security testing at software development stage as well as after deployment to limit the number of vulnerabilities;(d) Use of a secure email gateway to limit email based cyber attacks such as malware attachments, malicious links, and phishing scams (for example use of Microsoft Office 365 Advanced Threat Protection tools for emails);(e) Use of a Secure Web Gateway to limit browser based cyber-attacks, malicious websites and enforce organization policies;(f) Creating a list of whitelisted applications and application components (libraries, configuration files, etc.) that are authorized to be present or active on the organization’s systems; and(g) Implementing Bring Your Own Device “BYOD” security policies to secure all mobile devices with any access tolicensee systems, applications, and networks through security measures such as encryption, remote wipe capabilities, and password enforcement.Added: January 2022RM-9.1.19
Licensees should also implement the following prevention controls in the following areas:(a) Data leakage prevention to detect and prevent confidential data from leaving the licensee’s technology environment;(b) to Controls or solutions to secure, control, manage and monitor privileged access to critical assets, (e.g. Privileged Access Management (PAM))(c) Controls to secure physical network ports against connection to computers which are unauthorised to connect to thelicensee’s network or which do not meet the minimum-security requirements defined forlicensee computer systems (e.g. Network access control); and(d) Identity and access management controls to limit the exploitation and monitor the use of privileged and non-privileged accounts.Added: January 2022RM-9.1.20
Licensees must set up anti-spam and anti-spoofing measures to authenticate thelicensee ’s mail server and to prove to ISPs, mail services and other receiving mail servers that senders are truly authorized to send the email. Examples of such measures include:• SPF “Sender Policy Framework”;• DKIM “Domain Keys Identified Mail”; and• DMARC “Domain-based Message Authentication, Reporting and Conformance”.Added: January 2022RM-9.1.21
Licensees should subscribe to one of the Cyber Threat Intelligence services in order to stay abreast of emerging cyber threats, cybercrime actors and state of the art tools and security measures.Added: January 2022RM-9.1.22
Licensees must use a single unified private email domain or its subdomains for communication with customers to prevent abuse by third parties.Licensees must not utilise third-party email provider domains for communication with customers. The email domains must comply with the requirements with respect to SPF, DKIM and DMARC in this Module. With respect to URLs or other clickable links in communications with customers,licensees must comply with the following requirements:(a) Limit the use of links in SMS and other short messages (such as WhatsApp) to messages sent as a result of customer request or action. Examples of such customer actions include verification links for customer onboarding, payment links for customer-initiated transactions etc;(b) Refrain from using shortened links in communication with customers;(c) Implement one or more of the following measures for links sent to customers:i. ensure customers receive clear instructions in communications sent with the links;ii. prior notification to the customer such as through a phone call informing the customer to expect a link from thelicensee ;iii. provision of transaction details such as the transaction amount and merchant name in the message sent to the customer with the link;iv. use of other verification measures like password or biometric authentication; and(d) Create customer awareness campaigns to educate their customers on the risk of fraud related to links they receive in SMS, short messages and emails with clear instructions to customers thatlicensees will not send clickable links in SMS, emails and other short messages to request information or payments unless it is as a result of customer request or action.Amended: October 2022
Added: January 2022RM-9.1.22A
For the purpose of Paragraph RM-9.1.22, subject to CBB’s approval,
licensees may be allowed to use additional domains for email communications with customers under certain circumstances. Examples of such circumstances include emails sent to customers by:(a) Head/regional office of alicensee ; and(b) Third-party service providers subject to prior arrangements being made with customers. Examples of such third-party services include informational subscription services (e.g. Bloomberg) and document management services (e.g. DocuSign).Added: October 2022Cyber Risk Identification and Assessments
RM-9.1.23
Licensees must conduct periodic assessments of cyber threats. For the purpose of analysing and assessing current cyber threats relevant to thelicensee , it should take into account the factors detailed below:(a) Cyber threat entities including cyber criminals, cyber activists, insider threats;(b) Methodologies and attack vectors across various technologies including cloud, email, websites, third parties, physical access, or others as relevant;(c) Changes in the frequency, variety, and severity of cyber threats relevant to the region;(d) Dark web surveillance to identify any plot for cyber attacks;(e) Examples of cyber threats from past cyber attacks on thelicensee if available; and(f) Examples of cyber threats from recent cyber attacks on other organisations.Added: January 2022RM-9.1.24
Licensees must conduct periodic assessments of the maturity, coverage, and effectiveness of all cyber security controls. Cyber security control assessment must include an analysis of the controls’ effectiveness in reducing the likelihood and probability of a successful attack.Added: January 2022RM-9.1.25
Licensees should ensure that the periodic assessments of cyber threats and cyber security controls cover all critical technology systems. A risk treatment plan should be developed for all residual risks which are considered to be above thelicensee ’s risk tolerance levels.Added: January 2022RM-9.1.26
Licensees must conduct regular technical assessments to identify potential security vulnerabilities for systems, applications, and network devices. The vulnerability assessments must be comprehensive and cover internal technology, external technology, and connections with third parties. for external public facing services and systems must be more frequent.Added: January 2022RM-9.1.27
With respect to Paragraph RM-9.1.25, external technology refers to the
licensee ’s public facing technology such as websites, apps and external servers. Connections with third parties includes any API or other connections with fintech companies, technology providers, outsourcing service providers etc.Added: January 2022RM-9.1.28
Licensees must have in place vulnerability and patch management processes which include remediation processes to ensure that the vulnerabilities identified are addressed and that security patches are applied where relevant within a timeframe that is commensurate with the risks posed by each vulnerability.Added: January 2022RM-9.1.29
All
licensees must perform penetration testing of their systems, applications, and network devices to verify the robustness of the security controls in place at least once a year. These tests must be used to simulate real world cyber-attacks on the technology environment and must:(a) Follow a risk-based approach based on an internationally recognized methodology, such as National Institute of Standards and Technology “NIST” and Open Web Application Security Project “OWASP”;(b) Include both Grey Box and Black Box testing in its scope;(c) Be conducted by qualified and experienced security professionals who are certified in providing penetration testing services;(d) Be performed by internal and external independent third parties who are rotated out at least every two years; and(e) Be performed on either the production environment or on non-production exact replicas of the production environment.Added: January 2022RM-9.1.30
CBB may require additional third-party security reviews to be performed as needed.
Added: January 2022RM-9.1.31
The tests referred to in Paragraph RM-9.1.29 must be conducted each year in June and the report on such testing must be submitted to the CBB before 30th September. The penetration testing reports must include the vulnerabilities identified and a full list of ‘passed’ tests and ‘failed’ tests together with the steps taken to mitigate the risks identified.
Added: January 2022Cyber Incident Detection and Management
RM-9.1.32
Licensees must implement cyber security incident management processes to ensure timely detection, response and recovery for cyber security incidents. This includes implementing a monitoring system for log correlation and anomaly detection.Added: January 2022RM-9.1.33
Licensees should receive data on a real time basis from all relevant systems, applications, and network devices including operational and business systems. The monitoring system should be capable of identifying indicators of cyber incidents and initiate alerts, reports, and response activities based on the defined cyber security incident management process.Added: January 2022RM-9.1.34
Licensees should retain the logs and other information from the monitoring system for detecting cyber incidents, including "low-and-slow" attacks, in order to facilitate incident investigations, for 12 months or longer.Added: January 2022RM-9.1.35
Once a cyber incident is detected,
licensees should activate their containment measures, processes and technologies best suited to each type of cyber incident to prevent a cyber incident from inflicting further damage. This may involve, after considering the costs, business impact and operational risks, shutting down or isolating all or affected parts of their systems and networks as deemed necessary for containment and diagnosis.Added: January 2022RM-9.1.36
Licensees must define roles and responsibilities and assign adequate resources to detect, identify, investigate and respond to cyber incidents that could impact the licensee’s infrastructure, services and customers. Such responsibilities must include log correlation, anomaly detection and maintaining thelicensee ’s asset inventory and network diagrams.Added: January 2022RM-9.1.37
Licensees must regularly identify, test, review and update current cyber security risk scenarios and the corresponding response plan. This is to ensure that the scenarios and response plan remain relevant and effective, taking into account changes in the operating environment, systems or the emergence of new cyber security threats. If any gaps are identified, the monitoring system must be updated with new use cases and rule sets which are capable of detecting the current cyber incident scenarios.Added: January 2022RM-9.1.38
The cyber incident scenario tests should include high-impact-low-probability events and scenarios that may result in failure. Common cyber incident scenarios include distributed denial of service (DDoS) attacks, system intrusion, data exfiltration and system disruption.
Licensees should regularly use threat intelligence to update the scenarios so that they remain current and relevant.Licensees should periodically review current cyber incident scenarios for the purpose of assessing the licensee’s ability to detect and respond to these scenarios if they were to occur.Added: January 2022RM-9.1.39
Licensees must ensure that critical cyber security incidents detected are escalated to an incident response team, management and the Board, in accordance with thelicensee ’s business continuity plan and crisis management plan, and that an appropriate response is implemented promptly. See also Paragraph RM-9.1.58 for the requirement to report to CBB.Added: January 2022RM-9.1.40
Licensees should clearly define the roles, responsibilities and accountabilities for cyber incident detection and response activities to one or more named individuals that meet the pre-requisite role requirements. Potential conflicts of interest are minimised by ensuring a separation of implementation and oversight roles where possible. The roles should include:• Incident Owner: An individual that is responsible for handling the overall cyber incident detection and response activities according to the incident type and services affected. The Incident Owner is delegated appropriate authority to manage the mitigation or preferably, removal of all impacts due to the incident.• Spokesperson: An individual, from External Communications Unit or another suitable department, that is responsible for managing the communications strategy by consolidating relevant information and views from subject matter experts and thelicensee’s management to update the internal and external stakeholders with consistent information.• Record Keeper: An individual that is responsible for maintaining an accurate record of the cyber incident throughout its different phases, as well as documenting actions and decisions taken during and after a cyber incident. The record serves as an accurate source of reference for after-action reviews to improve future cyber incident detection and response activities.Added: January 2022RM-9.1.41
For the purpose of managing a critical cyber incident, the licensee should operate a situation room, and should include in the incident management procedure a definition of the authorities and responsibilities of staff members, internal and external reporting lines, communication channels, tools and detailed working procedures. The situation room or a war room is a physical room or a virtual room where relevant members of the management gather to handle a crisis in the most efficient manner possible.
Added: January 2022RM-9.1.42
Licensees should record and document in an orderly manner the incidents that have been handled and the actions that were taken by the relevant functions. In particular, thelicensee should maintain an "incident log" in which all the notifications, decisions and actions taken, in relation to cyber incidents, are documented, as close as possible to the time of their occurrence. It should also include the status of the issue whether it is open or has been resolved and person in charge of resolving the issue/incident. The logs should be stored and preserved in a secure and legally admissible manner.Added: January 2022RM-9.1.43
Licensees should utilise pre-defined taxonomy for classifying cyber incidents according to, for example, the type of incident, threat actors, threat vectors and repercussions; and a pre-established severity assessment framework to help gauge the severity of the cyber incident. For example, taxonomies that can be used when describing cyber incidents:(a) Describe the cause of the cyber incident (e.g. process failure, system failure, human error, external event, malicious action)(b) Describe whether the cyber incident due to a third-party service provider(c) Describe the attack vector (e.g. malware, virus, worm, malicious hyperlink)(d) Describe the delivery channel used (e.g. e-mail, web browser, removable storage media)(e) Describe the impact (e.g. service degradation/disruption, service downtime, potential impact to customers, data leakage, unavailability of data, data destruction/corruption, tarnishing of reputation)(f) Describe the type of incident (e.g. zero-day attack, exploiting a known vulnerability, isolated incident)(g) Describe the intent (e.g. malicious, theft, monetary gain, fraud, political, espionage, opportunistic)(h) Describe the threat actor (e.g. script kiddies, amateur, criminal syndicate, hacktivist, nation state)The cyber incident severity may be classified as:
(a) Severity 1 incident has or will cause a serious disruption or degradation of critical service(s) and there is potentially high impact on public confidence in thelicensee .(b) Severity 2 incident has or will cause some degradation of critical services and there is medium impact on public confidence in thelicensee .(c) Severity 3 incident has little or no impact to critical services and there is no visible impact on public confidence in thelicensee .Added: January 2022RM-9.1.44
Licensees should determine the effects of the cyber incident on customers and to the wider financial system as a whole and report the results of such an assessment to CBB if it is determined that the cyber incident may have a systemic impact.Added: January 2022RM-9.1.45
Licensees should establish metrics to measure the impact of a cyber incident and to report to management the performance of response activities. Examples include:1. Metrics to measure impact of a cyber incident(a) Duration of unavailability of critical functions and services(b) Number of stolen records or affected accounts(c) Volume of customers impacted(d) Amount of lost revenue due to business downtime, including both existing and future business opportunities(e) Percentage of service level agreements breached2. Performance metrics for incident management(a) Volume of incidents detected and responded via automation(b) Dwell time (i.e. the duration a threat actor has undetected access until completely removed)(c) Recovery Point objectives (RPO) and recovery time objectives (RTO) satisfiedAdded: January 2022Recovery
RM-9.1.46
Licensees must identify the critical systems and services within its operating environment that must be recovered on a priority basis in order to provide certain minimum level of services during the downtime and determine how much time thelicensee will require to return to full service and operations.Added: January 2022RM-9.1.47
Critical incidents are defined as incidents that trigger the BCP and the crisis management plan. Critical systems and services are those whose failure can have material impact on any of the following elements:
a) Financial situation;b) Reputation;c) Regulatory, legal and contractual obligations; andd) Operational aspects and delivery of key products and services.Added: January 2022RM-9.1.48
Licensees must define a program for recovery activities for timely restoration of any capabilities or services that were impaired due to a cyber security incident.Licensees must establish recovery time objectives (“RTOs”), i.e. the time in which the intended process is to be covered, and recovery point objectives (“RPOs”), i.e. point to which information used must be restored to enable the activity to operate on resumption”.Licensees must also consider the need for communication with third party service providers, customers and other relevant external stakeholders as may be necessary.Added: January 2022RM-9.1.49
Licensees must ensure that all critical systems are able to recover from a cyber security breach within thelicensee ’s defined RTO in order to provide important services or some level of minimum services for a temporary period of time.Added: January 2022RM-9.1.50
Licensees should validate that recovered assets are free of compromise, fully functional and meet the security requirements before returning the systems to normal business operations. This includes performing checks on data to ensure data integrity. In some cases,licensees may need to use backup data kept in a disaster recovery site or plan for the reconstruction of data from external stakeholders such as business partners and customers.Added: January 2022RM-9.1.51
Licensees must define a program for exercising the various response mechanisms, taking into account the various types of exercises such as attack simulations, "war games" and "table top" exercises, and with reference to the relevant stakeholders such as technical staff, crisis management team, decision-makers and spokespersons.Added: January 2022RM-9.1.52
Licensees must define the mechanisms for ensuring accurate, timely and actionable communication of cyber incident response and recovery activities with the internal stakeholders, including to the board or designated committee of the board.Added: January 2022RM-9.1.53
Licensee must ensure its business continuity plan is comprehensive and includes a recovery plan for its systems, operations and services arising from a cyber security incident.Added: January 2022Cyber Security Insurance
RM-9.1.54
Licensees must arrange to seek cyber risk insurance cover from a suitable insurer, following a risk-based assessment of cyber security risk is undertaken by the respectivelicensee and independently verified by the insurance company. The insurance policy may include some or all of the following types of coverage, depending on the risk assessment outcomes:a) Crisis management expenses, such as costs of notifying affected parties, costs of forensic investigation, costs incurred to determine the existence or cause of a breach, regulatory compliance costs, costs to analyse the insured’s legal response obligations;b) Claim expenses such as costs of defending lawsuits, judgments and settlements, and costs of responding to regulatory investigations; andc) Policy also provides coverage for a variety of torts, including invasion of privacy or copyright infringement. First-party coverages may include lost revenue due to interruption of data systems resulting from a cyber or denial of service attack and other costs associated with the loss of data collected by the insured.Added: January 2022Training and Awareness
RM-9.1.55
Licensees must evaluate improvement in the level of awareness and preparedness to deal with cyber security risk to ensure the effectiveness of the training programmes implemented.Added: January 2022RM-9.1.56
The
licensee must ensure that all employees receive adequate training on a regular basis, in relation to cyber security and the threats they could encounter, such as through testing employee reactions to simulated cyber-attack scenarios. All relevant employees must be informed on the current cyber security breaches and threats. Additional training should be provided to ‘higher risk staff’.Added: January 2022RM-9.1.57
The
licensees must ensure that role specific cyber security training is provided on a regular basis to relevant staff including:Executive board and senior management;Cyber security roles;IT staff; andAny high-risk staff as determined by thelicensee .Added: January 2022Reporting to CBB
RM-9.1.58
Upon occurrence or detection of any cyber security incident, whether internal or external, that compromises customer information or disrupts critical services that affect operations,
licensees must contact the CBB, immediately (within one hour), on 17547477 and submit Section A of the Cyber Security Incident Report (Appendix RM-1) to CBB’s cyber incident reporting email, incident.insurance@cbb.gov.bh, within two hours.Added: January 2022
Amended: April 2022RM-9.1.59
Following the submission referred to in Paragraph RM-9.1.58, the
licensee must submit to CBB Section B of the Cyber Security Incident Report (Appendix RM-1) within 10 calendar days of the occurrence of the cyber security incident.Licensees must include all relevant details in the report, including the full root cause analysis of the cyber security incident, its impact on the business operations and customers, and all measures taken by the licensee to stop the attack, mitigate its impact and to ensure that similar events do not recur. In addition, a weekly progress update must be submitted to CBB until the incident is fully resolved.Added: January 2022
Amended: April 2022RM-9.1.60
With regards to the submission requirement mentioned in Paragraph RM-9.1.58, the licensee should submit the report with as much information as possible even if all the details have not been obtained yet.
Added: January 2022RM-9.1.61
The penetration testing report as per Paragraph RM-9.1.29, along with the steps taken to mitigate the risks must be maintained by the
licensee for a five-year period from the date of the report and must be provided to CBBAdded: January 2022Appendix A – Cyber Security Control Guidelines
The Control Guidelines consists of five Core tasks which are defined below. These Functions are not intended to form a serial path or lead to a static desired end state. Rather, the Functions should be performed concurrently and continuously to form an operational culture that addresses the dynamic cyber security risk.
Identify – Develop an organisation-wide understanding to manage cyber security risk to systems, people, assets, data, and capabilities. The activities in the Identify Function are foundational for effective use of the Cyber Security Risk Management Framework. Understanding the business context, the resources that support critical functions, and the related cyber security risks enables an organization to focus and prioritize its efforts, consistent with its risk management strategy and business needs.
Protect – Develop and implement appropriate safeguards to ensure delivery of critical services. The Protect Function supports the ability to limit or contain the impact of a potential cyber security incident.
Detect – Develop and implement appropriate activities to identify the occurrence of a cyber security incident. The Detect Function enables timely discovery of cyber security events.
Respond – Develop and implement appropriate activities to take action regarding a detected cyber security incident. The Respond Function supports the ability to contain the impact of a potential cyber security incident.
Recover – Develop and implement appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cyber security incident. The Recover Function supports timely recovery to normal operations to reduce the impact from a cyber security incident.
Below is a listing of the specific cyber security activities that are common across all critical infrastructure sectors:
IDENTIFY
Asset Management: The data, personnel, devices, systems, and facilities that enable the licensee to achieve business purposes are identified and managed consistent with their relative importance to organizational objectives and the licensee’s risk strategy.
1. Physical devices and systems within the licensee are inventoried.2. Software platforms and applications within the licensee are inventoried.3. Communication and data flows are mapped.4. External information systems are catalogued.5. Resources (e.g., hardware, devices, data, time, personnel, and software) are prioritized based on their classification, criticality, and business value.6. Cyber security roles and responsibilities for the entire workforce and third-party stakeholders (e.g., suppliers, customers, partners) are established.Business Environment: The licensee’s mission, objectives, stakeholders, and activities are understood and prioritized; this information is used to inform cyber security roles, responsibilities, and risk management decisions.
1. Priorities for the licensee’s mission, objectives, and activities are established and communicated.2. Dependencies and critical functions for delivery of critical services are established.3. Resilience requirements to support delivery of critical services are established for all operating states (e.g. under duress/attack, during recovery, normal operations).Governance: The policies, procedures, and processes to manage and monitor the licensee’s regulatory, legal, risk, environmental, and operational requirements are understood and inform the management of cyber security risk.
1. licensee’s cyber security policy is established and communicated.2. Cyber security roles and responsibilities are coordinated and aligned with internal roles and external partners.3. Legal and regulatory requirements regarding cyber security, including privacy and civil liberties obligations, are understood and managed.4. Governance and risk management processes address cyber security risks.Risk Assessment: The licensee understands the cyber security risk to licensee’s operations (including mission, functions, image, or reputation), licensee’s assets, and individuals.
1. Asset vulnerabilities are identified and documented.2. Cyber threat intelligence is received from information sharing forums and sources.3. Threats, both internal and external, are identified and documented.4. Potential business impacts and likelihoods are identified.5. Threats, vulnerabilities, likelihoods, and impacts are used to determine risk.6. Risk responses are identified and prioritized.Risk Management Strategy: The licensee’s priorities, constraints, risk tolerances, and assumptions are established and used to support operational risk decisions.
1. Risk management processes are established, managed, and agreed to by licensee’s stakeholders.2. The licensee’s risk tolerance is determined and clearly expressed.3. The licensee’s determination of risk tolerance is informed by its role in critical infrastructure and sector specific risk analysis.Third Party Risk Management: The licensee’s priorities, constraints, risk tolerances, and assumptions are established and used to support risk decisions associated with managing third party risk. The licensee has established and implemented the processes to identify, assess and manage supply chain risks.
1. Cyber third-party risk management processes are identified, established, assessed, managed, and agreed to by the licensee’s stakeholders.2. Suppliers and third-party partners of information systems, components, and services are identified, prioritized, and assessed using a cyber third-party risk assessment process.3. Contracts with suppliers and third-party partners are used to implement appropriate measures designed to meet the objectives of a licensee’s cyber security program.4. Suppliers and third-party partners are routinely assessed using audits, test results, or other forms of evaluations to confirm they are meeting their contractual obligations.5. Response and recovery planning and testing are conducted with suppliers and third-party providers.PROTECT
Identity Management, Authentication and Access Control: Access to physical and logical assets and associated facilities is limited to authorized users, processes, and devices, and is managed consistent with the assessed risk of unauthorized access to authorized activities and transactions.
1. Identities and credentials are issued, managed, verified, revoked, and audited for authorized devices, users and processes.2. Physical access to assets is managed and protected.3. Remote access is managed.4. Access permissions and authorizations are managed, incorporating the principles of least privilege and separation of duties5. Network integrity is protected (e.g., network segregation, network segmentation).6. Identities are proofed and bound to credentials and asserted in interactions7. Users, devices, and other assets are authenticated (e.g., single-factor, multi-factor) commensurate with the risk of the transaction (e.g., individuals’ security and privacy risks and other organizational risks).Awareness and Training: The licensee’s personnel and partners are provided cyber security awareness education and are trained to perform their cyber security-related duties and responsibilities consistent with related policies, procedures, and agreements.
1. All users are informed and trained on a regular basis.2. Licensee’s security awareness programs are updated at least annually to address new technologies, threats, standards, and business requirements.3. Privileged users understand their roles and responsibilities.4. Third-party stakeholders (e.g., suppliers, customers, partners) understand their roles and responsibilities.5. The Board and senior management understand their roles and responsibilities.6. Physical and cyber security personnel understand their roles and responsibilities.7. Software development personnel receive training in writing secure code for their specific development environment and responsibilities.Data Security: Information and records (data) are managed consistent with the licensee’s risk strategy to protect the confidentiality, integrity, and availability of information.
1. Data-at-rest classified as critical or confidential is protected through strong encryption.2. Data-in-transit classified as critical or confidential is protected through strong encryption.3. Assets are formally managed throughout removal, transfers, and disposition4. Adequate capacity to ensure availability is maintained.5. Protections against data leaks are implemented.6. Integrity checking mechanisms are used to verify software, firmware, and information integrity.7. The development and testing environment(s) are separate from the production environment.8. Integrity checking mechanisms are used to verify hardware integrity.Information Protection Processes and Procedures: Security policies (that address purpose, scope, roles, responsibilities, management commitment, and coordination among organizational units), processes, and procedures are maintained and used to manage protection of information systems and assets.
1. A baseline configuration of information technology/industrial control systems is created and maintained incorporating security principles (e.g. concept of least functionality).2. A System Development Life Cycle to manage systems is implemented3. Configuration change control processes are in place.4. Backups of information are conducted, maintained, and tested.5. Policy and regulations regarding the physical operating environment for licensee’s assets are met.6. Data is destroyed according to policy.7. Protection processes are improved.8. Effectiveness of protection technologies is shared.9. Response plans (Incident Response and Business Continuity) and recovery plans (Incident Recovery and Disaster Recovery) are in place and managed.10. Response and recovery plans are tested.11. Cyber security is included in human resources practices (e.g., deprovisioning, personnel screening).12. A vulnerability management plan is developed and implemented.Maintenance: Maintenance and repairs of information system components are performed consistent with policies and procedures.
1. Maintenance and repair of licensee’s assets are performed and logged, with approved and controlled tools.2. Remote maintenance of licensee’s assets is approved, logged, and performed in a manner that prevents unauthorized access.Protective Technology: Technical security solutions are managed to ensure the security and resilience of systems and assets, consistent with related policies, procedures, and agreements.
1. Audit/log records are determined, documented, implemented, and reviewed in accordance with policy.2. Removable media is protected and its use restricted according to policy.3. The principle of least functionality is incorporated by configuring systems to provide only essential capabilities.4. Communications and control networks are protected.5. Mechanisms (e.g., failsafe, load balancing, hot swap) are implemented to achieve resilience requirements in normal and adverse situations.DETECT
Anomalies and Events: Anomalous activity is detected and the potential impact of events is understood.
1. A baseline of network operations and expected data flows for users and systems is established and managed.2. Detected events are analyzed to understand attack targets and methods.3. Event data are collected and correlated from multiple sources and sensors4. Impact of events is determined.5. Incident alert thresholds are established.Security Continuous Monitoring: The information system and assets are monitored to identify cyber security events and verify the effectiveness of protective measures.
1. The network is monitored to detect potential cyber security events.2. The physical environment is monitored to detect potential cyber security events3. Personnel activity is monitored to detect potential cyber security events.4. Malicious code is detected.5. Unauthorized mobile code is detected.6. External service provider activity is monitored to detect potential cyber security events.7. Monitoring for unauthorized personnel, connections, devices, and software is performed.8. Vulnerability scans are performed at least quarterly.Detection Processes: Detection processes and procedures are maintained and tested to ensure awareness of anomalous events.
1. Roles and responsibilities for detection are well defined to ensure accountability.2. Detection activities comply with all applicable requirements.3. Detection processes are tested.4. Event detection information is communicated.5. Detection processes are continuously improved.RESPOND
Response Planning: Response processes and procedures are executed and maintained, to ensure response to detected cyber security incidents. Response plan is executed during or after an incident.
Communications: Response activities are coordinated with internal and external stakeholders.
1. Personnel know their roles and order of operations when a response is needed.2. Incidents are reported consistent with established criteria.3. Information is shared consistent with response plans.4. Coordination with internal and external stakeholders occurs consistent with response plans.5. Voluntary information sharing occurs with external stakeholders to achieve broader cyber security situational awareness.6. Incident response exercises and scenarios across departments are conducted at least annually.Analysis: Analysis is conducted to ensure effective response and support recovery activities.
1. Notifications from detection systems are investigated.2. The impact of the incident is understood.3. Forensics are performed.4. Incidents are categorized consistent with response plans.5. Processes are established to receive, analyze and respond to vulnerabilities disclosed to the licensee from internal and external sources (e.g. internal testing, security bulletins, or security researchers).Mitigation: Activities are performed to prevent expansion of an event, mitigate its effects, and resolve the incident.
1. Incidents are contained.2. Incidents are mitigated.3. Newly identified vulnerabilities are mitigated or documented as accepted risks.Improvements: The response activities are improved by incorporating lessons learned from current and previous detection/response activities.
1. Response plans incorporate lessons learned.2. Response strategies are updated.RECOVER
Recovery Planning: Recovery processes and procedures are executed and maintained to ensure restoration of systems or assets affected by cyber security incidents. Recovery plan is executed during or after a cyber security incident.
Improvements: Recovery planning and processes are improved by incorporating lessons learned into future activities.
1. Recovery plans incorporate lessons learned.2. Recovery strategies are updated.Communications: Restoration activities are coordinated with internal and external parties (e.g. coordinating centers, Internet Service Providers, owners of attacking systems, victims, other CSIRTs, and vendors).
1. Public relations are managed.2. Reputation is repaired after an incident.3. Recovery activities are communicated to internal and external stakeholders as well as executive and management teams.Added: January 2022FC FC Financial Crime
FC-A FC-A Introduction
FC-A.1 FC-A.1 Purpose
Executive Summary
FC-A.1.1
This Module applies, to relevant
insurance licensees , a comprehensive framework of Rules and Guidance aimed at combating money laundering and terrorist financing. In so doing, it helps implement the FATF Recommendations on combating money laundering and financing of terrorism and proliferation, issued by the Financial Action Task Force (FATF), that are relevant toinsurance licensees ; it also implements IAIS guidance in this area. (Further information on these can be found in Chapter FC-9.) The Module also contains measures relating to the combating of fraud in the insurance sector.Amended: October 2015
Amended: January 2007FC-A.1.2
The Module requires
insurance firms andinsurance brokers to have effective anti-money laundering ('AML') policies and procedures, in addition to measures for combating the financing of terrorism ('CFT'). The Module contains detailed requirements relating to customer due diligence, reporting and the role and duties of the Money Laundering Reporting Officer (MLRO). Furthermore, examples of suspicious activity are provided (see Part B, Supplementary Information, Appendix FC-(iv)), to assist licensees to monitor transactions and fulfil their reporting obligations under Bahrain law. Because they represent negligible money laundering/terrorism financing risk, these requirements do not apply toinsurance consultants nor, in some circumstances, toinsurance managers .Amended: July 2007FC-A.1.3
This Module also covers measures in place to combat fraud: these apply to all
insurance licensees . Chapter FC-10 sets out basic requirements regarding measures to deter, detect and report instances of fraud and attempted fraud.Legal Basis
FC-A.1.4
This Module contains the Central Bank of Bahrain's (the CBB) Directive (as amended from time to time) regarding the combating money laundering and terrorism financing and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 (‛CBB Law’). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2022
Amended: January 2011
Added: January 2007FC-A.1.5
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007FC-A.2 FC-A.2 Module History
FC-A.2.1
This Module was first issued by the BMA in April 2005, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007FC-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007FC-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes FC-A.1;
FC-2;
FC-3;
FC-5;
FC-6.1;
FC-6.2;
FC-6.501/07/05 Inclusion of a revised and renamed Customer Due Diligence Chapter (including a new non-face-to-face business Section). Renamed Suspicious Transaction Reporting Chapter, with minor clarifications to the text. Changes to layout of FC-5 and clarifications to the text. Correction of minor typographical and cross-referencing errors. FC 01/10/05 New Chapter on Non-Cooperative Countries/Territories, and UN notifications. Section on charities removed, since not applicable to insurance licensees. Extensive drafting changes to remainder of text, to improve clarity and ensure consistency across different CBB Rulebooks; but no other changes of substance. FC-1.2 01/01/06 Clarified in FC-1.2.11 that the verification for item (a) applies to the identity of the ultimate provider of funds. FC-3.1.7 01/04/06 Clarified and added guidance Paragraph dealing with residency requirements of MLRO. FC-4.3.1 01/07/06 Updated contact information for Compliance Directorate. FC-A.1.4 01/2007 New Rule introduced, categorising this Module as a Directive FC-1.6.3 01/2007 Clarified simplified due diligence rules for transactions under BD6,000. FC-3.3.5A and FC-3.3.7 01/2007 Allowed for a transition period for the external auditor's report required under SubParagraph FC-3.3.1(d) and clarified when all reports are due. FC-4.3.1 01/2007 Updated new e-mail address for Compliance Directorate. FC-1.7.2(d) 10/2007 Clarified the record retention period for introduced business in line with Article 60 of the CBB Law FC-2.2.3,
FC-2.2.6,
FC-4.2.5,
FC-6.1.1,
FC-6.1.2,
FC-6.1.310/2007 Clarified the record retention period for various transactions to be in line with Article 60 of the CBB Law FC-3.3.2 10/2007 Clarified the appointment of external auditors for the purposes of the report required under Paragraph FC-3.3.1 (d) FC-10.1.11 10/2007 Added reference to new Guidance paper on fraud issued by the IAIS. FC-3.3.7 04/2008 Clarified to whom in the CBB should the reports required under Paragraph FC-3.3.1 be submitted to. FC-1.7.2,
FC-2.2.3,
FC-2.2.6,
FC-4.2.5,
FC-6.1.1,
FC-6.1.2,
FC-6.1.304/2008 Reduced retention requirements of records to five years to be consistent with AML Law and other Volumes of the CBB Rulebook Table of Contents 07/2008 Added Supplementary Documents to Part B. FC-1.1.3 07/2009 Provided guidance for insurance brokers on definition of 'customers'. FC-3.1.10,
FC-3.2.1,
FC-4.2.3,
FC-4.3.104/2010 Updated name and e-mail of relevant authority to Financial Intelligence Unit. FC-A.1.4 01/2011 Clarified legal basis FC-3.1.9 10/2011 Clarified requirements for MLRO. FC-3.3 10/2011 Amended Section to allow for CBB-approved consultancy firm to do required sample testing and report under Paragraph FC-3.3.1. FC-3.3.5 and FC-3.3.6 01/2012 Amended to reflect the addition of approved consultancy firm. FC-4.2.3 10/2014 Updated method of submitting STRs. FC-4.3 10/2014 Updated relevant authorities information. FC 10/2015 Updated to reflect February 2012 update to FATF Recommendations. FC-1.5.1 07/2016 Aligned definition of PEPs as per FATF Recommendations. FC-1.5.4 07/2016 Definition of PEPs is already included in Glossary so this guidance paragraph was deleted. FC-4.2.3 07/2016 Updated instructions for STR. FC-1.2.9A 01/2017 Added guidance paragraph on CR printing FC-7.2.1AA 04/2017 Implementing and complying with the United Nations Security Council resolutions requirement. FC-1.1.2B 10/2017 Amended paragraph on CDD requirements. FC-1.2.7 10/2017 Amended paragraph. FC-1.2.8A 10/2017 Added new paragraph on legal entities or legal arrangements CDD. FC-2.2.10 – FC-2.2.11 10/2017 Amended paragraphs on On-going CDD and Transaction Monitoring. FC-3.1.6A 10/2017 Added paragraph on combining the MLRO or DMLRO position with any other position within the licensee. FC-B.3.4 01/2018 Amended paragraph. FC-1.5.5 01/2018 Added new paragraph. FC-1.5.6 01/2018 Added new paragraph. FC-1.6.1 01/2018 Deleted sub-paragraph (f). FC-1.7.1 01/2018 Amended paragraph. FC-4.2.6 01/2018 Amended paragraph. FC-7.1.4 01/2018 Amended paragraph. FC-7.2.2 01/2018 Deleted paragraph. FC-1.1.2 07/2018 Deleted sub-paragraph (g). FC-1.2.1 07/2018 Amended guidance deleting the threshold. FC-1.6.3 07/2018 Deleted Paragraph. FC-1.6.9 07/2018 Deleted Paragraph. FC-1.6.10 07/2018 Deleted Paragraph. FC-1.6.1 01/2019 Amended references. FC-3.3.2 - FC-3.3.5 01/2019 Amended references. FC-3.3.5A 01/2019 Deleted paragraph. FC-3.3.7 01/2019 Amended references. FC-6.1.2 01/2019 Amended references. FC-3.1.10 10/2019 Amended authority name. FC-3.2.1 10/2019 Amended authority name. FC-4.2.3 10/2019 Amended authority name. FC-4.3.2 10/2019 Amended authority name. FC-7.2.1AA 10/2019 Defined 'without delay'. FC-1.1.1 01/2020 Amended Paragraph on procedures approval. FC-1.2.1 01/2020 Added a new sub-Paragraph. FC-3.3.5 01/2020 Amended Paragraph on report submission date. FC-3.3.7 01/2020 Amended Paragraphs references. FC-2.1.4 & FC-2.1.5 04/2020 Added new Paragraphs on KPIs compliance with AML/CFT requirements. FC-5.1.6A 01/2021 Added a new Paragraph on requirements to hire new employees. FC-A.1.4 01/2022 Amended Paragraph to replace financial crime with money laundering and terrorism financing. FC-C 01/2022 New chapter on risk-based approach (RBA). FC-1.1 01/2022 Amended Section to introduce additional rules for non-resident customers, amendments to customers onboarded prior to full completion of customer due diligence, digital onboarding etc. FC-1.2 01/2022 Amended Section to include E-KYC and electronic documents law requirements. FC-1.3 01/2022 Amended Section on enhanced due diligence requirements for customers identified as having higher risk profile. FC-1.4 01/2022 Amended Section to introduce detailed requirements for digital onboarding and related requirements. FC-1.5.2 01/2022 Amended Paragraph on onboarding non-Bahraini PEPs using digital ID applications. FC-1.5A 01/2022 Added a new Section on Enhanced Due Diligence: Charities, Clubs and Other Societies FC-1.6.8A 01/2022 Added a new Paragraph on not applying simplified CDD in situations where the licensee has identified high ML/TF/PF risks. FC-2.2.5 01/2022 Amended Paragraph. FC-3.3.1B 01/2022 Amended Paragraph. FC-3.3.2 01/2022 Amended Paragraph. FC-3.3.5 01/2022 Amended Paragraph. FC-3.3.6 01/2022 Deleted Paragraph. FC-3.3.7 01/2022 Deleted Paragraph. FC-5.1.6A 01/2022 Deleted Paragraph. FC-C.2.3 01/2023 Minor amendment to Paragraph. FC-7.2.4(c) 01/2023 Added a new Sub-paragraph on reporting any frozen assets or actions taken. FC-1.1.14A 10/2023 Amended Sub-Paragraph on the enhanced diligence for the non-resident accounts. FC-1.1.14E 10/2023 Deleted Paragraph. FC-1.1.14I 10/2023 Deleted Paragraph. FC-1.1.17 10/2023 Added a new Paragraph on CDD and Customer onboarding requirements. FC-1.8 10/2023 Added a new Section on reliance on third parties for customer due diligence. FC-1.2.1 01/2024 Amended Paragraph on customer due diligence. FC-A.2.3 [Deleted]
Deleted: January 2007FC-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007FC-B FC-B Scope of Application
FC-B.1 FC-B.1 License Categories
FC-B.1.1
Chapters FC-1 to FC-9 apply to all
insurance firms andinsurance brokers . These Chapters also apply toinsurance managers where they manage a captive insurer. Chapters FC-1 to FC-9 do not apply toinsurance consultants .FC-B.1.2
Chapters FC-1 to FC-9 apply, as specified in Paragraph FC-B.1.1, to all
insurance firms ,insurance brokers and, where they manage acaptive insurer ,insurance managers , irrespective of whether they are aBahraini insurance licensee or anoverseas insurance licensee .Overseas insurance licensees , andBahraini insurance licensees that are subsidiaries of an overseas group, may apply additional AML/CFT policies and procedures, provided they satisfy the minimum requirements contained in this Module.Amended: January 2007
Amended: October 2007FC-B.1.3
The Rules and Guidance in this Module are in addition to and supplement the requirements contained in Decree Law No. (4) of 2001 with respect to the prevention and prohibition of the laundering of money; this Law was subsequently updated, with the issuance of Decree Law No. 54 of 2006 with respect to amending certain provisions of Decree No. 4 of 2001 (collectively, 'the AML Law'). The AML Law imposes obligations generally in relation to the prevention of money laundering and the combating of the financing of terrorism, to all persons resident in Bahrain (including financial services firms such as
insurance licensees ). Allinsurance licensees are under the statutory obligations of that Law, in addition to the more specific requirements contained in this Module. Nothing in this Module is intended to restrict the application of the AML Law (a copy of which is contained in Part B of Volume 3 (Insurance), under 'Supplementary Information'). Also included in Part B is a copy of Decree Law No. 58 of 2006 with respect to the protection of society from terrorism activities ('the anti-terrorism law').Amended: January 2007FC-B.1.4
Chapter FC-10, dealing with insurance fraud, applies to all
insurance licensees .FC-B.2 FC-B.2 Types of Insurance Business
FC-B.2.1
This Module applies to all types of insurance contracts, including general and
long-term insurance , as well as toreinsurance and captive insurance business.Amended: January 2007
Amended: October 2007FC-B.2.2
International experience shows that all types of insurance (including
general insurance andreinsurance ) have been used as channels for illegal activities. However, the CBB also recognises that in the case of pure reinsurance transactions, these risks may exist to a lesser extent. Consequently, upon application by the licensee, the CBB will consider, on an individual basis, exemptions from specific requirements of this Module, in relation to the reinsurance activities of licensees. Normally, the CBB will consider granting such exemptions where the reinsurer concerned deals only with licensed insurance entities, that are subject to AML / CFT standards equivalent to those in this Module.Amended: January 2007
Amended: October 2007FC-B.3 FC-B.3 Overseas Subsidiaries and Branches
FC-B.3.1
Insurance licensees must apply the requirements in this Module to all theirbranches andsubsidiaries , including those operating in another jurisdiction. Where local standards differ, the higher standard must be followed.Insurance licensees must pay particular attention to procedures inbranches andsubsidiaries in countries that do not or insufficiently apply the FATF Recommendations and Special Recommendations and do not have adequate AML/CFT procedures, systems and controls (see also Section FC-7.1).Amended: October 2015
Amended: January 2007FC-B.3.2
Where another jurisdiction's laws or Regulations prevent an
insurance licensee (or any of its foreignbranches orsubsidiaries ) from applying the same standards contained in this Module or higher, the licensee must immediately inform the CBB in writing.Amended: January 2007FC-B.3.3
In such instances, the CBB will review alternatives with the
insurance licensee . Should the CBB and the licensee be unable to reach agreement on the satisfactory implementation of this Module in a foreignsubsidiary orbranch , theinsurance licensee may be required by the CBB to cease the operations of thesubsidiary orbranch in the foreign jurisdiction in question.Amended: January 2007FC-B.3.4
Financial groups (e.g. an insurance firm with its subsidiaries) must implement groupwide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes, which must also be applicable, and appropriate to, all branches and subsidiaries of the financial group. These must include:
(a) The development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees;(b) An ongoing employee training programme;(c) An independent audit function to test the system;(d) Policies and procedures for sharing information required for the purposes of CDD and money laundering and terrorist financing risk management;(e) The provision at group-level compliance, audit, and/or AML/CFT functions of customer, account and transaction information from branches and subsidiaries when necessary for AML/CFT purposes; and(f) Adequate safeguards on the confidentiality and use of information exchanged.Amended: January 2018
Added: October 2015FC-C FC-C Risk Based Approach
FC-C.1 FC-C.1 Risk Based Approach
FC-C.1.1
An
insurance licensee must implement Risk Based Approach (RBA) in establishing an AML/CFT/CPF program and conduct ML/TF/PF risk assessments prior to and during the establishment of a business relationship and, on an ongoing basis, throughout the course of its relationship with the customer. Thelicensee must establish and implement policies, procedures, tools and systems commensurate with the size, nature and complexity of its business operations to support its RBA.Added: January 2022FC-C.1.2
An
insurance licensee must perform enhanced measures where higher ML/TF/PF risks are identified to effectively manage and mitigate those higher risks.Added: January 2022FC-C.1.3
An
insurance license must maintain and regularly review and update the documented risk assessment. The risk management and mitigation measures implemented by alicensee must be commensurate with the identified ML/TF/PF risks.Added: January 2022FC-C.1.4
Insurance licensees must allocate adequate financial, human and technical resources and expertise to effectively implement and take appropriate preventive measures to mitigate ML/TF/PF risks.Added: January 2022FC-C.2 FC-C.2 Risk Assessment
FC-C.2.1
An
insurance licensee must ensure that it takes measures to identify, assess, monitor, manage and mitigate ML/TF/PF risks to which it is exposed and that the measures taken are commensurate with the nature, scale and complexities of its activities. The risk assessment must enable thelicensee to understand how, and to what extent, it is vulnerable to ML/TF/PF.Added: January 2022FC-C.2.2
In the context of the risk assessment, “proliferation financing risk” refers to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in FATF Recommendation 7.
Added: January 2022FC-C.2.3
The risk assessment must be properly documented, regularly updated and communicated to the
insurance licensee ’s senior management.Licensees must have in place policies, controls and procedures, which are approved by senior management, to enable them to manage and mitigate the risks that have been identified. In conducting its risk assessments, thelicensee must consider quantitative and qualitative information obtained from the relevant internal and external sources to identify, manage and mitigate these risks. This must include consideration of the risk and threat assessments using, national risk assessments, sectorial risk assessments, crime statistics, typologies, risk indicators, red flags, guidance and advisories issued by inter-governmental organisations, national competent authorities and the FATF, and AML/CFT/CPF mutual evaluation and follow-up reports by the FATF or associated assessment bodies.Amended: January 2023
Added: January 2022FC-C.2.4
An
insurance licensee must assess country/geographic risk, customer/investor risk, product/ service/ transactions risk and distribution channel risk taking into consideration the appropriate factors in identifying and assessing the ML/TF/PF risks, including the following:(a) The nature, scale, diversity and complexity of its business, products and target markets;(b) Products, services and transactions that inherently provide more anonymity, ability to pool underlying customers/funds, cash-based, face-to-face, non face-to-face, domestic or cross-border;(c) The volume and size of its transactions, nature of activity and the profile of its customers;(d) The proportion of customers identified as high risk;(e) Its target markets and the jurisdictions it is exposed to, either through its own activities or the activities of customers, especially jurisdictions with relatively higher levels of corruption or organised crime, and/or deficient AML/CFT/CPF controls and listed by FATF;(f) The complexity of the transaction chain (e.g. complex layers of intermediaries and sub intermediaries or distribution channels that may anonymise or obscure the chain of transactions) and types of distributors or intermediaries;(g) The distribution channels, including the extent to which thelicensee deals directly with the customer and the extent to which it relies (or is allowed to rely) on third parties to conduct CDD and the use of technology;(h) Internal audit, external audit or regulatory inspection findings; and(i) beneficiary of a life insurance policy.Added: January 2022Country/Geographic risk
FC-C.2.5
Country/geographic area risk, in conjunction with other risk factors, provides useful information as to potential ML/TF/PF risks. Factors that may be considered as indicators of higher risk include:
(a) Countries identified by credible sources, such as mutual evaluation or detailed assessment reports or published follow-up reports, as not having adequate AML/CFT/CPF systems;(b) Countries or geographic areas identified by credible sources as providing funding or support for terrorist activities, or that have designated terrorist organisations operating within their country;(c) Countries identified by credible sources as having significant levels of corruption or organized crime or other criminal activity, including source or transit countries for illegal drugs, human trafficking and smuggling and illegal gambling;(d) Countries subject to sanctions, embargoes or similar measures issued by international organisations such as the United Nations Organisation; and(e) Countries identified by credible sources as having weak governance, law enforcement, and regulatory regimes, including countries identified by the FATF statements as having weak AML/CFT/CPF regimes, and for which financial institutions should give special attention to business relationships and transactions.Added: January 2022Customer/Investor risk
FC-C.2.6
Categories of customers which may indicate a higher risk include:
(a) The business relationship is conducted in unusual circumstances (e.g. significant unexplained geographic distance between the financial institution and the customer).(b) Non-resident customers;(c) Legal persons or arrangements that are personal asset-holding vehicles;(d) Companies that have nominee shareholders or shares in bearer form;(e) Businesses that are cash-intensive;(f) The ownership structure of the company appears unusual or excessively complex given the nature of the company’s business;(g) Customer is sanctioned by the relevant national competent authority for non-compliance with the applicable AML/CFT/CPF regime and is not engaging in remediation to improve its compliance;(h) Customer is a PEP or customer’s family members, or close associates are PEPs (including where a beneficial owner of a customer is a PEP);(i) Customer resides in or whose primary source of income originates from high-risk jurisdictions;(j) Customer resides in countries considered to be uncooperative in providing beneficial ownership information; customer has been mentioned in negative news reports from credible media, particularly those related to predicate offences for AML/CFT/CPF or to financial crimes;(k) Customer’s transactions indicate a potential connection with criminal involvement, typologies or red flags provided in reports produced by the FATF or national competent authorities;(l) Customer is engaged in, or derives wealth or revenues from, a high-risk cash-intensive business;(m) The number of STRs and their potential concentration on particular client groups;(n) Customers who have sanction exposure; and(o) Customer has a non-transparent ownership structure.Added: January 2022Product/Service/Transactions risk
FC-C.2.7
An overall risk assessment should include determining the potential risks presented by product, service, transaction or the delivery channel of the
insurance licensee . Alicensee should assess, using a RBA, the extent to which the offering of its product, service, transaction or the delivery channel presents potential vulnerabilities to placement, layering or integration of criminal proceeds into the financial system.Added: January 2022FC-C.2.8
Determining the risks of product, service, transaction or the delivery channel offered to customers may include a consideration of their attributes, as well as any associated risk mitigation measures. Products and services that may indicate a higher risk include:
(a) Anonymous transactions (which may include cash);(b) Non-face-to-face business relationships or transactions;(c) Payment received from unknown or un-associated third parties;(d) Products or services that may inherently favour anonymity or obscure information about underlying customer transactions;(e) The geographical reach of the product or service offered, such as those emanating from higher risk jurisdictions;(f) Products with unusual complexity or structure and with no obvious economic purpose;(g) Products or services that permit the unrestricted or anonymous transfer of value (by payment or change of asset ownership) to an unrelated third party, particularly those residing in a higher risk jurisdiction; and(h) Use of new technologies or payment methods not used in the normal course of business by theinsurance licensee .Added: January 2022Distribution channel risk
FC-C.2.9
A customer may request transactions that pose an inherently higher risk to the
insurance licensee . Factors that may be considered as indicators of higher risk include:(a) A request is made to transfer funds to a higher risk jurisdiction/country/region without a reasonable business purpose provided; and(b) A transaction is requested to be executed, where thelicensee is made aware that the transaction will be cleared/settled through an unregulated entity.Added: January 2022FC-C.2.10
An
insurance licensee should analyse the specific risk factors, which arise from the use of intermediaries and their services. Intermediaries’ involvement may vary with respect to the activity they undertake and their relationship with thelicensee .Licensee should understand who the intermediary is and perform a risk assessment on the intermediary prior to establishing a business relationship.Licensees and intermediaries should establish clearly their respective responsibilities for compliance with applicable regulation.Added: January 2022FC-1 FC-1 Customer Due Diligence Requirements
FC-1.1 FC-1.1 General Requirements
Verification of Identity and Source of Funds
FC-1.1.1
Insurance licensees must establish effective systematic internal procedures for establishing and verifying the identity of theircustomers and the source of their funds. Such procedures must be set out in writing and approved by the licensee’ssenior management and must be strictly adhered to.Amended: January 2020
Amended: October 2015
Amended: January 2007FC-1.1.2
Insurance licensees must implement the customer due diligence measures outlined in this Chapter when:(a) Establishing business relations with a new or existing customer;(b) A change to the signatory or policyholder beneficiary is made;(c) A significant transaction takes place;(d) There is a material change in the terms of an insurance policy or in the manner in which the business relationship is conducted;(e)Customer documentation standards change substantially;(f) Theinsurance licensee has doubts about the veracity or adequacy of previously obtained customer due diligence information;(g) [This Sub-paragraph was deleted in July 2018]; or(h) There is a suspicion of money laundering or terrorist financing.Amended: July 2018
Amended: January 2007FC-1.1.2A
Insurance licensees must understand, and as appropriate, obtain information on the purpose and intended nature of the business relationship.Added: October 2015FC-1.1.2B
Insurance licensees must conduct ongoing due diligence on the business relationship, including:(a) Scrutinizing of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds; and(b) Ensuring that documents, data or information collected under the CDD process is kept up-to-date and relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.Amended: October 2017
Added: October 2015FC-1.1.2C
An
insurance licensee must also review and update the customer’s risk profile based on their level of ML/TF/PF risk upon onboarding the customer and regularly throughout the life of the relationship. The risk management and mitigation measures implemented by alicensee must be commensurate with the risk profile of a particular customer or type of customer.Added: January 2022FC-1.1.3
For the purposes of this Module, 'customer' includes counterparties such as reinsurers and financial markets counterparties, as well as persons insured by the licensee. However, in the case of group insurance policies (such as group life or medical), the requirements in this Module need not be applied to all
policyholders : see Paragraph FC-1.2.13. Forinsurance brokers , 'customer' refers topolicyholders .Amended: July 2009
Amended: January 2007FC-1.1.4
The CBB's specific minimum standards to be followed with respect to verifying customer identity and source of funds are contained in Section FC-1.2. Enhanced requirements apply under certain high-risk situations: these requirements are contained in Sections FC-1.3 to FC-1.5 inclusive. Simplified customer due diligence measures may apply in defined circumstances: these are set out in Section FC-1.6.
Amended: January 2007FC-1.1.5
Where an
insurance licensee is dealing with an intermediary such as a broker, reliance may be placed on customer identification undertaken by the intermediary, if certain conditions are satisfied: please refer to Chapter FC-1.7.Verification of Third Parties
FC-1.1.6
Insurance licensees must obtain a signed statement, in hard copy or through digital means from all newcustomers confirming whether or not thecustomer is acting on his own behalf or not. This undertaking must be obtained prior to conducting any transactions with thecustomer concerned.Amended: January 2022
Amended: January 2007FC-1.1.7
Where a
customer is acting on behalf of a third party, theinsurance licensee must also obtain a signed statement from the third party, confirming they have given authority to thecustomer to act on their behalf. Where the third party is a legal person, theinsurance licensee must have sight of the original Board resolution (or other applicable document) authorising thecustomer to act on the third party's behalf, and retain a certified copy.Amended: January 2007FC-1.1.8
Insurance licensees must establish and verify the identity of thecustomer and (where applicable) the party/parties on whose behalf thecustomer is acting. In the case of insurance policies, the identity of the beneficiaries must also be separately identified and verified, and the relationship between the insured party and the beneficiaries must be ascertained. Verification must take place in accordance with the requirements specified in this Chapter.Amended: January 2007FC-1.1.9
If claims, commissions, and other monies are to be paid to persons (including partnerships, companies, etc.) other than the
policyholder , then the identity of the proposed recipient of these monies must also be verified in accordance with the requirements specified in this Chapter.Amended: January 2007FC-1.1.10
Where a policy is provided to a minor or other person lacking full legal capacity, the normal identification procedures as set out in this Chapter must be followed. In the case of minors, licensees must additionally verify the identity of the parent(s) or legal guardian(s). Where a third party on behalf of a person lacking full legal capacity subscribes to a policy, the licensee must establish the identity of that third party as well as the intended
policyholder .Amended: January 2007Anonymous and Nominee Accounts
FC-1.1.11
Insurance licensees must not establish or keep anonymous policies or policies in fictitious names. Whereinsurance licensees maintain a nominee account, which is controlled by or held for the benefit of another person, the identity of that person must be disclosed to theinsurance licensee and verified by it in accordance with the requirements specified in this Chapter.Timing of Verification
FC-1.1.12
Insurance licensees must not commence a business relationship or undertake a transaction with acustomer before completion of the relevant customer due diligence (‛CDD’) measures specified in this Chapter.Licensees must also adopt risk management procedures with respect to the conditions under which a customer may utilise the business relationship prior to verification. However, verification may be completed after receipt of funds in the case of non-face-to-face business, or the subsequent submission of CDD documents by thecustomer after undertaking initial customer due diligence provided that no disbursement of funds takes place until after the requirements of this Chapter have been fully met.Amended: January 2022
Amended: January 2007Incomplete Customer Due Diligence
FC-1.1.13
Where an
insurance licensee is unable to comply with the requirements specified in this Chapter, it must consider whether to terminate the relationship or not proceed with the transaction. If funds have been received, these must be returned to the counterparty in the same method as originally received. If it proceeds with the transaction (to avoid tipping off thecustomer ), it should additionally consider whether it should file a suspicious transaction report.Amended: October 2015
Amended: January 2007FC-1.1.14
See also Chapter FC-4, which covers the filing of suspicious transaction reports. Regarding the return of funds to the counterparty, if funds are received in cash, funds should be returned in cash. If funds are received by wire transfer, they should be returned by wire transfer.
Amended: October 2015Non-Resident Accounts
FC-1.1.14A
Insurance licensees that transact or deal with non-resident customers who are natural persons must have documented criteria for acceptance of business with such persons. For non-resident customers,insurance licensees must ensure the following:(a) Ensure there is a viable economic reason for the business relationship;(b) Perform enhanced due diligence where required in accordance with Paragraph FC-1.1.17;(c) Obtain and document the country of residence for tax purposes where relevant;(d) Obtain evidence of banking relationships in the country of residence;(e) Obtain the reasons for dealing with licensee in Bahrain; and(f) Test that the persons are contactable without unreasonable delays.Amended: October 2023
Added: January 2022FC-1.1.14B
Insurance licensees that transact or deal with non-resident customers who are natural persons must have documented approved policies in place setting out the products and services which will be offered to non-resident customers. Such policy document must take into account a comprehensive risk assessment covering all risks associated with the products and services offered to non-residents. The licensee must also have detailed procedures to address the risks associated with the dealings with non-resident customers including procedures and processes relating to authentication, genuineness of transactions and their purpose.
Added: January 2022FC-1.1.14C
Insurance licensees must not accept non-residents customers from high risk jurisdictions subject to a call for action by FATF.Added: January 2022FC-1.1.14D
Insurance licensees must take adequate precautions and risk mitigation measures before onboarding non-resident customers from high risk jurisdictions. Thelicensees must establish detailed assessments and criteria that take into consideration FATF mutual evaluations, FATF guidance, the country national risk assessments (NRAs) and other available guidance on onboarding and retaining non-resident customers from the following high risk jurisdictions:(a) Jurisdictions under increased monitoring by FATF;(b) Countries upon which United Nations sanctions have been imposed except those referred to in Paragraph FC-1.1.12B; and(c) Countries that are the subject of any other sanctions.Added: January 2022FC-1.1.14E
[This Paragraph has been deleted in October 2023].
Deleted: October 2023
Added: January 2022FC-1.1.14F
Insurance licensees must establish systems and measures that are proportional to the risk relevant to each jurisdiction and this must be documented. Such a document must show the risks, mitigation measures for each jurisdiction and for each non-resident customer.Added: January 2022FC-1.1.14G
Insurance licensees must establish a comprehensive documented policy and procedures describing also the tools, methodology and systems that support the licensee’s processes for:(a) The application of RBA;(b) Customer due diligence;(c) Ongoing transaction monitoring; and(d) Reporting in relation to their transactions or dealings with non-resident customers.Added: January 2022FC-1.1.14H
Insurance licensees must ensure that only the official/government documents are accepted for the purpose of information in Subparagraphs FC-1.2.1 (a) to (f) in the case of non-resident customers.Added: January 2022FC-1.1.14I
[This Paragraph has been deleted in October 2023]
Deleted: October 2023
Added: January 2022Existing Customers
FC-1.1.15
[This Paragraph was deleted in October 2015.]
Deleted: October 2015FC-1.1.16
[This Paragraph was deleted in October 2015.]
Deleted: October 2015
Amended: January 2007FC-1.1.17
Insurance licensees must follow the below CDD and customer onboarding requirements:Enhanced Due Diligence Digital Onboarding Bahrainis and GCC nationals (wherever they reside) and expatriates resident in Bahrain No Yes Others Yes Yes Added: October 2023FC-1.2 FC-1.2 Face-to-face Business
Natural Persons
FC-1.2.1
If the customer is a natural person, the
insurance licensee must identify the person’s identity and obtain the following information before providing financial services of any kind:a) Full legal name and any other names used;b) Full permanent address (i.e. the residential address of the customer; a post office box is insufficient);c) Date of birth;d) Nationality;e) Passport number (if the customer is a passport holder);f) Current CPR or Iqama number (for Bahraini or GCC residents only) or government issued national identification proof;g) Telephone/fax number and email address (where applicable);h) Occupation or public position held (where applicable);i) Employer's name and address (if self-employed, the nature of the self-employment);j) Type of policy, and nature and volume of anticipated business dealings with theinsurance licensee ;k) Signature of thecustomer(s) ;l) Source of funds for payment of premium;m) Reason for opening the account; andn) Place of birth.Amended: January 2024
Amended: January 2022
Amended: January 2020
Amended: July 2018
Amended: January 2007FC-1.2.1A
Insurance licensees obtaining the information and customer signature electronically using digital applications must comply with the applicable laws governing the onboarding/business relationship including but not limited to the Electronic Transactions Law (Law No. 54 of 2018) for the purposes of obtaining signatures as required in Subparagraph FC-1.2.1 (k) above.Added: January 2022FC-1.2.2
See Part B, Volume 3 (Insurance), for a Guidance Note on source of funds.
FC-1.2.3
The
insurance licensee must verify the information in Paragraph FC-1.2.1 (a) to (f), by the following methods below; at least one of the copies of the identification documents mentioned in (a) and (b) below must include a clear photograph of the customer:(a) Confirmation of the date of birth and legal name, by use of the national E-KYC application and if this is not practical, obtaining a copy of a current valid official original identification document (e.g. birth certificate, passport, national identity card, CPR or Iqama);(b) Confirmation of the permanent residential address by use of the national E-KYC application and if this is not practical, obtaining a copy of a recent utility bill, bank statement or similar statement from another licensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of the licensee; and(c) Where appropriate, direct contact with the customer by phone, letter or email to confirm relevant information, such as residential address information.Amended: January 2022
Amended: January 2007FC-1.2.4
Any document copied or obtained for the purpose of identification verification in a face-to-face customer due diligence process must be an original. An authorised official of the licensee must certify the copy, by writing on it the words ‘original sighted’, together with the date and his signature. Equivalent measures must be taken for electronic copies.
Amended: January 2022FC-1.2.5
Identity documents which are not obtained by an authorised official of the licensee in original form (e.g. due to a
customer sending a copy by post following an initial meeting) must instead be certified (as per FC-1.2.4) by one of the following from a GCC or FATF member state:(a) A lawyer;(b) A notary;(c) A chartered/certified accountant;(d) An official of a government ministry;(e) An official of an embassy or consulate; or(f) An official of another licensed financial institution or of an associate company of the licensee.Amended: January 2007FC-1.2.6
The individual making the certification under FC-1.2.5 must give clear contact details (e.g. by attaching a business card or company stamp). The
insurance licensee must verify the identity of the person providing the certification through checking membership of a professional organisation (for lawyers or accountants), or through checking against databases/websites, or by direct phone or email contact.Amended: January 2007Legal Entities or Legal Arrangements (such as trusts)
FC-1.2.7
If the
customer is a legal entity or a legal arrangement such as a trust, theinsurance licensee must obtain and record the following information from original identification documents, databases or websites, in hard copy or electronic form, to identify thecustomer and to take reasonable measures to verify its identity, legal existence and structure:(a) The entity's full name and other trading names used;(b) Registration number (or equivalent);(c) Legal form and proof of existence;(d) Registered address and trading address (where applicable);(e) Type of business activity;(f) Date and place of incorporation or establishment;(g) Telephone, fax number and email address;(h) Regulatory body or listing body (for regulated activities such as financial services and listed companies);(hh) The names of the relevant persons having a senior management position in the legal entity or legal arrangement;(i) Name of externalauditor (where applicable);(j) Type of policy, and nature and volume of anticipated business dealings with theinsurance licensee ; and(k) Source of funds for payment of premium.Amended: October 2017
Amended: January 2007FC-1.2.8
The information provided under FC-1.2.7 must be verified by obtaining certified copies of the following documents, as applicable (depending on the legal form of the entity):
(a) Certificate of incorporation and/or certificate of commercial registration or trust deed;(b) Memorandum of association;(c) Articles of association;(d) Partnership agreement;(e) Board resolution seeking the insurance services (only necessary in the case of private or unlisted companies);(f) Identification documentation of the authorised signatories of the insurance contract;(g) Copy of the latest financial report and accounts, audited where possible (audited copies do not need to be certified); and(h) List of authorised signatories of the company for the insurance contract and a Board resolution (or other applicable document) authorising the named signatories or their agent to receive any proceeds from the insurance contract or to modify the terms of the contract (resolution only necessary for private or unlisted companies).Amended: January 2007FC-1.2.8A
For customers that are legal persons,
Insurance licensees must identify and take reasonable measures to verify the identity of beneficial owners through the following information:(a) The identity of the natural person(s) who ultimately have a controlling ownership interest in a legal person, and(b) To the extent that there is doubt under (a) as to whether the person(s) with the controlling ownership interest is the beneficial owner(s), or where no natural person exerts control of the legal person or arrangement through other means; and(c) Where no natural person is identified under (a) or (b) above, the identity of the relevant natural person who holds the position of senior managing official.Amended: October 2017
Amended: January 2007FC-1.2.9
Documents obtained to satisfy the requirements in FC-1.2.8 above must be certified in the manner specified in FC-1.2.4 to FC-1.2.6.
FC-1.2.9A
For the purpose of Paragraph FC-1.2.8(a), the requirement to obtain a certified copy of the commercial registration, may be satisfied by obtaining a commercial registration abstract printed directly from the Ministry of Industry, Commerce and Tourism's website, through "SIJILAT Commercial Registration Portal".
Added: January 2017FC-1.2.10
The documentary requirements in FC-1.2.8 above do not apply in the case of FATF/GCC listed companies: see Section FC-1.6 below. Also, the documents listed in FC-1.2.8 above are not exhaustive: for
customers from overseas jurisdictions, documents of an equivalent nature may be produced as satisfactory evidence of acustomer's identity.Amended: January 2007FC-1.2.11
Insurance licensees must also obtain and document the following due diligence information. These due diligence requirements must be incorporated in the licensee's new business procedures:(a) Enquire as to the structure of the legal entity or trust sufficient to determine and verify the identity of the ultimate provider of funds and ultimate controller of the funds (if different);(b) Ascertain whether the legal entity has been or is in the process of being wound up, dissolved, struck off or terminated;(c) Obtain the names, country of residence and nationality of Directors or partners (only necessary for private or unlisted companies, and for trustees in the case of trusts);(d) Require, through new customer documentation or other transparent means, updates on significant changes to corporate ownership and/or legal structure;(e) Obtain and verify the identity ofshareholders holding 20% or more of the issued capital (where applicable). The requirement to verify the identity of theseshareholders does not apply in the case of FATF/GCC listed companies;(f) In the case of trusts or similar arrangements, establish the identity of the settlor(s), trustee(s), and beneficiaries (including making such reasonable enquiries as to ascertain the identity of any other potential beneficiary, in addition to the named beneficiaries of the trust); and(g) Where a licensee has reasonable grounds for questioning the authenticity of the information supplied by acustomer , conduct additional due diligence to confirm the above information.Amended: January 2007FC-1.2.12
For the purposes of Paragraph FC-1.2.11, acceptable means of undertaking such due diligence might include taking bank references; visiting or contacting the company by telephone; undertaking a company search or other commercial enquiries; accessing public and private databases (such as stock exchange lists); making enquiries through a business information service or credit bureau; confirming a company's status with an appropriate legal or accounting firm; or undertaking other enquiries that are commercially reasonable.
FC-1.2.13
In the case of group insurance policies (such as group life or medical insurance), customer identification may be limited to the principal
shareholders and Directors of the contracting company.Amended: January 2007FC-1.3 FC-1.3 Enhanced Customer Due Diligence: General Requirements
FC-1.3.1
Enhanced customer due diligence must be performed on those
customers identified as having a higher risk profile, and additional inquiries made or information obtained in respect of thosecustomers . If theinsurance licensee determines that a beneficiary who is a legal person or a legal arrangement presents a higher risk, it must take enhanced measures which must include reasonable measures to identify and verify the identity of the beneficial owner of the beneficiary, at the time of payout.Amended: January 2022
Amended: January 2007FC-1.3.2
Licensees should examine, as far as reasonably possible, the background and purpose of all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. Where the risks of money laundering or terrorist financing are higher,
licensees should conduct enhanced CDD measures, consistent with the risks identified. In particular, they should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious. The additional inquiries or information referred to in Paragraph FC-1.3.1 include:(a) Obtaining additional information on the customer (e.g. occupation, volume of assets, information available through public databases, internet, etc.), and updating more regularly the identification data of customer and beneficial owner;(b) Obtaining additional information on the intended nature of the business relationship;(c) Obtaining information on the source of funds or source of wealth of the customer;(d) Obtaining information on the reasons for intended or performed transactions;(e) Obtaining the approval of senior management to commence or continue the business relationship;(f) Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination;(g) Taking specific measures to identify the source of the first payment in this account and applying RBA to ensure that there is a plausible explanation in any case where the first payment was not received from the same customer’s account;(h) Obtaining evidence of a person's permanent address through the use of a credit reference agency search, or through independent governmental database or by home visit;(i) Obtaining a personal reference (e.g. by an existingcustomer of theinsurance licensee );(j) Obtaining another licensed entity’s reference and contact with the concernedlicensee regarding thecustomer ;(k) Obtaining documentation outlining thecustomer’s source of wealth;(l) Obtaining additional documentation outlining thecustomer’s source of income; and(m) Obtaining additional independent verification of employment or public position held.Amended: January 2022
Amended: January 2007FC-1.4 FC-1.4 Enhanced Customer Due Diligence: Non face-to-face Business and New Technologies
FC-1.4.1
Insurance licensees must establish specific procedures for verifyingcustomer identity where no face-to-face contact takes place.Amended: January 2007FC-1.4.2
Where no face-to-face contact takes place,
insurance licensees must take additional measures (to those specified in Section FC-1.2), in order to mitigate the potentially higher risk associated with such business. In particular,insurance licensees must take measures:(a) To ensure that thecustomer is the person they claim to be; and(b) To ensure that the address provided is genuinely thecustomer's .Amended: January 2007FC-1.4.3
There are a number of checks that can provide an
insurance licensee with a reasonable degree of assurance as to the authenticity of the applicant. They include:(a) Telephone contact with the applicant on an independently verified home or business number;(b) With thecustomer’s consent, contacting an employer to confirm employment, via phone through a listed number or in writing;(c) Requiring a premium payment to be made from an account in thecustomer’s name at a bank having equivalent CDD standards;(d) Independent verification of employment (e.g. through the use of a national E-KYC application, or public position held;(e) Carrying out additional searches (e.g. internet searches using independent and open sources) to better inform the customer risk profile;(f) Carrying out additional searches focused on financial crime risk indicator (i.e. negative news);(g) Evaluating the information provided with regard to the destination of fund and the reasons for the transaction;(h) Seeking and verifying additional information from the customer about the purpose and intended nature of the transaction or the business relationship; and(i) Increasing the frequency and intensity of transaction monitoring.Amended: January 2022
Amended: January 2007FC-1.4.4
Financial services provided using digital channels or internet pose greater challenges for
customer identification andAML/CFT purposes.Insurance licensees must identify and assess the money laundering or terrorist financing risks relevant to any new technology or channel and establish procedures to prevent the misuse of technological developments in money laundering or terrorist financing schemes. The risk assessments must be consistent with the requirements in Section FC-C.2.Amended: January 2022
Amended: January 2007FC-1.4.5
Insurance licensees must identify and assess the money laundering or terrorist financing risks that may arise in relation to:(a) The development of new products and new business practices, including new delivery mechanisms; and(b) The use of new or developing technologies for both new and pre-existing products.Added: October 2015FC-1.4.6
For purposes of Paragraph FC-1.4.5, such a risk assessment consistent with the requirements in Section FC-C.2 and must take place prior to the launch of the new products, business practices or the use of new or developing technologies.
Insurance licensees must take appropriate measures to manage and mitigate those risks.Amended: January 2022
Added: October 2015Enhanced Monitoring
FC-1.4.7
Customers onboarded digitally must be subject to enhanced on-going account monitoring measures.
Added: January 2022FC-1.4.8
The CBB may require a
licensee to share the details of the enhanced monitoring and the on-going monitoring process for non face-to-face customer relationships.Added: January 2022Licensee’s digital ID applications
FC-1.4.9
Insurance licensees may use its digital ID applications that use secure audio-visual real time (live video conferencing/live photo selfies) communication means to identify the natural person.Added: January 2022FC-1.4.10
Insurance licensees must maintain a document available upon request for the use of its digital ID applications that includes all the following information:(a) A description of the nature of products and services for which the proprietary digital ID application is planned to be used with specific references to the rules in this Module for which it will be used;(b) A description of the systems and IT infrastructure that are planned to be used;(c) A description of the technology and applications that have the features for facial recognition or biometric recognition to authenticate independently and match the face and the customer identification information available with the licensee. The process and the features used in conjunction with video conferencing include, among others, face recognition, three-dimensional face matching techniques etc;(d) “Liveness” checks created in the course of the identification process;(e) A description of the governance arrangements related to this activity including the availability of specially trained personnel with sufficient level of seniority; and(f) Record keeping arrangements for electronic records to be maintained and the relative audit.Added: January 2022FC-1.4.11
Insurance licensees that intend to use its digital ID application to identify the customer and verify identity information must meet the following additional requirements:(a) The digital ID application must make use of secure audio visual real time (live video conferencing /live photo selfies) technology to (i) identify the customer, (ii) verify his/her identity, and also (iii) ensure the data and documents provided are authentic;(b) The picture/sound quality must be adequate to facilitate unambiguous identification;(c) The digital ID application must include or be combined with capability to read and decrypt the information stored in the identification document’s machine readable zone (MRZ) for authenticity checks from independent and reliable sources;(d) Where the MRZ reader is with an outsourced provider, thelicensee must ensure that such party is authorized to carry out such services and the information is current and up to date and readily available such that thelicensee can check that the decrypted information matches the other information in the identification document;(e) The digital ID application has the features for allowing facial recognition or biometric recognition that can authenticate and match the face and the customer identification documents independently;(f) The digital ID solution has been tested by an independent expert covering the governance and control processes to ensure the integrity of the solution and underlying methodologies, technology and processes and risk mitigation. The report of the expert’s findings must be retained and available upon request;(g) The digital ID application must enable an ongoing process of retrieving and updating the digital files, identity attributes, or data fields which are subject to documented access rights and authorities for updating and changes; and(h) The digital ID application must have the geo-location features which must be used by the licensee to ensure that it is able to identify any suspicious locations and to make additional inquiries if the location from which a customer is completing the onboarding process does not match the location of the customer based on the information and documentation submitted.Added: January 2022FC-1.4.12
Insurance licensees using its digital ID application must establish and implement an approved policy which lays down the governance, control mechanisms, systems and procedures for the CDD which include:(a) A description of the nature of products and services for which customer due diligence may be conducted through video conferencing or equivalent electronic means;(b) A description of the systems, controls and IT infrastructure planned to be used;(c) Governance mechanism related to this activity;(d) Specially trained personnel with sufficient level of seniority; and(e) Record keeping arrangements for electronic records to be maintained and the relative audit trail.Added: January 2022FC-1.4.13
Insurance licensees must ensure that the information referred to in Paragraph FC-1.2.1 is collected in adherence to privacy laws and other applicable laws of the country of residence of the customer.Added: January 2022FC-1.4.14
Insurance licensees must ensure that the information referred to in Subparagraphs FC-1.2.1 (a) to (f) is obtained prior to commencing the digital verification such that:(a) Thelicensee can perform its due diligence prior to the digital interaction/communication and can raise targeted questions at such interaction/communication session; and(b) Thelicensee can verify the authenticity, validity and accuracy of such information through digital means (See Paragraph FC.1.4.16 below) or by use of the methods mentioned in Paragraph FC-1.2.3 and /or FC-1.4.3 as appropriate.Added: January 2022FC-1.4.15
The
licensee must also obtain the customer’s explicit consent to record the session and capture images as may be needed.Added: January 2022FC-1.4.16
Insurance licensees must verify the information in Paragraph FC-1.2.1 (a) to (f) by the following methods below:(a) Confirmation of the date of birth and legal name by digital reading and authenticating current valid passport or other official original identification using machine readable zone (MRZ) or other technology which has been approved under paragraph FC-1.4.9, unless the information was verified using national E-KYC application;(b) Performing real time video calls with the applicant to identify the person and match the person’s face and /other features through facial recognition or bio-metric means with the office documentation, (e.g. passport, CPR);(c) Matching the official identification document, (e.g. passport, CPR) and related information provided with the document captured/displayed on the live video call; and(d) Confirmation of the permanent residential address by, unless the information was verified using national E-KYC application capturing live, the recent utility bill, bank statement or similar statement from anotherlicensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of theinsurance licensee .Added: January 2022FC-1.4.17
For the purposes of Paragraph FC-1.4.16, actions taken for obtaining and verifying customer identity could include:
(a) Collection: Present and collect identity attributes and evidence, either in person and/or online (e.g., by filling out an online form, sending a selfie photo, uploading photos of documents such as passport or driver’s license, etc.);(b) Certification: Digital or physical inspection to ensure the document is authentic and its data or information is accurate (for example, checking physical security features, expiration dates, and verifying attributes via other services);(c) De-duplication: Establish that the identity attributes and evidence relate to a unique person in the ID system (e.g., via duplicate record searches, biometric recognition and/or deduplication algorithms);(d) Verification: Link the individual to the identity evidence provided (e.g., using biometric solutions like facial recognition and liveness detection); and(e) Enrolment in identity account and binding: Create the identity account and issue and link one or more authenticators with the identity account (e.g., passwords, one-time code (OTC) generator on a smartphone, etc.). This process enables authentication.Added: January 2022FC-1.4.18
Not all elements of a digital ID system are necessarily digital. Some elements of identity proofing and enrolment can be either digital or physical (documentary), or a combination, but binding and authentication must be digital.
Added: January 2022FC-1.4.19
Sufficient controls must be put in place to safeguard the data relating to customer information collected through the video conference and due regard must be paid to the requirements of the Personal Data Protection Law (PDPL). Additionally, controls must be put in place to minimize the increased impersonation fraud risk in such non face-to-face relationship where there is a chance that customer may not be who he claims he is.
Added: January 2022Overseas branches
FC-1.4.20
Where
insurance licensees intend to use a digital ID application in a foreign jurisdiction in which it operates, it must ensure that the digital ID application meets with the requirements under Paragraph FC-B.3.1.Added: January 2022FC-1.5 FC-1.5 Enhanced Customer Due Diligence: Politically Exposed Persons ('PEPs')
FC-1.5.1
Insurance licensees must have appropriate risk management systems to determine whether acustomer or beneficial owner is aPolitically Exposed Person ('PEP') , both at the time of establishing business relations and thereafter on a periodic basis. Licensees must utilise publicly available databases and information to establish whether a customer is aPEP .Amended: July 2016
Amended: October 2015
Amended: January 2007
Amended: October 2007FC-1.5.2
Insurance licensees must establish a client acceptance policy with regard to PEPs, taking into account the reputational and other risks involved. Senior management approval must be obtained before a PEP is accepted as acustomer .Licensees must not accept a non-Bahraini PEP as a customer based on customer due diligence undertaken using digital ID applications.Amended: January 2022
Amended: January 2007FC-1.5.3
Where an existing
customer is aPEP , or subsequently becomes a PEP, enhanced monitoring and customer due diligence measures must include:(a) Analysis of complex financial structures, including trusts, foundations or international business corporations;(b) A written record in thecustomer file to establish that reasonable measures have been taken to establish both the source of wealth and the source of funds;(c) Development of a profile of anticipatedcustomer activity, to be used in on-going monitoring;(d) Approval of senior management for allowing thecustomer relationship to continue; and(e) On-going account monitoring of thePEP's account by senior management (such as the MLRO).Amended: January 2007FC-1.5.3A
In cases of higher risk business relationships with such persons, mentioned in Paragraph FC-1.5.1,
insurance licensees must apply the measures referred to in Subparagraphs FC-1.5.3 (b), (d) and (e).Added: October 2015FC-1.5.3B
The requirements for all types of
PEP must also apply to family or close associates of suchPEPs .Added: October 2015FC-1.5.3C
For the purpose of Paragraph FC-1.5.3B, 'family' means spouse, father, mother, sons, daughters, sisters and brothers. 'Associates' are persons associated with a
PEP whether such association is due to the person being an employee or partner of thePEP or of a firm represented or owned by thePEP , or family links or otherwise.Added: October 2015FC-1.5.4
[This Paragraph was deleted in July 2016 as definition is included under Part B in the Glossary.]
Deleted: July 2016
Amended: October 2015
Amended: January 2007FC-1.5.5
In relation to life insurance policies,
insurance licensees must take reasonable measures to determine whether the beneficiaries and/or, where required, the beneficial owner of thebeneficiary , are PEPs. This must occur, at the latest, at the time of the payout.Added: January 2018
FC-1.5.6
Where higher risks are identified,
senior management must be informed before the payout of the policy proceeds, in order to conduct enhanced scrutiny on the whole business relationship with the policyholder, and to consider making a suspicious transaction report.Added: January 2018
FC-1.5A FC-1.5A Enhanced Due Diligence: Charities, Clubs and Other Societies
FC-1.5A.1
Financial services must not be provided to charitable funds and religious, sporting, social, cooperative and professional and other societies, until an original certificate authenticated by the relevant Ministry confirming the identities of those purporting to act on their behalf (and authorising them to obtain the said service) has been obtained. Charities should be subject to enhanced monitoring by
insurance licensees .Added: January 2022FC-1.5A.2
For the purpose of Paragraph FC-1.5A.1, for clubs and societies registered with the Ministry of Youth and Sport Affairs,
insurance licensees must contact the Ministry to clarify whether a policy may be issued in accordance with the rules of the Ministry. In addition, in the case of sport associations registered with the Bahrain Olympic Committee (BOC),insurance licensees must contact BOC to clarify whether the policy may be issued in accordance with the rules of BOC.Added: January 2022FC-1.6 FC-1.6 Simplified Customer Due Diligence
FC-1.6.1
Insurance licensees may apply simplified customer due diligence measures, as described in Paragraphs FC-1.6.2 to FC-1.6.8, if:(a) Thecustomer is the Central Bank of Bahrain ('CBB'), the Bahrain Bourse ('BHB') or a licensee of the CBB;(b) Thecustomer is a Ministry of a Gulf Cooperation Council ('GCC') or Financial Action Task Force ('FATF') member state government, a company in which a GCC government is a majorityshareholder , or a company established by decree in the GCC;(c) Thecustomer is a company listed on a GCC or FATF member state stock exchange with equivalent disclosure standards to those of the BHB;(d) Thecustomer is a financial institution whose entire operations are subject toAML/CFT requirements consistent with the FATF Recommendations and it is supervised by a financial services supervisor in a FATF or GCC member state for compliance with those requirements;(e) Thecustomer is a financial institution that is asubsidiary of a financial institution located in a FATF or GCC member state, and theAML/CFT requirements applied to its parent also apply to the subsidiary; or(f) [This Subparagraph was deleted in January 2018].(g) The transaction is a long-term insurance contract, either taken out in connection with a pension scheme relating to thecustomer's employment or occupation, or contains a no surrender clause and cannot be used as security for a loan.Amended: January 2019
Amended: January 2018
Amended: October 2015
Amended: January 2007FC-1.6.2
For
customers falling under the categories (a) to (e) specified in Paragraph FC-1.6.1, the information required under Paragraph FC-1.2.1 (for natural persons) or FC-1.2.7 (for legal entities or legal arrangements such as trusts) must be obtained. However, the verification and certification requirements in Paragraphs FC-1.2.3 and FC-1.2.8, and the due diligence requirements in Paragraph FC-1.2.11, may be dispensed with.Amended: January 2007FC-1.6.3
[This Paragraph was deleted in July 2018].
Deleted: July 2018
Amended: January 2007FC-1.6.4
Insurance licensees wishing to apply simplified due diligence measures as allowed for under Paragraph FC-1.6.1 must retain documentary evidence supporting their categorisation of thecustomer .Amended: January 2007FC-1.6.5
Examples of such documentary evidence may include a printout from a regulator's website, confirming the licensed status of an institution, and internal papers attesting to a review of the
AML/CFT measures applied in a jurisdiction.FC-1.6.6
For
customers coming under Paragraph FC-1.6.1 (e), licensees must also obtain and retain a written statement from the parent institution of thesubsidiary concerned, confirming that thesubsidiary is subject to the sameAML/CFT measures as itsparent .Amended: January 2007FC-1.6.7
[This Paragraph was deleted in January 2007]
Deleted: January 2007FC-1.6.8
Simplified customer due diligence measures must not be applied where a licensee knows, suspects, or has reason to suspect, that the applicant is engaged in money laundering or terrorism financing or that the transaction is carried out on behalf of another person engaged in money laundering or terrorism financing.
FC-1.6.8A
Simplified customer due diligence measures must not be applied in situations where the licensee has identified high ML/TF/PF risks.
Added: January 2022FC-1.6.9
[This Paragraph was deleted in July 2018].
Deleted: July 2018FC-1.6.10
[This Paragraph was deleted in July 2018].
Deleted: July 2018
Amended: January 2007FC-1.7 FC-1.7 Introduced Business from Professional Intermediaries
FC-1.7.1
Insurance licensees may only acceptcustomers introduced to them by other financial institutions or intermediaries, if they have satisfied themselves that the financial institution or intermediary concerned is subject to FATF-equivalent measures and customer due diligence measures. Where aninsurance licensee delegates part of the customer due diligence measures to another financial institution or intermediary, the responsibility for meeting the requirements of this Chapter remains with theinsurance licensee , not the third party.Amended: January 2018
Amended: January 2007FC-1.7.2
Insurance licensees may only accept introduced business if all of the following conditions are satisfied:(a) The customer due diligence measures applied by the introducer are consistent with those required by the FATF Recommendations;(b) A formal agreement is in place defining the respective roles of the licensee and the introducer in relation to customer due diligence measures. The agreement must specify that the customer due diligence measures of the introducer will comply with the FATF Recommendations;(c) The introducer is able to provide all relevant data pertaining to thecustomer's identity, the identity of thepolicyholder and beneficiary of the policy and, where applicable, the party/parties on whose behalf thecustomer is acting; also, the introducer has confirmed that the licensee will be allowed to verify the customer due diligence measures undertaken by the introducer at any stage; and(d) Written confirmation is provided by the introducer confirming that all customer due diligence measures required by the FATF Recommendations have been followed and thecustomer's identity established and verified. In addition, the confirmation must state that any identification documents or other customer due diligence material can be accessed by theinsurance licensee and that these documents will be kept for at least five years after the policy relationship has ended.Amended: October 2015
Amended: January 2007
Amended: October 2007
Amended: April 2008FC-1.7.3
The
insurance licensee must perform periodic reviews ensuring that any introducer on which it relies is in compliance with the FATF Recommendations. Where the introducer is resident in another jurisdiction, theinsurance licensee must also require the introducer to perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF Recommendations.Amended: October 2015FC-1.7.4
Should the
insurance licensee not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, the licensee must conduct its own customer due diligence or not accept or continue the business relationship.Amended: October 2015FC-1.8 Reliance on Third Parties for Customer Due Diligence
FC-1.8.1
Licensees are permitted to rely on third parties to perform elements of CDD measures and recordkeeping requirements stipulated in Chapter FC-1 related to customer and beneficial owner identity, verification of their identity and information on the purpose and intended nature of the business relationship with thelicensee , subject to complying with the below:(a)Licensees remain ultimately responsible for CDD measures;(b)Licensees immediately obtain the relevant CDD information from the third party upon onboarding clients;(c) There is an agreement with the third party for the arrangement with clear contractual terms on the obligations of the third party;(d) The third party without delay makes available the relevant documentation relating to the CDD requirements upon request;(e)Licensees ensure that the third party is a financial institution that is regulated and supervised for, and has measures in place for compliance with, CDD and recordkeeping requirements in line with FATF Recommendations 10 and 11; and(f) For third parties based abroad,licensees must consider the information available on the level of country risk.Added: October 2023FC-1.8.2
Where a
licensee relies on a third-party that is part of the same financial group, thelicensee can consider that:(a) The requirements under Subparagraphs FC-1.8.1 (d) and (e) are complied with through its group programme, provided the group satisfies the following conditions:(i) The group applies CDD and record keeping requirements consistent with FATF Recommendations 10, 11 and 12 and has in place internal controls in accordance with FATF Recommendation 18; and(ii) The implementation of CDD, record keeping and AML/CFT measures are supervised at a group level by a financial services regulatory authority for compliance with AML/CFT requirements consistent with standards set by the FATF.(b) The requirement under Subparagraph FC-1.8.1 (f) is complied with if the country risk is adequately mitigated by the group’s AML/CFT policies.Added: October 2023FC-1.8.3
This Section does not apply to outsourcing or agency arrangements in which the outsourced entity applies the CDD measures on behalf of the delegating
licensee , in accordance with its procedures.Added: October 2023FC-2 FC-2 AML / CFT Systems and Controls
FC-2.1 FC-2.1 General Requirements
FC-2.1.1
Insurance licensees must implement programmes against money laundering and terrorist financing which establish and maintain appropriate systems and controls for compliance with the requirements of this Module and which limit their vulnerability to financial crime. These systems and controls must be documented, and approved and reviewed annually by the Board of the licensee. The documentation, and the Board's review and approval, must be made available upon request to the CBB.Amended: October 2015
Amended: January 2007FC-2.1.2
Where the
insurance licensee is an unincorporated entity, the annual review and approval should be undertaken by the most senior person with oversight responsibilities for the licensee, such as itsGeneral Manager or managing partner.Amended: October 2007FC-2.1.3
The above systems and controls, and associated documented policies and procedures, should cover standards for customer acceptance, on-going monitoring of high-risk accounts, staff training and adequate screening procedures to ensure high standards when hiring employees.
Amended: October 2007FC-2.1.4
Insurance licensees must incorporate Key Performance Indicators (KPIs) to ensure compliance with AML/CFT requirements by all staff. The performance against the KPIs must be adequately reflected in their annual performance evaluation and in their remuneration (See also Paragraph HC-5.4.3).Added: April 2020FC-2.1.5
In implementing the policies, procedures and monitoring tools for ensuring compliance with Paragraph FC-2.1.4,
insurance licensees should consider the following:(a) The business policies and practices should be designed to reduce incentives for staff to expose theinsurance licensee to AML/CFT compliance risk;(b) The performance measures of departments/divisions/units and personnel should include measures to address AML/CFT compliance obligations;(c) AML/CFT compliance breaches and deficiencies should be attributed to the relevant departments/divisions/units and personnel within the organisation as appropriate;(d) Remuneration and bonuses should be adjusted for AML/CFT compliance breaches and deficiencies; and(e) Both quantitative measures and human judgement should play a role in determining any adjustments to the remuneration and bonuses resulting from the above.Added: April 2020FC-2.2 FC-2.2 On-going Customer Due Diligence and Transaction Monitoring
Risk-Based Monitoring
FC-2.2.1
Insurance licensees must develop risk-based monitoring systems appropriate to the complexity of their business, their number of clients and types of transactions. These systems must be configured to identify significant or abnormal transactions or patterns of activity. Such systems must include limits on the number, types or size of transactions undertaken outside expected norms; and must include limits for cash and non-cash transactions.FC-2.2.2
Insurance licensees' risk-based monitoring systems should therefore be configured to help identify:(a) Transactions which do not appear to have a clear purpose or which make no obvious economic sense;(b) Significant or large transactions not consistent with the normal or expected behaviour of acustomer ; and(c) Unusual patterns of activity (relative to othercustomers of the same profile or of similar types of transactions, for instance because of differences in terms of volumes, transaction type, or flows to or from certain countries), or activity outside the expected or regular patter of acustomer's account activity.Amended: January 2007Automated Transaction Monitoring
FC-2.2.3
Insurance licensees must consider the need to include automated transaction monitoring as part of their risk-based monitoring systems. In the absence of automated transaction monitoring systems, all transactions above BD 6,000 must be viewed as 'significant' and be captured in a daily transactions report for monitoring by the MLRO or a relevant delegated official, and records retained by theinsurance licensee for five years after the date of the transaction.Amended: January 2007
Amended: October 2007
Amended: April 2008Unusual Transactions or Customer Behaviour
FC-2.2.5
In instances where an
insurance licensee’s risk-based monitoring systems identify significant or abnormal transactions (as defined in FC-2.2.2 and FC-2.2.3), it must verify the source of funds for those transactions, particularly where the transactions are above the transactions threshold of BD 6,000. Furthermore,insurance licensees must examine the background and purpose to those transactions and document their findings.Amended: January 2022FC-2.2.6
The investigations required under FC-2.2.5 must be carried out by the MLRO (or relevant delegated official). The documents relating to these findings must be maintained for five years from the date when the transaction was completed (see also FC-6.1.1(b)).
Amended: October 2007
Amended: April 2008FC-2.2.7
Insurance licensees must consider instances where there is a significant, unexpected or unexplained change in the behaviour ofpolicyholders' account (e.g., early surrenders).Insurance licensees must be extra vigilant to the particular risks involved in the buying and selling of second hand endowment policies, as well as the use of single premium unit-linked policies.Insurance licensees must check any reinsurance or retrocession to ensure that monies are paid to bona fide reinsurance entities at rates commensurate with the risks underwritten.Amended: January 2007FC-2.2.8
When an existing
customer cancels a policy and applies for another, theinsurance licensee must review its customer identity information and update its records accordingly. Where the information available falls short of the requirements contained in Chapter FC-1, the missing or out of date information must be obtained and re-verified with thecustomer .Amended: January 2007FC-2.2.9
Once identification procedures have been satisfactorily completed and, as long as records concerning the
customer are maintained in line with Chapters FC-1 and FC-6, no further evidence of identity is needed when transactions are subsequently undertaken within the expected level and type of activity for thatcustomer , provided reasonably regular contact has been maintained between the parties and no doubts have arisen as to thecustomer's identity.Amended: January 2007On-going Monitoring
FC-2.2.10
Insurance licensees must take reasonable steps to:(a) Scrutinize transactions undertaken throughout the course of that relationship to ensure that transactions being conducted are consistent with theInsurance licensee's knowledge of the customer, their business risk and risk profile; and(b) Ensure that they receive and maintain up-to-date and relevant copies of the identification documents specified in Chapter FC-1, by undertaking reviews of existing records, particularly for higher risk categories of customers.Insurance licensees must require allcustomers to provide up-to-date identification documents in their standard terms and conditions of business.Amended: October 2017
Amended: January 2007FC-2.2.11
Insurance licensees must review and update their customer due diligence information at least every three years, particularly for higher risk categories of customers. If, upon performing such a review, copies of identification documents are more than 12 months out of date, theinsurance licensee must take steps to obtain updated copies as soon as possible.Amended: October 2017FC-3 FC-3 Money Laundering Reporting Officer
FC-3.1 FC-3.1 Appointment of MLRO
FC-3.1.1
Insurance firms (exceptcaptive insurance firms managed by aninsurance manager ),insurance brokers andinsurance managers (that manage acaptive insurance firm ) must appoint a Money Laundering Reporting Officer ('MLRO'). In the case ofinsurance managers that managecaptive insurance firms , theinsurance manager must appoint a MLRO for each of thecaptive insurance firms under its management.Amended: January 2007
Amended: October 2007FC-3.1.2
Insurance managers may nominate the same individual to act as MLRO for more than onecaptive insurance firm , providing this person can meet in full the responsibilities of MLRO for eachcaptive insurance firm in question.Amended: January 2007FC-3.1.3
The position of MLRO is a
controlled function and the MLRO is anapproved person .FC-3.1.4
For details of the CBB's requirements regarding
controlled functions andapproved persons , see Section AU-1.2. Amongst other things,approved persons require CBB approval before being appointed, which is granted only if they are assessed as 'fit and proper' for the function in question. A completed Form 3 must accompany any request for CBB approval.Amended: January 2007FC-3.1.5
The position of MLRO must not be combined with functions that create potential conflicts of interest, such as an internal auditor or business line head. The position of MLRO may not be outsourced.
FC-3.1.6
Subject to Paragraph FC-3.1.5, however, the position of MLRO may otherwise be combined with other functions in the
insurance licensee , such as that of Compliance Officer, in cases where the volume and geographical spread of the business is limited and, therefore, the demands of the function are not likely to require a full time resource. Paragraph FC-3.1.9 requires that the MLRO is aDirector oremployee of the licensee, so the function may not be outsourced to a third party employee.Amended: January 2007
Amended: October 2007FC-3.1.6A
For purposes of Paragraphs FC-3.1.5 and FC-3.1.6 above,
insurance licensees must clearly state in the Application for Approved Person Status — Form 3 — when combining the MLRO or DMLRO position with any other position within theinsurance licensee .Added: October 2017FC-3.1.7
Insurance licensees must appoint at least one deputy MLRO (or more depending on the scale and complexity of the licensee's operations). The deputy MLRO(s) must be resident in Bahrain unless otherwise agreed with the CBB.Amended: January 2007FC-3.1.7A
The deputy MLRO should be able to support the MLRO discharge his responsibilities and to deputise for him in his absence. In the case of
insurance licensees undertaking significant overseas business, the CBB would normally expect to see one or more deputy MLRO(s) residing in the jurisdiction(s) where the bulk of the customer business is processed. In such cases, the CBB would normally agree to an application for an exemption from the residency requirement in Rule FC-3.1.7.Amended: January 2007FC-3.1.8
Insurance licensees should note that although the MLRO may delegate some of his functions, either to other employees of the licensee or even (in the case of larger groups) to individuals performing similar functions for other group entities, that the responsibility for compliance with the requirements of this Module remains with the licensee and the designated MLRO.Amended: January 2007FC-3.1.9
So that he can carry out his
controlled function effectively,insurance licensees must ensure that their MLRO:(a) Is a member of senior management of the licensee;(b) Has a sufficient level of seniority within theinsurance licensee , has the authority to act without interference from business line management and has direct access to the Board and senior management (where necessary);(c) Has sufficient resources, including sufficient time and (if necessary) support staff, and has designated a replacement to carry out the function should the MLRO be unable to perform his duties;(d) Has unrestricted access to all transactional information relating to any financial services provided by theinsurance licensee to acustomer , or any transactions conducted by theinsurance licensee on behalf of thatcustomer ;(e) Is provided with timely information needed to identify, analyse and effectively monitorcustomer accounts;(f) Has access to allcustomer due diligence information obtained by theinsurance licensee ; and(g) Is resident in Bahrain.Amended: October 2011
Amended: January 2007
Amended: October 2007FC-3.1.10
In addition,
insurance licensees must ensure that their MLRO is able to:(a) Monitor the day-to-day operation of their policies and procedures relevant to this Module; and(b) Respond promptly to any reasonable request for information made by the Financial Intelligence Directorate or the CBB.Amended: October 2019
Amended: April 2010
Amended: October 2007
Amended: January 2007FC-3.1.11
If the position of MLRO falls vacant, the
insurance licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the licensee must make immediate interim arrangements (including the appointment of an acting MLRO) to ensure continuity in the MLRO function's performance. These interim arrangements must be approved by the CBB.Amended: January 2007FC-3.2 FC-3.2 Responsibilities of the MLRO
FC-3.2.1
The MLRO is responsible for:
(a) Establishing and maintaining theinsurance licensee's AML/CFT policies and procedures;(b) Ensuring that the licensee complies with the AML Law and any other applicableAML/CFT legislation and this Module;(c) Ensuring day-to-day compliance with the licensee's own internalAML/CFT policies and procedures;(d) Acting as theinsurance licensee's main point of contact in respect of handling internal suspicious transactions reports from the licensee's staff (refer to Section FC-4.1) and as the main contact for the Financial Intelligence Directorate, the CBB and other concerned bodies regardingAML/CFT ;(e) Making external suspicious transactions reports to the Financial Intelligence Directorate and the Compliance Directorate (refer to Section FC-4.2);(f) Taking reasonable steps to establish and maintain adequate arrangements for staff awareness and training onAML/CFT matters (whether internal or external), as per Chapter FC-5;(g) Producing annual reports on the effectiveness of the licensee'sAML/CFT controls, for consideration by senior management, as per Paragraph FC-3.3.3;(h) On-going monitoring of what may, in his opinion, constitute high-riskcustomer accounts; and(i) Ensuring that theinsurance licensee maintains all necessary CDD, transactions, STR and staff training records for the required periods (refer to Section FC-6.1).Amended: October 2019
Amended: October 2015
Amended: April 2010
Amended: January 2007FC-3.3 FC-3.3 Compliance Monitoring
Annual Compliance Review
FC-3.3.1
Insurance licensees must take appropriate steps to identify and assess their money laundering and terrorist financing risks (for customers, countries or geographic areas; and products, services, transactions or delivery channels). They must document those assessments in order to be able to demonstrate their basis, keep these assessments up to date, and have appropriate mechanisms to provide risk assessment information to the CBB. The nature and extent of any assessment of money laundering and terrorist financing risks must be appropriate to the nature and size of the business.Added: October 2015FC-3.3.1A
Insurance licensees should always understand their money laundering and terrorist financing risks, but the CBB may determine that individual documented risk assessments are not required, if the specific risks inherent to the sector are clearly identified and understood.Added: October 2015FC-3.3.1B
An
insurance licensee must review the effectiveness of itsAML/CFT procedures, systems and controls at least once each calendar year. The review must cover the licensee and itsbranches andsubsidiaries both inside and outside the Kingdom of Bahrain. Aninsurance licensee must monitor the implementation of those controls and enhance them if necessary. The scope of the review must include:(a) A report, containing the number of internal reports made in accordance with Section FC-4.1, a breakdown of all the results of those internal reports and their outcomes for each segment of the licensee's business, and an analysis of whether controls or training need to be enhanced;(b) A report, indicating the number of external reports made in accordance with Section FC-4.2 and, where aninsurance licensee has made an internal report but not made an external report, noting why no external report was made;(c) A sample test of compliance with this Module's customer due diligence requirements; and(d) A report as to the quality of the licensee's anti-money laundering procedures, systems and controls, and compliance with the AML Law and this Module.Amended: January 2022
Amended: October 2015
Amended: January 2007
Amended: October 2007FC-3.3.2
The reports listed under Paragraph FC-3.3.1B (a) and (b) must be made by the MLRO. The sample testing and report required under Paragraph FC-3.3.1B (c) and (d) must be made by the licensee’s external
auditor or a consultancy firm approved by the CBB.Amended: January 2022
Amended: January 2019
Amended: October 2011
Amended: January 2007
Amended: October 2007FC-3.3.2A
In order for a consultancy firm to be approved by the CBB for the purposes of Paragraph FC-3.3.2, such firm should provide the CBB's Compliance Directorate with:
(a) A sample AML/CFT report prepared for a financial institution;(b) A list of other AML/CFT related work undertaken by the firm;(c) A list of other audit/review assignments undertaken, specifying the nature of the work done, date and name of the licensee; and(d) An outline of any assignment conducted for or in cooperation with an international audit firm.Added: October 2011FC-3.3.2B
The firm should indicate which personnel (by name) will work on the report (including, where appropriate, which individual will be the team leader) and demonstrate that all such persons have appropriate qualifications in one of the following areas:
(a) Audit;(b) Accounting;(c) Law; or(d) Banking/Finance.Added: October 2011FC-3.3.2C
At least two persons working on the report (one of whom would normally expected to be the team leader) should have:
(a) A minimum of 5 years professional experience dealing with AML/CFT issues; and(b) Formal AML/CFT training.Added: October 2011FC-3.3.2D
Submission of a curriculum vitae for all personnel to be engaged on the report is encouraged for the purposes of evidencing the above requirements.
Added: October 2011FC-3.3.2E
Upon receipt of the above required information, the CBB Compliance Directorate will assess the firm and communicate to it whether it meets the criteria required to be approved by the CBB for this purpose. The CBB may also request any other information it considers necessary in order to conduct the assessment.
Added: October 2011FC-3.3.3
The items listed under Paragraph FC-3.3.1B must be submitted to the licensee's Board, for it to review and commission any required remedial measures, and copied to the licensee's senior management.
Amended: January 2019FC-3.3.4
The purpose of the annual compliance review is to assist a licensee's Board and senior management to assess, amongst other things, whether internal and external reports are being made (as required under Chapter FC-4), and whether the overall number of such reports (which may otherwise appear satisfactory) does not conceal inadequate reporting in a particular segment of the licensee's business (or, where relevant, in particular
branches orsubsidiaries ). Licensees should use their judgement as to how the reports listed under Paragraph FC-3.3.1B (a) and (b) should be broken down in order to achieve this aim (e.g. by branches, departments and product lines).Amended: January 2019
Amended: January 2007FC-3.3.5
Insurance licensees must instruct their appointed firm to produce the report referred to in Paragraph FC-3.3.1B (c) and (d). The report must be submitted to the CBB by the 30th of June of the following year. The findings of this review must be received and acted upon by the licensee.Amended: January 2022
Amended: January 2020
Amended: January 2019
Amended: January 2012
Amended: October 2007
Amended: January 2007FC-3.3.5A
[This Paragraph was deleted in January 2019].
Deleted: January 2019
Added: January 2007FC-3.3.6
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: January 2012
Amended: October 2007FC-3.3.7
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: January 2020
Added: January 2007
Amended: April 2008
Amended: January 2019FC-4 FC-4 Suspicious Transaction Reporting
FC-4.1 FC-4.1 Internal Reporting
FC-4.1.1
Insurance licensees must implement procedures to ensure that staff who handlecustomer business (or are managerially responsible for such staff) make a report promptly to the MLRO if they know or suspect that acustomer (or a person on whose behalf acustomer may be acting) is engaged in money laundering or terrorism financing, or if the transaction orcustomer's conduct otherwise appears unusual or suspicious. These procedures must include arrangements for disciplining any member of staff who fails, without reasonable excuse, to make such a report.Amended: January 2007FC-4.1.2
Suspicious transaction or conduct may include a claim made in suspicious circumstances, a policy surrendered soon after inception or in circumstances that would otherwise appear contrary to the interests of a reasonable
policyholder . If a prospectivepolicyholder does not pursue an application, this may be considered suspicious in itself. Item FC (iv) in Part B of Volume 3 (Insurance) provides further examples of transactions that may be suspicious or unusual.Amended: January 2007FC-4.1.3
Where
insurance licensees' internal processes provide for staff to consult with their line managers before sending a report to the MLRO, such processes must not be used to prevent reports reaching the MLRO, where staff have stated that they have knowledge or suspicion that a transaction may involve money laundering or terrorist financing.FC-4.2 FC-4.2 External Reporting
FC-4.2.1
Insurance licensees must take reasonable steps to ensure that all reports made under Section FC-4.1 are considered by the MLRO (or his duly authorised delegate). Having considered the report and any other relevant information, if the MLRO (or his duly authorised delegate) still suspects that a person has been engaged in money laundering or terrorism financing, or the activity concerned is otherwise still regarded as suspicious, he must report the fact promptly to therelevant authorities . Where no report is made, the MLRO must document the reasons why.Amended: January 2007FC-4.2.2
To take reasonable steps, as required under Paragraph FC-4.2.1,
insurance licensees must:(a) Require the MLRO to consider reports made under Section FC-4.1 in the light of all relevant information accessible to or reasonably obtainable by the MLRO;(b) Permit the MLRO to have access to any information, including know your customer information, in theinsurance licensee's possession which could be relevant; and(c) Ensure that where the MLRO, or his duly authorised delegate, suspects that a person has been engaged in money laundering or terrorist financing, a report is made by the MLRO which is not subject to the consent or approval of any other person.Amended: January 2007FC-4.2.3
Reports to the
relevant authorities made under Paragraph FC-4.2.1 must be sent to the Financial Intelligence Directorate at the Ministry of Interior and the CBB's Compliance Directorate using the Suspicious Transaction Reporting Online System (Online STR system). STRs in paper format will not be accepted.Amended: October 2019
Amended: July 2016
Amended: October 2014
Amended: April 2010
Amended: January 2007FC-4.2.4
Insurance licensees must report all suspicious transactions or attempted transactions. This reporting requirement applies regardless of whether the transaction involves tax matters.FC-4.2.5
Insurance licensees must retain all relevant details of STRs submitted to therelevant authorities , for at least five years.Amended: October 2014
Amended: October 2007
Amended: April 2008FC-4.2.6
In accordance with the AML Law,
insurance licensees , theirDirectors , officers andemployees :(a) Must not warn or inform ('tipping off') thepolicyholder , beneficiary or other subjects of the STR when information relating to them is being reported to therelevant authorities ; and(b) In cases whereinsurance licensees form a suspicion that transactions relate to money laundering or terrorist financing, they must take into account the risk of tipping-off when performing the CDD process. If theinsurance licensee reasonably believes that performing the CDD process will tip-off the customer or potential customer, it may choose not to pursue that process, and must file an STR.Amended: January 2018
Amended: January 2007
Amended: October 2007FC-4.3 FC-4.3 Contacting the Relevant Authorities
FC-4.3.1
Reports made by the MLRO or his duly authorised delegate under Section FC-4.2 must be sent electronically using the Suspicious Transaction Reporting Online System (Online STR system).
Amended: October 2014
Amended: April 2010
Amended: January 2007FC-4.3.2
The
relevant authorities are:Financial Intelligence Directorate (FID)
Ministry of Interior
P.O. Box 26698
Manama, Kingdom of Bahrain
Telephone: + 973 17 749397
Fax: + 973 17 715502
E-mail: bahrainfid@moipolice.bhDirector of the Compliance Directorate
Central Bank of Bahrain
P.O. Box 27
Manama, Kingdom of Bahrain
Telephone: 17 547107
Fax: 17 535673
E-mail: Compliance@cbb.gov.bhAmended: October 2019
Added: October 2014
FC-5 FC-5 Staff Training and Recruitment
FC-5.1 FC-5.1 General Requirements
FC-5.1.1
An
insurance licensee must take reasonable steps to provide periodic training and information to ensure that staff who handlecustomer transactions, or are managerially responsible for such transactions, are made aware of:(a) Their responsibilities under the AML Law, this Module, and any other relevantAML/CFT laws and Regulations;(b) The identity and responsibilities of the MLRO and his deputy;(c) The potential consequences, both individual and corporate, of any breach of the AML Law, this Module and any other relevantAML/CFT laws or Regulations;(d) Theinsurance licensee's currentAML/CFT policies and procedures;(e) Money laundering and terrorist financing typologies and trends;(f) The type ofcustomer activity or transaction that may justify an internal STR;(g) Theinsurance licensee's procedures for making internal STRs; and(h) Customer due diligence measures with respect to establishing business relations withcustomers .Amended: January 2007FC-5.1.2
The information referred to in Paragraph FC-5.1.1 must be brought to the attention of relevant new
employees ofinsurance licensees , and must remain available for reference by staff during their period of employment and by the CBB.Amended: January 2007FC-5.1.3
Relevant new
employees must be givenAML/CFT training within three months of joining aninsurance licensee .Amended: January 2007FC-5.1.4
Insurance licensees must ensure that theirAML/CFT training for relevant staff remains up-to-date, and is appropriate given the licensee's activities andcustomer base.Amended: January 2007FC-5.1.5
The CBB would normally expect
AML/CFT training to be provided to relevant staff at least once a year.Amended: January 2007FC-5.1.6
Insurance licensees must develop adequate screening procedures to ensure high standards when hiringemployees . These procedures must include controls to prevent criminals or their associates from being employed by licensees.Amended: January 2007FC-5.1.6A
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2021FC-6 FC-6 Record-keeping Arrangements
FC-6.1 FC-6.1 General Requirements
Policyholder/Transaction Records
FC-6.1.1
Insurance licensees must comply with the record-keeping requirements contained in the AML Law and the CBB Law.Insurance licensees must therefore retain adequate records (including accounting and identification records), for the following minimum periods:(a) Forcustomers , in relation to evidence of identity and business relationship records (such as application forms, account files and business correspondence, including the results of any analysis undertaken (e.g. enquiries to establish background and purpose of complex, unusual large transactions)), for at least five years after thecustomer relationship has ceased; and(b) For transactions, in relation to documents enabling a reconstitution of the transaction concerned, for at least ten years after the transaction was completed.Amended: October 2015
Amended: January 2007
Amended: October 2007
Amended: April 2008Compliance Records
FC-6.1.2
Insurance licensees must retain copies of the reports produced for their annual compliance review, as specified in Paragraph FC-3.3.1B, for at least five years. Licensees must also maintain for five years reports made to, or by, the MLRO made in accordance with Sections FC-4.1 and FC-4.2, and records showing how these reports were dealt with and what action, if any, was taken as a consequence of those reports.Amended: January 2007
Amended: October 2007
Amended: April 2008
Amended: January 2019Training Records
FC-6.1.3
Insurance licensees must maintain for at least five years, records showing the dates whenAML/CFT training was given, the nature of the training, and the names of the staff that received the training.Amended: January 2007
Amended: October 2007
Amended: April 2008Access
FC-6.1.4
All records required to be kept under this Section must be made available for prompt and swift access by the
relevant authorities or other authorised persons.FC-6.1.5
Insurance licensees are also reminded of the requirements contained in Chapter GR-1 (Books and Records).FC-7 FC-7 NCCT Measures and Terrorist Financing
FC-7.1 FC-7.1 Special Measures for Non-Cooperative Countries or Territories ('NCCTs')
FC-7.1.1
Insurance licensees must give special attention to any dealings they may have with entities or persons domiciled in countries or territories which are:(a) Identified by the FATF as being 'non-cooperative'; or(b) Notified toinsurance licensees from time to time by the CBB.Amended: January 2007FC-7.1.2
Whenever transactions with such parties have no apparent economic or visible lawful purpose, their background and purpose must be re-examined and the findings documented. If suspicions remain about the transaction, these must be reported to the
relevant authorities in accordance with Section FC-4.2.FC-7.1.3
Insurance licensees must apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries where such measures are called for by the FATF. The type of enhanced due diligence measures applied must be effective and proportionate to the risks.Added: October 2015FC-7.1.4
With regard to jurisdictions identified as NCCTs or those which in the opinion of the CBB, do not have adequate AML/CFT systems, the CBB reserves the right to:
(a) Refuse the establishment of subsidiaries or branches or representative offices of financial institutions from such jurisdictions;(b) Limit business relationships or financial transactions with such jurisdictions or persons in those jurisdictions;(c) Prohibit financial institutions from relying on third parties located in such jurisdictions to conduct elements of the CDD process;(d) Require financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in such jurisdictions;(e) Require increased supervisory examination and/or external audit requirements for branches and subsidiaries of financial institutions based in such jurisdictions; or(f) Require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in such jurisdictions.Amended: January 2018
Added: October 2015FC-7.2 FC-7.2 Terrorist Financing
FC-7.2.1AA
Insurance licensees must implement and comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing.Insurance licensees must freeze,without delay , the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267(1999) and its successor resolutions as well as Resolution 2178(2014) or (ii) designated as pursuant to Resolution 1373(2001).Amended: October 2019
Added: April 2017FC-7.2.1
Insurance licensees must comply in full with the provisions of the UN Security Council Anti-terrorism Resolution No. 1373 of 2001 ('UNSCR 1373').FC-7.2.2
[This Paragraph was deleted in January 2018].
Deleted: January 2018
Amended: January 2007FC-7.2.3
A copy of UNSCR 1373 is included in Part B of Volume 3 (Insurance), under 'Supplementary Information'.
FC-7.2.4
Insurance licensees must report to the CBB details of:(a) Funds or other financial assets or economic resources held with them which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373;(b) All claims, whether actual or contingent, which theinsurance licensee has on persons and entities which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373; and(c) All assets frozen or actions taken in compliance with the prohibition requirements of the relevant UNSCRs, including attempted transactions.Amended: January 2023
Amended: January 2007FC-7.2.5
For the purposes of Paragraph FC-7.2.4, 'funds or other financial resources' includes (but is not limited to) shares in any undertaking owned or controlled by the persons and entities referred to in Article 1, Paragraph (c) and (d) of UNSCR 1373, and any associated dividends received by the licensee.
Amended: January 2007FC-7.2.6
All reports or notifications under this Section must be made to the CBB's Compliance Directorate.
Amended: January 2007FC-7.2.7
See Section FC-4.3 for the Compliance Directorate's contact details.
Amended: January 2007FC-7.3 FC-7.3 Designated Persons and Entities
FC-7.3.1
Without prejudice to the general duty of all
insurance licensees to exercise the utmost care when dealing with persons or entities who might come under Article 1, Paragraphs (c) and (d) of UNSCR 1373,insurance licensees must not deal with any persons or entities designated by the CBB as potentially linked to terrorist activity.Amended: January 2007FC-7.3.2
The CBB from time to time issues to licensees lists of designated persons and entities believed linked to terrorism. Licensees are required to verify that they have no dealings with these designated persons and entities, and report back their findings to the CBB. Names designated by the CBB include persons and entities designated by the United Nations, under UN Security Council Resolution 1267 ("UNSCR 1267").
Amended: January 2007FC-7.3.3
Insurance licensees must report to therelevant authorities , using the procedures contained in Section FC-4.2, details of any accounts or other dealings with designated persons and entities, and comply with any subsequent directions issued by therelevant authorities .FC-8 FC-8 Enforcement Measures
FC-8.1 FC-8.1 Regulatory Penalties
FC-8.1.1
The requirements in this Module are legally binding. Without prejudice to any other penalty imposed by the CBB Law, the Decree Law No. 4 or the Penal Code of the Kingdom of Bahrain, failure by a licensee to comply with this Module or any direction given hereunder shall result in the levying by the CBB, without need of a court order and at the CBB's discretion, of a fine of up to BD 20,000.
Amended: January 2007FC-8.1.2
Module EN provides further information on the assessment of financial penalties and the criteria taken into account prior to imposing such fines (reference to Paragraph EN-5.2.3). Other enforcement measures may also be applied by the CBB in response to a failure by a licensee to comply with this Module; these other measures are also set out in Module EN.
Amended: January 2007
Amended: October 2007FC-8.1.3
The CBB will endeavour to assist
insurance licensees to interpret and apply the requirements of this Module.Insurance licensees may seek clarification on any issue by contacting the Compliance Directorate (see Section FC-4.3 for contact details).Amended: January 2007FC-8.1.4
Without prejudice to the CBB's general powers under the law, the CBB may amend, clarify or issue further directions on any provision of this Module from time to time, by notice to its licensees.
Amended: January 2007FC-9 FC-9 AML / CFT Guidance and Best Practice
FC-9.1 FC-9.1 Guidance Provided by International Bodies
FATF Recommendations
FC-9.1.1
The Financial Action Task Force (FATF) Recommendations (see www.fatf-gafi.org) (together with their associated interpretative notes and best practices papers) provide the basic framework for combating money laundering activities and the financing of terrorism. FATF Recommendations 9-12, 15-17, 18-21, 26-27, 33-35, 37 and 40 and the
AML/CFT Methodology are specifically relevant to the insurance sector.Amended: October 2015
Amended: January 2007FC-9.1.2
The
relevant authorities in Bahrain believe that the principles established by these Recommendations should be followed by licensees in all material respects, as representing best practice and prudence in this area.Amended: October 2015IAIS: Guidance Paper on Anti-Money Laundering and Combating the Financing of Terrorism
FC-9.1.3
In January 2002, the International Association of Insurance Supervisors (IAIS) issued Anti-Money Laundering Guidance Notes for Insurance Supervisors and Insurance Entities. This document was updated in October 2004 and was reissued as Guidance Paper No. 5: Guidance Paper on Anti-Money Laundering and Combating the Financing of Terrorism (see www.iaisweb.org/publication). The Guidance Paper includes a set of measures and procedures, including elements of customer due diligence (CDD), reporting of suspicious transactions and measures affecting the organisation and staff of
insurance licensees .FC-9.1.4
The CBB supports the above papers and the desirability of all
insurance licensees adhering to their requirements and guidance.Amended: January 2007Other Website References Relevant to AML/CFT
FC-9.1.5
The following lists a selection of other websites relevant to
AML/CFT :(a) The Middle East North Africa Financial Action Task Force: www.menafatf.org;(b) The Egmont Group: www.egmontgroup.org;(c) The United Nations: www.un.org/terrorism;(d) The UN Counter-Terrorism Committee: www.un.org/Docs/sc/committees/1373/;(e) The UN list of designated individuals: www.un.org/Docs/sc/committees/1267/1267ListEng.htm;(f) The Wolfsberg Group: www.wolfsberg-principles.com; and(g) The Association of Certified Anti-Money Laundering Specialists: www.acams.org.Amended: January 2007FC-10 FC-10 Fraud
FC-10.1 FC-10.1 General Requirements
FC-10.1.1
Insurance licensees must ensure that they allocate appropriate resources and have in place systems and controls to deter, detect, and record instances of fraud or attempted fraud.FC-10.1.2
Fraud may arise from internal sources originating from changes or weaknesses to processes, products and internal systems and controls. Fraud can also arise from external sources, such as claims fraud.
FC-10.1.3
Any actual or attempted fraud incident (however small) must be reported to the appropriate authorities (including the CBB) and followed up. Monitoring systems must be designed to measure fraud patterns that might reveal a series of related fraud incidents.
Amended: January 2007FC-10.1.4
Insurance licensees must ensure that a person is given overall responsibility for the prevention, detection and remedy of fraud, at a senior level of the organisation.FC-10.1.5
Insurance licensees must ensure the effective segregation of functions and responsibilities, between different individuals and departments, such that the possibility of financial crime is reduced and that no single individual is able to initiate, process and control a transaction.FC-10.1.6
Insurance licensees must provide regular training to their management and staff, to make them aware of potential fraud risks.Advance Fee Fraud
FC-10.1.7
In a number of jurisdictions, there have been a number of recent incidents whereby insurance entities have either been the victims of, or have inadvertently provided assistance to, advance fee frauds. Advance fee fraud consists of setting up a fraudulent and almost certainly non-existent financial or banking transaction, the aim of which is to defraud an innocent third party of an up front payment or deposit which is intended by the third party to be consideration for their involvement in that financial transaction, the receipt of a low interest or interest fee loan or the receipt of some other financial benefit. The types of transactions used as the façade for the frauds vary in detail, some of the most common are investment in financial instruments, self liquidating loans and loans or other financial benefits. Although these transactions are generally based around banking or securities transactions, it is occasionally the case that the transaction will purport to be guaranteed by insurers.
FC-10.1.8
The most common type of advance fee fraud is for a fraudster to approach a company or sovereign state which has a poor credit rating or which is in some financial difficulty and offer to obtain funding at beneficial rates. Likewise, a potential investor may be approached and offered the opportunity to invest in a transaction with a very high rate of return. In each instance, the borrower or investor will be asked to provide some funds up front to cover the costs of setting up the transaction or by way of a deposit or down payment on fees. Once the fee has been paid, the fraudster will disappear and the transaction will, on further investigation, prove to be fictitious.
FC-10.1.9
Insurance licensees are encouraged to promote the exchange of information amongst themselves with respect to fraud and those committing fraud including, as appropriate, through the use of databases. Licensees should also consider the need to exchange information with the police and other external bodies.FC-10.1.10
Insurance claims fraud is an offence punishable under the provision of Section 391 of the Penal Code, Decree Act No. (15), of 1976 of the Kingdom of Bahrain.
Guidance Provided by the IAIS
FC-10.1.11
In October 2006, the International Association of Insurance Supervisors (IAIS) issued Guidance Paper on Preventing, Detecting and Remedying Fraud in Insurance (see www.iaisweb.org/publication). The Guidance Paper has been developed to help the insurance sector prevent and detect cases of fraud. Insurance licensees should assess their own vulnerability and implement effective and efficient policies, procedures and controls to address the risk of fraud.
Adopted: October 2007TC TC Training and Competency
TC-A TC-A Introduction
TC-A.1 TC-A.1 Purpose
Executive Summary
TC-A.1.1
This Module provides Rules and Guidance to
insurance licensees to ensure satisfactory levels of competence, in terms of an individual’s knowledge, skills, experience and professional qualifications.Insurance licensees are required to demonstrate thatapproved persons including individuals undertakingcontrolled functions are sufficiently competent and are able to undertake their respective roles and responsibilities.Insurance licensees must maintain the competence to provideregulated insurance services as outlined in Section AU-1.4. Individuals occupyingcontrolled functions as outlined in Paragraph AU-1.2.2, must therefore meet minimum levels of training and experience related to their functions.Added: October 2020TC-A.1.2
The Rules build upon Principles 3 and 9 of the Principles of Business (see Module PB (Principles of Business). Principle 3 (Due Skill, Care and Diligence) requires
insurance licensees andapproved persons to observe high standards of integrity and fair dealing, and to be honest and straightforward in its dealings with clients. Principle 9 (Adequate Resources) requiresinsurance licensees to maintain adequate human, financial and other resources sufficient to run its business in an orderly manner.Added: October 2020TC-A.1.3
Condition 4 of the Central Bank of Bahrain’s (‘CBB’) Licensing Conditions (Chapter AU-2.4) and Chapter AU-3 (Approved Persons Conditions) of Module AU impose further requirements. To satisfy Condition 4 of the CBB’s Licensing Conditions, an
insurance licensees staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner (AU-2.4). This condition specifies thatinsurance licensees must ensure their employees meet any training and competency requirements specified by the CBB. Chapter AU-3 (Approved Persons Conditions) of Module AU sets forth the ‘fit and proper’ requirements in relation to competence, experience and expertise required byapproved persons ; this Chapter specifies various factors that the CBB takes into account when reaching such a decision.Added: October 2020Legal Basis
TC-A.1.4
This Module contains the Central Bank of Bahrain’s (‘CBB’) Directive, as amended from time to time, relating to training and competency and is issued under the powers available to the CBB under Articles 38 and 65(b) of the Central Bank of Bahrain and Financial Institutions Law 2006 (‛CBB Law’). The Directive in this Module is applicable to all
insurance licensees .Added: October 2020TC-A.1.5
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: October 2020TC-A.2 TC-A.2 Module History
TC-A.2.1
This Module was first issued in August 2020. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made. UG-3 provides further details on Rulebook maintenance and version control.
Added: October 2020TC-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TC-A.2.3
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Added: October 2020TC-B TC-B Scope of Application
TC-B.1 TC-B.1 Scope
TC-B.1.1
This Module applies to all
insurance licensees authorised in the Kingdom. It covers the training and competency requirements forapproved persons (See Chapter TC-1).Added: October 2020TC-B.1.2
In the case of an overseas
insurance licensee , the application of this Module is restricted to its Bahrain operations.Added: October 2020TC-B.1.3
Persons authorised by the CBB to undertake a
controlled function prior to the issuance of Module TC do not need to reapply for authorisation.Added: October 2020TC-B.1.4
The requirements of this Module apply to
approved persons in connection with theinsurance licensees regulated insurance services, or under a contract of service.Added: October 2020TC-B.1.5
In the case of outsourcing arrangements, the
insurance licensee should refer to the competency requirements, outlined in Appendix TC-1 forapproved persons , for assessing the suitability of the outsourcing provider.Added: October 2020TC-B.1.6
Insurance licensees must satisfy the CBB that individuals undertaking acontrolled function position for it or on its behalf are suitable and competent to carry on that position.Added: October 2020TC-B.1.7
In implementing this Module,
insurance licensees must ensure that individuals appointed/recruited to performcontrolled functions :(a) Hold suitable qualifications and experience appropriate to the nature of the business;(b) Remain competent for the work they do; and(c) Are appropriately supervised.Added: October 2020TC-1 TC-1 Requirements for Controlled Functions
TC-1.1 TC-1.1 Controlled Functions
TC-1.1.1
Individuals occupying
controlled functions (refer to Section AU-1.2) in aninsurance licensee must be qualified and suitably experienced for their specific roles and responsibilities. Theapproved persons are those of:(a) Board Member/Director ;(b) Chief Executive Officer or General Manager and their Deputies;(c) Chief Financial Officer and/or Head of Finance;(d) Compliance Officer;(e) Chief Risk Officer/ Head of Risk Management;(f) Head of Internal Audit;(g) Internal Shari’a Reviewer (where applicable);(h) Head of Underwriting;(i) Head of Claims;(j) Head of Sales and Marketing/Head of Business Development(k) Heads of other Functions (including IT and HR functions);(l) Money Laundering Reporting Officer/ Deputy Money Laundering Reporting Officer;(m) Unit-linked investment adviser (where applicable); and(n) Signing Actuary (where the function is undertaken by a Director or an employee of the insurance firm).Added: October 2020TC-1.1.2
An
insurance licensee must take reasonable steps to ensure that individuals holdingcontrolled functions are sufficiently knowledgeable about their respective fields of work to be able to guide and supervise operations that fall under their responsibilities. Competence must be assessed on the basis of experience and relevant qualifications described in Appendix TC-1 as a minimum. However, the CBB reserves the right to impose a higher level of qualifications as it deems necessary.Added: October 2020Board Member/ Director
TC-1.1.3
Board members/ Directors collectively are responsible for the business performance and strategy of the
insurance licensee , as outlined in more details in Section HC-1.2.Added: October 2020TC-1.1.4
When taken as a whole, the board of directors of an
insurance licensee must be able to demonstrate that it has the necessary skills and expertise, as outlined in Paragraphs HC-1.2.4.Added: October 2020Chief Executive Officer or General Manager and their Deputies
TC-1.1.5
The
Chief Executive Officer orGeneral Manager and their deputies (as appropriate) is responsible for the executive management and performance of theinsurance licensee within the framework or delegated authorities set by the Board, and is outlined in more details in Paragraph HC-6.3.4.Added: October 2020Chief Financial Officer/ Head of Finance
TC-1.1.6
The Chief Financial Officer/Head of Finance is responsible for directing the
insurance licensee’s financial function, including ensuring that the relevant accounting treatment is applied to all of the activities of theinsurance licensee in a timely manner. The scope of authority of the CFO/ Head of Finance is outlined in more detail in Subparagraph HC-6.3.2 (b).Added: October 2020Compliance Officer
TC-1.1.7
In accordance with Paragraph AU-1.2.11A, an employee of appropriate standing must be designated by
insurance licensees for the position ofcompliance officer . The duties of thecompliance officer , who must have Bahraini residency, include:(a) Having responsibility for oversight of thelicensee’s compliance with the requirements of the CBB; and(b) Reporting to thelicensee’s Board in respect of that responsibility.Added: October 2020Chief Risk Officer/ Head of Risk Management
TC-1.1.8
The Chief Risk Officer/ Head of Risk Management is responsible for the management and control of all risk exposures arising from the activities of the insurance licensee.
Added: October 2020Head of Internal Audit
TC-1.1.9
The Head of Internal Audit is responsible for providing independent and objective review on the adequacy and effectiveness of the holistic internal control environment within the
insurance licensee . The duties of the head of internal audit are outlined in more detail in Subparagraph HC-6.3.2 (d).Added: October 2020Internal Shari’a Reviewer
TC-1.1.10
The Internal Shari’a reviewer in an
insurance licensee , dealing with Islamic products and services, is responsible for the examination of the extent of aninsurance licensee compliance, in all its activities, with the Shari’a. This examination includes contracts, agreements, policies, products, transactions memorandum and articles of association, financial statements, reports (especially internal audit and central bank inspection), circulars etc. The objective of the internal Shari’a review is to ensure that the activities carried out by aninsurance licensee do not contravene the Shari’a. This role is outlined in more detail in Paragraph AU-1.2.11B.Added: October 2020Head of Underwriting
TC-1.1.11
The Head of Underwriting function is involved in portfolio analysis and to manage the underwriting process such as risk assessment, pricing and negotiation with the broker or clients. The Head of Underwriting should ensure effective oversight and guidance of underwriting risk in line with the
insurance licensees risk appetite and policies and procedures.Added: October 2020Head of Claims
TC-1.1.12
The Head of Claims function is responsible for directing and overseeing the operations of an insurance claims function to meet operational, financial and service requirements. The Head of Claims should ensure effective oversight and control of settlements in line with the
insurance licensees risk appetite and policies and procedures. Moreover, the Head of Claims are involved in strategic processing and payment of claims and are often involved in sets policies on insurance claims.Added: October 2020Head of Sales and Marketing/Head of Business Development
TC-1.1.13
The Head of Sales and Marketing/Head of Business Development is responsible for implementing the corporate strategy; marketing, sales and public relations. He/ she is responsible for developing and overseeing the marketing campaigns, social media accounts, digital marketing channels and other marketing plans. He/ she ensures innovation in product design and developments and conduct behavioural and trend analysis. He/ she engages directly with customers and ensures services provided to customers are in line with
insurance licensees policies and procedures and with industry best practices.Added: October 2020Heads of other Functions
TC-1.1.14
Heads of other functions are responsible for tracking specific functional performance goals in addition to identifying, managing, and reporting critical organisational issues upstream. Certain functions require dealing directly withcustomers while others do not. Both categories of functions, however, require specific qualifications and experience to meet the objectives as well as compliance requirements of theinsurance licensee .Added: October 2020TC-1.1.15
For purposes of Paragraph TC-1.1.15,
insurance licensees should contact the CBB should they require further clarification on whether a specific position falls under the definition of “Heads of other Functions”.Added: October 2020Money Laundering Reporting Officer (MLRO) / Deputy Money Laundering Reporting Officer (DMLRO)
Unit-Linked Investment Adviser
TC-1.1.17
A
Unit-Linked Investment Adviser refers to the function of advising clients on contracts that are, by their nature, investment products, including, but not limited to pension and retirement products.Added: October 2020Signing Actuary
TC-1.1.18
A
Signing Actuary is appointed to provide professional opinion and report on an insurance firm's actuarial evaluation; level of reserves that should be held in order to meet potential insurance liabilities. Thesigning actuary may be a Director or employee of the licensee and are accredited by an internationally recognised organisation.Added: October 2020TC-1.2 TC-1.2 Continuous Professional Development Training (“CPD”)
CPD
TC-1.2.1
All individuals holding
controlled functions in aninsurance licensee must undergo a minimum of 15 hours ofCPD per annum.Added: October 2020TC-1.2.2
The
insurance licensee must ensure that anapproved person undertaking acontrolled function is being supervised and undergoes appropriate review and assessment of performance.Added: October 2020TC-1.2.3
The level of supervision should be proportionate to the level of competence demonstrated by the
approved person . Supervision will include, as appropriate:(a) Reviewing and assessing work on a regular basis; and(b) Coaching and assessing performance against the competencies necessary for the role.Added: October 2020TC-1.2.4
Supervisors of
approved persons should have technical knowledge and relevant skills, e.g. coaching and assessment skills.Added: October 2020TC-2 TC-2 General Requirements
TC-2.1 TC-2.1 Recruitment and Assessing Competence
Recruitment and Appointment
TC-2.1.1
If an
insurance licensee recruits or promotes an individual to undertake acontrolled function , it must satisfy itself, where appropriate, of such individual’s relevant qualifications and experience.Added: October 2020TC-2.1.2
For purposes of Paragraph TC-2.1.1
insurance licensees must file Form 3 (Approved Persons) with the CBB and obtain the express written approval of the CBB for that person to occupy the desired position. In its application, theinsurance licensee must demonstrate to the CBB that full consideration has been given to the qualifications and core competencies forcontrolled functions in Appendix TC-1 (See Article 65(b) of the CBB Law).Added: October 2020TC-2.1.3
Insurance licensees should refer to Module AU (Authorisation) providing detailed requirements on the appointment of individuals occupyingcontrolled functions (approved persons ).Added: October 2020TC-2.1.4
An
insurance licensee proposing to recruit or appoint an individual has to satisfy itself, of his/her relevant qualifications and experience. Theinsurance licensee should:(a) Take into account the knowledge and skills required for the role, in addition to the nature and the level of complexity of thecontrolled function ; and(b) Take reasonable steps to obtain sufficient information about the individual’s background, experience, training and qualification.Added: October 2020Assessing Competence
TC-2.1.5
Insurance licensees must not allow an individual to undertake or supervisecontrolled functions unless that individual has been assessed by theinsurance licensee as competent in accordance with this Section.Added: October 2020TC-2.1.6
In determining an individual’s competence,
insurance licensees may assess if the person is fit and proper in accordance with Chapter AU-3.Added: October 2020TC-2.1.7
Insurance licensees must assess individuals as competent when they have demonstrated the ability to apply the knowledge and skills required to perform a specificcontrolled function .Added: October 2020TC-2.1.8
The assessment of competence will be dependent on the nature and the level of complexity of the
controlled functions . Such assessment of competence of new personnel may take into account the fact that an individual has been previously assessed as competent in a similarcontrolled functions .Added: October 2020TC-2.1.9
If an
insurance licensee assesses an individual as competent in accordance with TC-2.1.7 to perform a specificcontrolled function , it does not necessarily mean that the individual is competent to undertake othercontrolled functions .Added: October 2020TC-2.1.10
An
insurance licensee should use methods of assessment that are appropriate to thecontrolled functions as it relates to the individual’s role.Added: October 2020TC-2.2 TC-2.2 Training and Maintaining Competence
TC-2.2.1
An
insurance licensee must annually determine the training needs of individuals undertakingcontrolled functions . It must develop a training plan to address these needs and ensure that training is planned, appropriately structured and evaluated.Added: October 2020TC-2.2.2
The assessment and training plan described in Paragraph TC-2.2.1 should be aimed at ensuring that the relevant
controlled functions maintains competence in theposition An individual can develop skills and gain experience in a variety of ways. These could include on the job learning, individual study, and other methods. In almost every situation, and for most individuals, it is likely that competence will be developed most effectively by a mixture of training methods.Added: October 2020TC-2.2.3
The training plan of
insurance licensees must include a programme for continuous professional development training (“CPD ”) for theircontrolled functions .Added: October 2020TC-2.2.4
Approved persons may choose to fulfil their CPD requirements by attending courses, workshops, conferences and seminars at local or foreign training institutions.Added: October 2020TC-2.2.5
The annual training required under Paragraph TC-2.2.1 must also include the quarterly updates, if any, to the CBB Volume 3 (Insurance) Rulebook, in areas relevant to each
controlled function .Added: October 2020TC-2.2.6
Insurance licensees should maintain appropriate training records for each individual.Licensees should note how the relevant training relates to and supports the individual’s role. Training records may be reviewed during supervisory visits to assess theinsurance licensees systems and to review how thelicensee ensures that its staff are competent and remain competent for their roles.Added: October 2020Maintaining Competence
TC-2.2.7
An
insurance licensee must make appropriate arrangements to ensure thatcontrolled functions maintain competence.Added: October 2020TC-2.2.8
An
insurance licensee should ensure that maintaining competence for anapproved person takes into account:(a) Application of technical knowledge;(b) Application and development of skills; and(c) Any market changes and changes to products, legislation and regulation.Added: October 2020TC-2.2.9
An
insurance licensee may utilise theCPD schemes of relevant professional bodies to demonstrate compliance with TC-2.2.1. In-house training, seminars, conferences, further qualifications, product presentations, computer-based training and one-to-one tuition may also be considered to demonstrate compliance with Paragraph TC-2.2.1.Added: October 2020TC-2.3 TC-2.3 Transitional Period
TC-2.3.1
The requirements of Module TC for
insurance licensees are effective from the issuance date of this Module.Added: October 2020TC-2.3.2
New applications for approved persons are subject to the requirements of this Module (See Paragraph TC-B.1.4).
Added: October 2020TC-2.3.3
Approved persons occupyingcontrolled functions at the time this Module is issued will be grandfathered and not subject to the requirements of this Module, with the exception of CPD requirements in Paragraph TC-1.2.1. However, should the approved person move to anothercontrolled function , Paragraph TC-2.3.4 will apply.Added: October 2020TC-2.3.4
In instances, where an
approved person in oneinsurance licensee moves to anotherinsurance licensee and occupies the same position, the CBB will exercise its discretion on whether to grandfather suchapproved person from the required qualifications and competencies outlined in Appendix TC-1 into the newinsurance licensee . The grandfathering criteria used by the CBB will include a comparison of the scope and size of both positions. This will also apply in instances where anapproved person in oneinsurance licensee moves from one department to another within the sameinsurance licensee .Added: October 2020TC-2.4 TC-2.4 Record Keeping
TC-2.4.1
An
insurance licensee must make and retain updated records of:(a) The annual training plan for eachcontrolled function ;(b) Materials used to conduct in-house training courses;(c) List of participants attending such in-house training courses;(d) Results of evaluations conducted at the end of such training courses.(e) The criteria applied in assessing competence;(f) How and when the competence decision was arrived at; and(g) Record of CPD hours undertaken by eachapproved person .Added: October 2020TC-2.4.2
For purposes of Paragraph TC-2.4.1, the record keeping requirements apply to both current employees as well as to employees following termination of their services or employment with the
insurance licensee , for a minimum period of five years.Added: October 2020TC-2.4.3
An
insurance licensee must maintain records of its recruitment and appointment procedures forapproved persons for a minimum period of five years following termination of their services or employment with theinsurance licensee . Such procedures should be designed to adequately take into account proof of the candidates’ knowledge and skills and their previous activities and training.Added: October 2020TC-2.4.4
For purposes of Paragraph TC-2.4.3, the recruitment record keeping procedure should include, but is not limited to, the following:
(a) Results of the initial screening;(b) Results of any employment tests;(c) Results and details of any interviews conducted;(d) Background and references checks; and(e) Details of any professional qualifications.Added: October 2020Appendices Appendices
Appendix TC-1 Qualifications and Core Competencies
Role Core Competencies How can competence be demonstrated? Board Member/ Director Board members should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Sufficient experience to demonstrate sound business decision-making;(c) Good understanding of the industry; and(d) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum experience of 7 years in business and/or government/quasi government of which at least 5 years at a senior management level; and(b) An academic degree from a university at bachelor level or higher and/or a relevant professional qualification.Chief Executive Officer or General Manager and their Deputies The Chief Executive Officer or General Manager and their Deputies should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of Insurance business and the wider industry;(c) Good understanding of the industry’s regulatory environment;(d) Relevant experience and qualifications associated with such executive responsibilities; and(e) The necessary professional and leadership capabilities which qualify him for this position.Competence could be demonstrated by: (a) A minimum experience of 10 years in the insurance industry of which at least 5 years is at a senior management level in the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to insurance, accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Advanced Diploma in Insurance (ACII), Chartered Insurance Institute (general and life insurance);(ii) Advanced Diploma in Financial Planning, Chartered Institute of Insurance (life insurance);(iii) Fellow, Life Management Institute (FLMI), Life Office Management Association (LOMA) (life insurance); and/or(iv) Fellowship (F.I.I.I), Insurance Institute of India (I.I.I)(general and life insurance).Chief Financial Officer/ Head of Finance The Chief Financial Officer/ Head of Finance should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Good understanding of Insurance business and the wider industry;(c) Strong understanding of the industry’s regulatory environment;(d) The relevant experience and qualifications to fulfil his responsibilities; and(e) Strong knowledge and understanding of international accounting standards and how they are applied in a business context, including IFRS.Competence could be demonstrated by: (a) A minimum of 10 years of practical experience in a finance function of which at least 5 years within the insurance industry. Experience of external audit within the insurance industry will also be considered as part of the minimum experience requirements; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Affiliate, The Association of Chartered Certified Accountants (ACCA);(ii) Certified Public Accountant (CPA), The Association of International Certified Professional Accountants (AICPA);(iii) Associate Chartered Accountant (ACA), Institute of Chartered Accountants in England and Wales (ICAEW);(iv) Chartered Financial Analyst (CFA); and/or(v) Certified Islamic Professional Accountant (CIPA) from AAOIFI (For Takaful companies).Compliance Officer A Compliance Officer should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within theInsurance Licensee ;(c) Good understanding of the industry; and(d) Strong understanding of the industry’s applicable regulatory requirements.Competence could be demonstrated by: (a) A minimum of 5 years of relevant experience in compliance in the insurance industry, financial institution or financial regulator;(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Certified Insurance Supervisor (CIS) qualification, Bahrain Institute of Banking and Finance (BIBF); and/or(ii) International Diploma in Governance, Risk and Compliance, International Compliance Association (ICA).Chief Risk Officer/ Head of Risk Management The Chief Risk Officer/ Head of Risk Management should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within theinsurance licensee ;(c) Good understanding of insurance business and the wider industry;(d) Good understanding of the industry’s regulatory environment; and(e) The relevant experience and qualifications to fulfill his responsibilities.Competence could be demonstrated by: (a) A minimum of 7 years of practical experience in a financial institution of which at least 5 years in a risk management position within the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to actuary, accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Associate in Risk Management (ARM), The institutes;(ii) International Diploma in Risk Management, Institute of Risk Management qualifications (IRM);(iii) Financial Risk Manager (FRM), Global Association of Risk Professionals (GARP); and/or(iv) Professional Risk Manager (PRM), Professional Risk Managers’ International Association (PRIMA).Head of Internal Audit The Head of Internal Audit should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within theinsurance licensee ;(c) Good understanding of insurance business and the wider industry;(d) Good understanding of the industry’s regulatory environment;(e) The relevant accounting and auditing experience and qualifications to fulfil his responsibilities; and(f) A demonstrable knowledge and understanding of the Standards for the Professional Practice of Internal Audit.Competence could be demonstrated by: (a) A minimum of 7 years of practical experience in a relevant role in financial institution. Experience of external audit within the insurance industry will also be considered as part of the minimum experience requirements; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to audit, accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Certified Internal Auditor (CIA), Institute of Internal Auditors (IIA);(ii) Affiliate, The Association of Chartered Certified Accountants (ACCA);(iii) Certified Public Accountant (CPA),(iv) The Association of International Certified Professional Accountants (AICPA);(v) Associate Chartered Accountant (ACA), Institute of Chartered Accountants in England and Wales (ICAEW).Internal Shari’a Reviewer The Internal Shari’a Reviewer should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Have the relevant accounting and auditing experience and qualifications to fulfil his/her responsibilities; and(c) Have appropriate level of knowledge in Shari’a rules and principles, AAOIFI Shari’a standards and Islamic finance.Competence could be demonstrated by: (a) A minimum of 5 years of experience as an Internal Shari’a audit function with aninsurance licensee or financial institution dealing with Islamic products and services; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Certified Islamic Professional Accountant (CIPA), Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI);(ii) BIBF Advanced Diploma in Islamic Commercial Jurisprudence (ADICJ);(iii) BIBF Advanced Diploma in Islamic Finance (ADIF); and/or(iv) Certified Shari’a Advisor & Auditor (CSAA), Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).Head of Underwriting The Head of Underwriting should have: (a) A clear understanding of the role and responsibilities associated with this position; and(b) Strong understanding of the licensee’s business and the broader industry; and(c) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum of 7 years of practical experience in an underwriting or comparable function (underwriting/claims) within the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to underwriting and claims and other relevant certification(s) specific to this role. Such certifications may include but are not limited to Insurance Management Diploma, Bahrain Institute for Banking and Finance (BIBF) in combination with BIBF Professional Award for Certified Insurance Practitioner (BPACIP) and BIBF Professional Award for Specialist Insurance Practitioner (BPASIP).Head of Claims The Head of Claims should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Relevant claims management experience to ensure policyholder(s) receives fair and equitable settlement for their loss;(c) Relevant experience in dealing with customers in a professional manner;(d) Strong understanding of the licensee’s business and the broader industry; and(e) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum of 7 years of practical experience in a claims management or comparable function (claims/underwriting) within the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to underwriting and claims and other relevant certification(s) specific to this role. Such certifications may include but are not limited to Insurance Management Diploma, Bahrain Institute for Banking and Finance (BIBF) in combination with BIBF Professional Award for Certified Insurance Practitioner (BPACIP) and BIBF Professional Award for Specialist Insurance Practitioner (BPASIP).Head of Sales and Marketing/ Head of Business Development The Head of Sales and Marketing/ Head of Business Development should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Relevant experience to provide suitable recommendation(s) and advise(s) to policyholders;(c) Sufficient experience to exercise high standards of integrity and honesty by disclosing fully all relevant information to customers and effectively managing any conflict(s) of interest that rises;(d) Strong understanding of the licensee’s business and the broader industry; and(e) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum of 7 years of practical experience in a relevant role within the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to sales marketing and other relevant certification(s) specific to this role.Heads of other Functions Heads of other Functions should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the licensee’s business and the broader industry;(c) Good understanding of the industry’s regulatory environment; and(d) The relevant experience and qualifications to fulfil their responsibilities.Competence could be demonstrated by: (a) A minimum of 5 years of practical experience in a comparable function within the insurance industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) and other relevant certification(s) specific to this role.Money Laundering Reporting Officer (MLRO)/ Deputy Money Laundering Reporting Officer (DMLRO) The MLRO /DMLRO should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Understand the business of theinsurance licensee and how the Anti Money Laundering framework applies to it;(c) Demonstrate independence from insurance staff who deal directly with customer; and(d) A thorough knowledge of the financial industry and be familiar with relevant FATF and applicable domestic regulatory requirements.Competence could be demonstrated by: (a) An MLRO/ DMLRO should have a minimum experience of 5 years in the financial services industry of which at least 3 years of experience in anti-money laundering or anti-money laundering related role.(b) The MLRO/ DMLRO should have:(i) A degree from a university at bachelor level or higher or a relevant professional qualification; and(ii) Relevant certification(s) specific to this role. Such certifications may include but are not limited to:1) Certified Anti-Money Laundering Specialist Examination, Association of Certified Anti-Money Laundering (ACAMS);2) Diploma in Anti-Money Laundering, International Compliance Association (ICA);3) International Diploma in Financial Crime Prevention, International Compliance Association (ICA); and/or4) International Advanced Certificate in Compliance and Financial Crime, International Compliance Association (ICA).Unit-linked investment adviser A Unit-linked investment adviser should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of unit-linked products, capital markets, latest product offering, and working knowledge of the various insurance investment vehicles;(c) Strong understanding of the licensee’s business and the broader industry; and(d) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum experience of 3 years in a relevant role; and(b) A minimum of a diploma level qualification from a university or above in investment/finance/ insurance or equivalent with the following minimum standard certification:(i) Diploma in Regulated Financial Planning, Chartered Insurance Institute (CII); and(ii) Associate (ALMI), Life Management Institute (LOMA).Signing Actuary A Signing Actuary should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the various actuarial techniques relevant to the classes of business undertaken by the licensee; and(c) Strong understanding of the licensee’s business and the broader industry; and(d) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) A minimum experience of 5 years in an actuarial role; and(b) A professional qualification(s) related to actuary and other relevant certification(s) specific to this role. Such professional(i) Fellow of Institute of Actuaries (FIA) or Fellow of Faculty of Actuaries (FFA), the Institute and Faculty of Actuaries; and(ii) Fellow of Society of Actuaries (FSA), the Society of Actuaries.(c) An active membership of Institute of the Faculty of Actuaries, UK; Society of Actuaries, USA; or other recognized equivalent actuarial institution.Added: October 2020Appendix TC-2 Appendix TC-2 Professional Bodies and Qualifications
Relevant Professional Bodies
(a) Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)(b) American Institute of Certified Public Accountants (AICPA), USA(c) Association Cambiste Internationale (ACI), France(d) Association of Certified Anti-Money Laundering Specialists (ACAMS), USA(e) Association of Chartered Certified Accountants (ACCA), UK(f) Bahrain Institute of Banking and Finance (BIBF), Bahrain(g) Chartered Financial Analyst (CFA) Institute , USA(h) Chartered Alternative Investment Analyst Association (CAIA)(i) Chartered Institute for Securities & Investment (CISI)(j) Institute of Chartered Accountants in England and Wales (ICAEW), UK(k) Institute of Internal Auditors (IIA);(l) Institute of Risk Management qualifications (IRM)(m) Insurance Institute of India (I.I.I), India(n) International Compliance Association (ICA), UK(o) Life Office Management Association (LOMA), USA(p) Society of Actuaries, USA(q) The Chartered Insurance Institute (CII), UK(r) The Institute and Faculty of Actuaries, UK(s) The Institutes, USAAdded: October 2020IA IA Insurance Aggregators
IA-A IA-A Introduction
IA-A.1 IA-A.1 Purpose
IA-A.1.1
This Module sets out the Central Bank of Bahrain's (CBB's) Directive relevant to
insurance aggregators who are intermediaries with aninsurance broker's license providing insurance aggregator services, as defined in the Authorisation Module of the CBB Rulebook Volume 3, in the Kingdom of Bahrain.October 2019IA-A.1.2
This Module should be read in conjunction with the requirements in other parts of the CBB Rulebook, Volume 3, applicable to
insurance brokers particularly:(a) Authorisation Module;(b) Principles of Business Module;(c) High Level Controls Module;(d) General Requirements Module;(e) Risk Management Module;(f) Capital Adequacy Module;(g) CBB Reporting Requirements Module(h) Auditors and Accounting Standards Module;(i) Financial Crime Module; and(j) Enforcement Module.October 2019Legal Basis
IA-A.1.3
This Module contains the CBB's Directive (as amended from time to time) applicable to
insurance brokers undertakinginsurance aggregator activities by operating an online platform for this purpose, and is issued under the powers available to the CBB under Article 38 of the CBB Law.October 2019IA-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
October 2019IA-A.2 IA-A.2 Module History
IA-A.2.1
This Module was first issued in August 2019. All subsequent changes to this Module are annotated with a sequential version number. UG-3 provides further details on Rulebook maintenance and version control.
October 2019IA-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes IA-B IA-B Scope of Application
IA-B.1 IA-B.1 Introduction
IA-B.1.1
Insurance aggregators as defined in Module AU-1.1.8A provide information aggregation services to clients by comparing the different insurance products for its customers.Insurance aggregators are licensed asinsurance brokers and may provide all or some of the services thatinsurance brokers are authorised to provide only through an online platform.October 2019IA-B.1.2
The word aggregator simply means an organisation that collects information from other businesses and then places it on one website. This may be used by a number of industries as an effective way of increasing client proposals and referrals. In the insurance industry, a customer is able to find insurance quotes under a single electronic platform instead of trawling through multiple insurer websites for quotes individually.
October 2019IA-B.1.3
Insurance aggregators who handle client money should have policies and procedures in place to safeguard client money, and comply with the requirements under Module CL.October 2019IA-B.1.4
Additionally, there are confidentiality and data privacy implications if the
Insurance aggregator uses the cloud for the analytics. Ifclient data is processed by the tool using the cloud, there must be safeguards to avoid noncompliance with applicable laws.October 2019IA-1 IA-1 Systems and Controls
IA-1.1 IA-1.1 Systems and Controls
Role of Board and Senior Management
IA-1.1.1
The Board of Directors must establish adequate internal controls and maintain effective oversight and governance of the
insurance aggregator process and the client interface including establishing sound policies, procedures, systems, methodologies and controls. Such policies must be comprehensive and cover the following:(a) Controls over technology solutions;(b) Platform operations and performance;(c) Tools and measures to prevent frauds and errors;(d) Risk management controls;(e) Prevention of anti-money laundering (AML) and combating terrorist financing (CTF);(f) Record keeping and audit trails;(g) Safeguarding client moneys; and(h) Financial controls.October 2019IA-1.1.2
The Board of Directors must take responsibility for the establishment and oversight of effective risk management and internal controls.
October 2019Technology governance
IA-1.1.4
Insurance aggregators must use technology solutions which are capable of interfacing with software and systems used byinsurance licensees and different applications used by customers.October 2019IA-1.1.4A
With respect to Paragraph IA-1.1.4, if an
insurance licensee does not have technology systems capable of interfacing with theinsurance aggregator , it may utilize other means to display the said licensee's quote such as a quoting engine based on the criteria of theinsurance firm .October 2019IA-1.1.5
The internal controls mentioned in Paragraph IA-1.1.3 must include, but not be limited to, the following:
(a) The development and or acquisition of the technology solutions to conduct the activity;(b) Testing of the solutions and application program interfaces;(c) Standards of communication and access and related security controls;(d) Safe authentication of the users; and(e) Tools and measures to prevent frauds and errors.October 2019IA-1.1.6
Insurance aggregators must maintain an up-to-date security policy document containing the following information:a) a detailed documentation of the technology architecture and of the systems and the network elements providing:i. description of the business IT systems supporting the business activities;ii. the type of authorised connections from outside, such as with partners, service providers, entities of the group and employees working remotely, including the rationale for such connections;iii. for each of the connections, the logical security measures and mechanisms in place, specifying the control the licensee will have over such access as well as the nature and frequency of each control,iv. process for the opening/closing of communication lines, and description of security equipment configuration, generation of keys or client authentication certificates, system monitoring, authentication, confidentiality of communication, intrusion detection, antivirus systems and logs;b) the logical security measures and mechanisms that govern the internal access to IT systems;c) the physical security measures and mechanisms of the premises and the data centre of the licensee, such as access controls and environmental security;d) the security of the customer payment processes; ande) ensure that the information systems, (both hardware and software) including the aggregation website(s)/portals, Proposal Management System and the Data Centers hosting the website(s)/Portal(s)/Proposal Management System are in compliance with the Cyber Security rules stipulated in Section RM-9.October 2019Business continuity
IA-1.1.9
Insurance aggregators must ensure they have an up-to-date business continuity plan and arrangements consisting of the following information:a) a business impact analysis, including the business processes and recovery objectives, such as recovery time objectives, recovery point objectives and protected assets;b) the identification of the back-up site, access to IT infrastructure, and the key software and data to recover from a disaster or disruption;c) an explanation of how the licensee will deal with significant continuity events and disruptions, such as the failure of key systems; the loss of key data; the inaccessibility of the premises; and the loss of key persons; andd) the frequency with which the licensee intends to test the business continuity and disaster recovery plans, including how the results of the testing will be recorded.October 2019IA-1.1.10
Insurance aggregators must ensure that there are documented measures to protect confidentiality of client data consistent with Law No. 30 of 2018, Personal Data Protection Law (PDPL) issued on 12 July 2018.October 2019IA-1.1.11
Insurance aggregators must ensure that the requirements relating to enhanced due diligence as required under Module FC are met when the client is assessed as higher risk and also where the client relationship (whether at the time of on-boarding or otherwise) is on a non-face-to-face basis.October 2019IA-2 IA-2 Operating Framework
IA-2.1 IA-2.1 Client Agreements
IA-2.1.1
Insurance aggregators must agree in writing the terms of business with theirclients (i.e.insurance firms ) and ensure that the following are stipulated:a) the full scope of theinsurance aggregator services ;b) the basis for providing advice (if any) including but not limited to methodologies used for such advice,c) the fees, charges or commissions relevant to the services being offered;d) the dispute resolution processes are available to theclients if they wish to make a complaint.October 2019IA-2.1.2
Insurance aggregators must disclose in writing the full particulars of any actual or potential conflicts of interest arising from any connection or association with product provider, including any commissions or fees and any material information or facts that may compromise its objectivity or independence.October 2019IA-2.2 IA-2.2 Arrangements with Insurance Firms
IA-2.2.1
No arrangements must be made by the
insurance aggregators with theinsurance firms which are against the interests of policyholders.October 2019IA-2.2.2
An
insurance aggregator desirous of transmitting proposals to aninsurance firm must enter into an "agreement" with theinsurance firm which must include at least the following details:a) Timeframe and mode of transmission of proposals to be shared;b) Onus of complying with regulatory and other legal requirements on both the parties to the agreement;c) Identifying the different data elements to be shared such as name of prospective client/client/visitor of the web site, contact details etc.;d) The timeframe for providing the premium and feature tables of the agreed products to theinsurance aggregator after concluding the agreement and keeping them up to date.October 2019IA-2.2.3
The
insurance aggregator must keep the agreement ready for inspection as and when desired by the CBB's on-site supervision team.October 2019IA-2.2.4
The
insurance aggregator must ensure the following:a) While entering into such arrangements, noinsurance aggregator must promise nor anyinsurance firm must compel theinsurance aggregator to distribute the products of only a particular insurance firm;b) The arrangements must have provisions to include duties and responsibilities ofinsurance aggregators towards the policyholders, duties and responsibilities ofinsurance firms andinsurance aggregators , terms and conditions for termination of arrangements;c) In case aninsurance aggregator wishes to terminate arrangement with anyinsurance firm , they may do so after informing theinsurance firm , the reasons for termination of arrangement. In such cases, theinsurance aggregator must service any policies solicited but not yet issued by the concernedinsurance firm until the issuance of the said policies;d) Noinsurance firm must pay and noinsurance aggregator must receive any signing fee or any other charges by whatever name called, except those permitted by the CBB under relevant regulations, for becoming itsinsurance aggregator .October 2019IA-2.2.5
The CBB may, at any point in time, direct any
insurance firm orinsurance aggregator to terminate the distribution arrangements.October 2019IA-2.3 IA-2.3 Product Comparisons
Policy for comparison and distribution of insurance products
IA-2.3.1
Insurance aggregators must have a Board approved policy on the approach to be followed by theinsurance aggregator in having multiple tie-ups, type of products sold, grievance redress mechanism, reporting requirements and any other item. The Board of theinsurance aggregator must review the same at least once in three years.October 2019Display of product comparisons on the insurance aggregator website
IA-2.3.2
The
insurance aggregator must adhere to the following conditions relating to display of product comparison on its website:a) Disclose prominently on the home page, a notice thati. the prospective client's/visitor's particulars could be shared withinsurance firms ;ii. the information displayed on theinsurance aggregator's website is of theinsurance firms with whom theinsurance aggregator has an agreement;b) Product information displayed by theinsurance aggregator must be authentic and be based solely on information received frominsurance firms ;c)Insurance aggregators must not display customer ratings, rankings, endorsements or bestsellers of insurance products on its website;d) The content of the website of theinsurance aggregator must be unbiased and factual in nature;e) Basic features of products may be compared, such as:i. Eligibility criteriaii. Policy termiii. Premiumiv. Inbuilt benefits/ridersv. Premiums for different age groupsvi. Benefits such as survival benefits/maturity benefits/death benefits etc.vii. Any other additional information/special product features relating to the productsf) Product comparisons that are displayed must be up-to-date and reflect the true picture of the products.g) The product comparison must highlight whether a particular policy is a sharia compliant Takaful policy or a conventional insurance policy.October 2019IA-2.3.3
Insurance aggregators must not operate multiple websites or tie up with other un-registered websites for comparison of products.October 2019IA-2.4 IA-2.4 Disclosures and Management of Proposals
IA-2.4.1
Insurance aggregators must adhere to the following requirements with respect to their platform:a)Insurance aggregators must disclose prominently on the home page or similar page of the relevant application that the prospective client's/visitor's particulars could be shared withinsurance firms if the arrangements theinsurance firms warrant such a disclosureb)Insurance aggregator must provide an option to select multipleinsurance firms by the visitor, to whom the proposal must be transmitted simultaneously;c)Insurance aggregators must provide an option to select or choose between conventional insurance and Takaful products;d)Insurance aggregators must not transmit the proposal containing data of a client toinsurance firm (s) other than the one(s) preferred by the client. However, if the client shows interest in buying insurance but does not prefer any insurance firm , theinsurance aggregator may transmit the proposal to severalinsurance firms in the same class of insurance business based on the need analysis of the client;e) Ensure that the proposals and other data are transmitted to theinsurance firms and others using secured data encryption technologies;f) Disclose in all its correspondences with all stakeholders its name followed by "licensed as an Insurance Broker — Insurance Aggregator by the Central Bank of Bahrain".October 2019IA-2.4.2
Insurance aggregators must not provide customers with any cash discounts on their own account, such as in the form of discount codes, cash backs and promotional codes etc.October 2019IA-2.5 IA-2.5 Professional Indemnity Insurance
IA-2.5.1
Every
insurance aggregator must take out and continue to maintain a professional indemnity insurance cover from a licensedinsurance firm in the Kingdom of Bahrain. (See Section GR-10.1)October 2019IA-2.5.2
An
insurance aggregator must ensure that the insurance cover indemnifies against the following:a) any error or omission or negligence;b) any loss of money or other property for which theinsurance aggregator is legally liable in consequence of any financial or fraudulent act or omission;c) any loss of documents and costs and expenses incurred in replacing or restoring such documents; andd) dishonest or fraudulent acts or omissions byinsurance aggregator employees.October 2019IA-2.5.3
The indemnity cover should not contain any terms to the effect that payments of claims depend upon the
insurance aggregator having first met the liability.October 2019IA-2.5.4
The cover should indemnify in respect of all claims made during the period of the insurance regardless of the time at which the event giving rise to the claim may have occurred.
October 2019IA-2.5.5
The professional indemnity insurance cover must not be cancelled without the CBB's prior written approval.
October 2019IA-3 IA-3 Other Controls
IA-3.1 IA-3.1 Remuneration
IA-3.1.1
Remuneration in any form paid to
insurance aggregators byinsurance firms must be in compliance with the following provisions:a) No fee can be charged to theinsurance firm for listing its products;b) Proposals which are converted into sale of insurance policies will entitle theinsurance aggregator to earn commission as applicable toinsurance brokers ;c)Insurance aggregator can provide other services toinsurance firms in respect of policies procured through them. In such instances, theinsurance firm may pay theinsurance aggregators , reasonable service charges at mutually agreed rates in the service agreements with theinsurance aggregators .October 2019IA-3.1.2
The
insurance aggregator , if requested by a prospective client, must disclose the amount of remuneration it receives as a result of effecting insurance for that client.October 2019IA-3.2 IA-3.2 Complaints Handling
IA-3.2.1
The
insurance aggregator must:a) Have in place a system for recording and monitoring complaints;b) Ensure that the website contains details of complaints handling procedures and provides a facility to the customer to log complaints online;c) Ensure that communication of clients in any form, written/phone/email/messaging etc. are acknowledged promptly in accordance with the requirements stated in Paragraph BC-4.5.1;d) Ensure that the grievance is resolved to the fullest satisfaction of the client;e) Ensure that responses are sent to the customer on the resolution of the grievance, and the customer is informed of the further redress procedure available to him; andf) Ensure that complaints are attended to atsenior management level.October 2019IA-3.2.2
The
insurance aggregator must disclose on its website that if a member of the public wishes to make a complaint or requires the assistance of the CBB in resolving a dispute, he may write to the CBB.October 2019IA-3.3 IA-3.3 Training and Independent Assessments
Training
IA-3.3.1
The
Insurance aggregator must:a) Ensure that its staff are aware of and adhere to the standards expected of them by this Module;b) Ensure that staff is competent, suitable and have been given adequate training; andc) Ensure that there is a system in place to monitor the quality of services of its staff.October 2019Independent assessments
IA-3.3.2
Insurance aggregators must ensure that their overall control framework is evaluated and independently tested by an independent external consultant other than the external auditors:a) initially upon implementation of this Module and prior to launching of business;b) when there are any material changes to the systems and controls; andc) at least once every 3 years.October 2019IA-3.3.3
Insurance aggregators must ensure that report of the evaluation referred to in paragraph IA-3.3.2(b) is provided to the CBB within 2 weeks of completion of the report. The report required under IA-3.3.2(c) must be submitted within 3 months of the year-end in which the evaluation was conducted. In addition, the report required under IA-3.3.2 (a) should be submitted to the CBB for the CBB's review and no-objection prior to launching the business.October 2019Reporting Requirements
BR BR CBB Reporting
BR-A BR-A Introduction
BR-A.1 BR-A.1 Purpose
Executive Summary
BR-A.1.1
This Module sets out the Central Bank of Bahrain ('CBB')'s financial reporting requirements, as well as notifications and CBB prior approvals required from
insurance licensees , except for licensees exempted as per Chapter BR-1. This Module also outlines the methods used by the CBB in gathering information required in the supervision ofinsurance licensees .Amended: January 2007Legal Basis
BR-A.1.2
This Module contains the CBB's (as amended from time to time) Directive relating to reporting requirements of the CBB and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2011
Added: January 2007BR-A.1.3
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007BR-A.2 BR-A.2 Module History
BR-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change is made: UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007BR-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007BR-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes BR-1.1 01/10/05 Corrected reference to Form IFR; Clarified definition of equity basis; amended requirement to have IFR reviewed (instead of audited) by external auditors; amended signatures required for IFR for overseas insurance firms and; added a Paragraph detailing other reporting requirements. BR-1.2 01/10/05 Amended requirement to have IMR reviewed (instead of audited) by external auditors; amended signatures required for IMR for overseas insurance licensees and; added a Paragraph detailing other reporting requirements. BR-1.4 01/10/05 Corrected reference to Form IFRQ and amended due date of quarterly return to within 45 days of the relevant quarter year end. BR-2.2 01/10/05 Added notification requirement for appointed representatives and for reinsurance in excess of 25%. BR-2.3 01/10/05 Clarified that prior approval for changes in controllers is required for all insurance licensees. BR-1.1 01/01/06 Clarified that the Insurance Firm Return (IFR) of every insurance firm must be reviewed in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements. Added a transition period for the submission of the first IFR for the period ending December 31, 2006. BR-1.2 01/01/06 Clarified that the IMR of every insurance intermediary and insurance manager must be reviewed, in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements. BR-1.3 01/01/06 Added a transition period for the submission of the first GIFR for the period ending December 31, 2006. BR-1.4 01/01/06 Added a transition period for the submission of the first QIFR for the period ending March 31, 2007. BR-1.1 01/04/06 Added the requirement for filing a copy of the external auditor's management letter. BR-1.2 01/04/06 Added the requirement for filing a copy of the external auditor's management letter. BR-2.3.22
BR-2.3.23
BR-2.3.29(d)01/04/06 Corrected cross reference to Module CA and clarified prior approval requirements in the case of insurance contracts with related parties; corrected cross reference to Module AU. BR-A.1.2 01/2007 New Rule introduced, categorising this Module as a Directive. BR-1.1.5, 16, 17 and 26 and BR-1.2.5, .15, 16 and 17 01/2007 Auditor's report (Agreed Upon Procedures) for both the IFR and IMR is to be submitted separately, within four months of the financial year end. BR-1.1.18 01/2007 Amended details of actuary's certification in line with new format of certificate included as part of the IFR. BR-1.1.29 and 36 and BR-1.2.20 and 27 01/2007 The management letter issued by the external auditors is to be deposited along with the audited financial statements with every IFR and IMR. BR-1.4.2 01/2007 Clarified that quarterly reporting requirements do not apply to insurance firms in run-off and to pure reinsurers. BR-2.3.22 01/2007 Clarified the Rule regarding related party transactions. BR-1.1.22, 23, 25 10/2007 Reporting requirements for actuarial reports amended as per changes to Chapter AA-4. BR-1.1.26 and 30 10/2007 Amended number and format of copies of IFR to be submitted to CBB BR-1.2.17 and 21 10/2007 Amended number and format of copies of IMR to be submitted to CBB BR-2.3.29 10/2007 Added that CBB prior approval is required for dividend distribution. BR-2.2.14 04/2009 Added notification requirement for when an approved person ceases to occupy a controlled function. BR-2.2.8 04/2010 Added conflict of interest in notification requirements. BR-2.2.11(g) 04/2010 Amended name of bankruptcy legislation. BR-A.1.2 01/01/11 Clarified legal basis. BR-1.5 01/2011 Added IIS reporting requirements. BR-1.5.2 04/2011 Corrected cross reference. BR-1.5.3 10/2011 Added requirement for submission of complaint handling procedures report. BR-3.4.1 10/2011 Corrected cross reference. BR-3.5 10/2011 Added new Section on the Role of the Appointed Expert (Material transferred from EN-2). BR-1.1.35(a) 04/2012 Corrected cross reference. BR-1.2 04/2012 Amended to reflect updated requirements for insurance consultant and manager financial reporting. BR-1.2A 04/2012 New Section added for Insurance Broker return. BR-1.4A 04/2012 New Section added for semi-annual prudential reporting by insurance brokers. BR-1.5 04/2012 Added requirement for a report reviewing the insurance broker's compliance with Module CL and other minor corrections. BR-3.1.1A and BR-3.1.1B 04/2012 Added Paragraphs to clarify Rules on power to request information. BR-3.3.1 and BR-3.4 04/2012 Minor corrections. BR-1.5.1 01/2013 Clarified deadline to update IIS. BR-1.2A.6 04/2013 Corrected due date for insurance broker return to be consistent with other related Rules. BR-2.3.14 04/2013 Added reference to CBB Law. BR-2.3.17 04/2013 Clarified the Rule on the establishments of new operations. BR-1.1 04/2014 Amended to be in line with the updated requirements for the actuary's financial condition report. BR-2.3.29 and BR-2.3.30 10/2014 Clarified that the requirement for the payment of dividends is a no objection letter from the CBB. BR-2.2.13A, BR-2.2.13B, BR-2.3.7 and BR-2.3.9 10/2015 Amended to be in line with updated Chapter GR-5. BR-1A.5 04/2017 Added a new Section on On-site Inspection Reporting. BR-2.3.14 01/2020 Amended Paragraph. BR-2.3.17 01/2020 Amended Paragraph. BR-1A.5.2 01/2022 Amended Paragraph on the submission of the written assessment of the observations/issues raised in the Inspection draft report. BR-1.4.7 04/2022 Amended Paragraph on the submission of the quarterly financial report. BR-1.4A.6 04/2022 Amended Paragraph on the submission of the semi-annual financial report. BR-1.1A 07/2022 Added a new Section on semi-annual (interim) financial statements. BR-1.4.2 07/2022 Amended Paragraph on submission of Quarterly Financial Reporting. BR-2.3.29(a) 01/2023 Deleted Sub-paragraph on CBB approval for outsourcing internal audit function and other material functions. BR-1.1.5 10/2023 Amended Paragraph on submission of IFR requirements. BR-1.1.12 10/2023 Deleted Paragraph. BR-1.1.13 10/2023 Deleted Paragraph. BR-1.1.26 10/2023 Amended Paragraph on submission of IFR requirements. BR-1.1.30 10/2023 Deleted Paragraph. BR-1.1.31 10/2023 Deleted Paragraph. BR-1.2A.6 10/2023 Amended Paragraph on the content of the insurance broker return report. BR-1.2A.11 – BR-1.2A.13 10/2023 Deleted Paragraphs. BR-1.2A.18 10/2023 Amended Paragraph on submission of IBR. BR-1.2A.21 – BR-1.2A.22 10/2023 Deleted Paragraphs. BR-A.2.3 [Deleted]
Deleted: January 2007BR-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007BR-B BR-B Scope of Application
BR-B.1 BR-B.1 Scope
BR-B.1.1
The content of this Module — unless otherwise stated — applies to all
insurance licensees authorised in the Kingdom, that isinsurance firms ,insurance intermediaries andinsurance managers .BR-B.1.2
The effect of BR-B.1.1 is that this Module, unless otherwise stated, applies in full to all
insurance licensees authorised in Bahrain whether or not the insurance licensee is incorporated in an overseas territory and operating through a branch in the Kingdom. In respect ofinsurance firms , unless otherwise stated, this Module applies in full whether or not theinsurance firm is a direct insurer, a reinsurer, or both.BR-B.1.3
In this Module, the term 'in writing' includes electronic communication capable of being reproduced in paper form.
Amended: October 2007BR-1 BR-1 Prudential Reporting
BR-1.1 BR-1.1 Insurance Firms — Insurance Firm Return
BR-1.1.1
Insurance firms must prepare and submit to the CBB an Insurance Firm Return for each financial year, within 3 months of theinsurance firm's financial year end.Amended: January 2007BR-1.1.2
The financial year of an
insurance firm must be a 12-month period ending on 31 December, except where the firm has obtained the written consent from the CBB for either the period or the period end to be other than 12 months and 31 December respectively. In any event, the financial year can never be less than a 6-month period or greater than an 18-month period.Amended: January 2007BR-1.1.3
Except in exceptional circumstances and subject to BR-1.1.2, an
insurance firm's financial year, for the purposes of preparing the Insurance Firm Return, and the financial year for the purposes of preparing the shareholder accounts, must coincide.Amended: January 2007BR-1.1.4
For the purposes of BR-1.1.3, the CBB would usually accept that the financial year end of an
overseas insurance firm would be the same as that of the company itself. The only times that the CBB would be likely to consider allowing aninsurance firm to adopt a financial period of other than 12 months would be the year in which it is authorised (i.e. a period of less than 12 months) or when the company itself changes its reporting period for the purposes of its shareholder accounts.Amended: January 2007Content of the Insurance Firm Return
BR-1.1.5
For every
insurance firm who undertakes insurance business, an Insurance Firm Return must be submitted within three months of its financial year end, using the prescribed form IFR from Part B of Volume 3 (Insurance), together with where applicable, Actuary's Certificate and report.Amended: October 2023
Amended: January 2007BR-1.1.6
For purposes of Paragraph BR-1.1.5,
captive insurers are required to submit additional information, as outlined in prescribed Form IFR. This information covers:(a) Risk Gap — the degree to which the firm's potential liabilities (under the policy limits) exceed available assets and the resources available to meet this gap; and(b) Reinsurance — the firm's providers, limits and claims.Amended: January 2007
Amended: October 2007BR-1.1.7
The content of the Insurance Firm Return required to be submitted by an
insurance firm in accordance with BR-1.1.5 must be in the format prescribed by the CBB and completed in accordance with any instructions specified by the CBB.Amended: January 2007BR-1.1.8
The Insurance Firm Return must be completed by every
insurance firm licensed in Bahrain, in the following manner:(a) In the case of aninsurance firm incorporated in Bahrain the Insurance Firm Return must be completed on an equity basis, (cost of investment plus share of profits and less share of loss and dividends declared) detailing all investments in subsidiaries; or(b)In the case of anoverseas insurance firm licensed in Bahrain, the Insurance Firm Return must be completed in respect of the insurance business carried out by theoverseas insurance firm in Bahrain.Amended: January 2007BR-1.1.9
The format of the Insurance Firm Return is included in Part B of the Rulebook as Form IFR, with forms applicable for conventional business, IFR(C) and for takaful business, IFR (T).
Valuation of Assets and Liabilities
BR-1.1.10
For the purposes of the Insurance Firm Return, the information submitted must include the amounts as per the audited financial statements, the value or amount given for an asset or a liability of the
insurance licensee as determined in accordance with Chapter CA-4, Valuation of Assets and Chapter CA-5, Valuation of Liabilities, as well as the admissibility and counterparty limits of the firm's assets for purposes of calculating the firm's capital available.BR-1.1.11
The valuation of liabilities in respect of
long-term insurance business must be made on a basis not less stringent than the minimum basis specified in Chapter CA-5. Should this long-term business relate to a jurisdiction other than Bahrain, the valuation basis adopted must be the more stringent of:(a) The basis specified in Chapter CA-5; and(b)The basis required by the law of that other jurisdiction for regulatory purposes.Amended: January 2007
Amended: October 2007BR-1.1.12
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Amended: January 2007BR-1.1.13
[This Paragraph was deleted in October 2023].
Amended: January 2007
Amended: October 2007
Deleted: October 2023Audit and Auditor's Report
BR-1.1.14
The Insurance Firm Return (IFR) of every
insurance firm must be reviewed in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements. The review must certify that the information provided in the IFR is in agreement with the books and records of the company and its audited financial statements.BR-1.1.15
The Insurance Firm Return must be reviewed by the firm's external
auditor , appointed in accordance with Module AA, or by other qualified persons as directed by the CBB.Amended: January 2007
Amended: October 2007BR-1.1.16
The
insurance firm must provide to the CBB within four months of the financial year end, an auditor's report, in the format prescribed by the CBB, stating the auditor's opinion on the matters identified in this Module.Amended: January 2007BR-1.1.17
The format of the Auditor's Report is included in Part B of the Rulebook, as part of the Supplementary Information.
Amended: January 2007Actuary's Certification
BR-1.1.18
An actuary's certification is included as part of the IFR. The certification must be in the format prescribed by the CBB and signed by the
actuary . It must state that, in his opinion, theactuary has satisfied himself as to the accuracy of the valuations made for the purposes of the investigation and as to their adequacy to meet the obligations of theinsurance firm and the financial statements fairly present the results of the valuation. In addition, theactuary will have verified the consistency of the valuation data with the insurance firm’s financial records.Amended: January 2007
Amended: October 2007BR-1.1.19
The format of the Actuary's Certification is included as part of the IFR.
Amended: January 2007BR-1.1.20
The
actuary must also disclose and quantify in his certification the effect on his valuations of any material event that occurs after the valuation date.Amended: October 2007BR-1.1.21
The Actuary's Certificate must be submitted every year where an Actuary's financial condition report is submitted in accordance with Chapter AA-4.
Amended: April 2014
Amended: October 2007Actuary's Financial Condition Report
BR-1.1.22
An insurance firm carrying on long-term insurance business must commission a financial condition report (FCR) as required under Paragraph AA-4.1.3 and made pursuant to Paragraph AA-4.3.1 and must submit to the CBB an abstract of the actuary's report as prescribed in Paragraph BR-1.1.23.
Amended: April 2014
Amended: January 2007
Amended: October 2007BR-1.1.22A
An insurance firm carrying on general insurance business must commission a financial condition report (FCR) as required under Paragraph AA-4.1.4 and made pursuant to Paragraph AA-4.3.1 and must submit to the CBB an abstract of the actuary's report as prescribed in Paragraph BR-1.1.23.
Added: April 2014BR-1.1.23
An abstract of the actuary's report must be submitted in the prescribed form in compliance with the Valuations of Liabilities rules outlined in Chapter CA-5 and Rules outlined in Sections AA-4.3 and AA-4.3A, wherever applicable. The abstract must be signed by the actuary, recognised by the CBB in accordance with Chapter AA-4.
Amended: April 2014
Amended: October 2007
Amended: January 2007BR-1.1.24
The abstract must include:
(a) A summary and valuation of the policies; and(b) A valuation result and the actuary's opinion of the surplus available for distribution, for each of the separate funds maintained by theinsurance firm .Amended: January 2007BR-1.1.25
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
Amended: October 2007
Amended: January 2007Preparation and Deposit of the Insurance Firm Return
BR-1.1.26
Every Insurance Firm Return, including the Actuary's Certificate made pursuant to Paragraph BR-1.1.18 and any report made by the actuary pursuant to Paragraph BR-1.1.22 and/or Paragraph BR-1.1.22A, whichever is applicable, must be submitted to the CBB electronically within 3 months of the financial year end.
Amended: October 2023
Amended: April 2014
Amended: October 2007
Amended: January 2007BR-1.1.27
If the CBB notifies the
insurance firm that a document deposited under Paragraph BR-1.1.26 appears to be inaccurate or incomplete, theinsurance firm must consider the matter and within one month of the CBB notification, it must correct any inaccuracies and make good any omissions and submit the amended parts of the Insurance Firm Return.Amended: January 2007BR-1.1.28
The external
auditor and actuary must consider the impact on their report of any amendment referred to in Paragraph BR-1.1.27, and withdraw and correct their original report based on the revised information.Amended: January 2007
Amended: October 2007BR-1.1.29
The audited financial statements submitted to the shareholders and policyholders (or participants, in the case of Takaful companies) of the
insurance firm and the management letter issued by the externalauditor must be deposited with every Insurance Firm Return in respect of the financial year to which the Insurance Firm Return relates.Amended: April 2014
Amended: October 2007
Amended: January 2007BR-1.1.29A
For
Takaful firms , the audited financial statements submitted to the CBB along with the IFR, must provide a detailed breakdown of the statement of financial position and statement of comprehensive income for the shareholder fund and for any participant fund(s) of theTakaful firm .Added: April 2014BR-1.1.30
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Amended: October 2007BR-1.1.31
[This Paragraph was deleted in October 2023].
Deleted: October 2023Public Disclosure
BR-1.1.32
While certain information related to
insurance firms is subject to public disclosure as prescribed by Module PD, the Insurance Firm Return is not a public document and as such will not, unless otherwise provided in the CBB's Rulebook, be disclosed to third parties by the CBB without theinsurance firm's consent.Amended: January 2007BR-1.1.33
Whilst the Insurance Firm Return is not a public document, the CBB may from time to time publish aggregate information derived from the Insurance Firm Return relating to classes of
insurance firms and the Bahrain insurance industry as a whole.Amended: January 2007BR-1.1.34
Whilst the Insurance Firm Return is not a public document, as per Paragraph BR-1.1.32
insurance firms are not prevented from providing complete copies (including all relevant certifications and reports) to third parties.Other Reporting Requirements
BR-1.1.35
The IFR Form also includes other reporting requirements found throughout Volume 3 (Insurance), including:
(a) Directors' High-Level Control Certificate (HC-1.11.3); and(b) Report on close links (GR-6.2.1).Amended: April 2012
Amended: January 2007BR-1.1.36
All
insurance firms must submit a copy of the externalauditor 's management letter no later than three months of theinsurance firm's financial year end.Amended: January 2007
Amended: October 2007BR-1.2 BR-1.2 Insurance Consultants and Managers Financial Reporting —
BR-1.1A BR-1.1A Semi-annual (Interim) Financial Statements
BR-1.2.1 BR-1.2.1
Insurance consultants andinsurance managers must submit to the CBB the audited financial statements for each financial year, within 3 months of theinsurance consultant's andinsurance manager's financial year end.Amended: April 2012
Amended: January 2007BR-1.1A.1
Insurance firms are required to submit their semi-annual (interim) financial statements to the CBB within two months of the date of the statement.Added: July 2022BR-1.2.2
The financial year of an
insurance consultant or aninsurance manager must be a 12-month period ending on 31 December except where the firm has obtained the written consent from the CBB for either the period or the period end to be other than 12 months and 31 December respectively. In any event, the financial year can never be less than a 6-month period or greater than an 18-month period.Amended: April 2012
Amended: January 2007BR-1.2.3
[This Paragraph was deleted in April 2012].
Deleted: April 2012BR-1.2.4
For the purposes of BR-1.2.2, the CBB would usually accept that the financial year end of an
overseas insurance licensee would be the same as that of the company itself. The only times that the CBB would be likely to consider allowing aninsurance consultant orinsurance manager to adopt a financial period of other than 12 months would be the year in which it is authorised (i.e. a period of less than 12 months) or when the company itself changes its reporting period for the purposes of its shareholder accounts.[Paragraphs BR-1.2.5 to 1.2.27 were deleted in April 2012 as
insurance consultants andinsurance managers are no longer required to file form IMR nor subject to other reporting requirements, other than those referred to in Paragraph BR-1.2.1].Amended: April 2012
Amended: January 2007[Deleted]
Deleted: April 2012BR-1.2.5
Deleted: April 2012
Amended: January 2007BR-1.2.6
Deleted: April 2012
Amended: January 2007BR-1.2.7
Deleted: April 2012
Amended: October 2007
Amended: January 2007BR-1.2.8
Deleted: April 2012[Deleted]
Deleted: April 2012BR-1.2.9
Deleted: April 2012
Amended: January 2007[Deleted]
Deleted: April 2012BR-1.2.10
Deleted: April 2012
Amended: January 2007BR-1.2.11
Deleted: April 2012BR-1.2.12
Deleted: April 2012
Amended: January 2007[Deleted]
Deleted: April 2012BR-1.2.13
Deleted: April 2012BR-1.2.14
Deleted: April 2012
Amended: October 2007
Amended: January 2007BR-1.2.15
Deleted: April 2012
Amended: January 2007BR-1.2.16
Deleted: April 2012
Amended: January 2007[Deleted]
Deleted: April 2012BR-1.2.17
Deleted: April 2012
Amended: October 2007
Amended: January 2007BR-1.2.18
Deleted: April 2012
Amended: January 2007BR-1.2.19
Deleted: April 2012
Amended: October 2007BR-1.2.20
Deleted: April 2012
Amended: October 2007
Amended: January 2007BR-1.2.21
Deleted: April 2012
Amended: October 2007BR-1.2.22
Deleted: April 2012[Deleted]
Deleted: April 2012BR-1.2.23
Deleted: April 2012
Amended: January 2007BR-1.2.24
Amended: April 2012
Amended: January 2007BR-1.2.25
Deleted: April 2012[Deleted]
Deleted: April 2012BR-1.2.26
Deleted: April 2012
Amended: January 2007BR-1.2.27
Deleted: April 2012
Amended: October 2007
Amended: January 2007BR-1.2A BR-1.2A Insurance Brokers – Insurance Broker Return
BR-1.2A.1
Insurance brokers must prepare and submit to the CBB an Insurance Broker Return (Form IBR) for each financial year, within 2 months of theinsurance broker's financial year end.Added: April 2012BR-1.2A.2
The first annual return (IBR) for
insurance brokers is to be submitted to the CBB for the annual period ending 31st December 2012 (refer to ES-2.7.4).Added: April 2012BR-1.2A.3
The financial year of an
insurance broker must be a 12-month period ending on 31 December, except where the licensee has obtained the written consent from the CBB for either the period or the period end to be other than 12 months and 31 December respectively. In any event, the financial year can never be less than a 6-month period or greater than an 18-month period.Added: April 2012BR-1.2A.4
Except in exceptional circumstances and subject to Paragraph BR-1.2A.3, an
insurance broker's financial year, for the purposes of preparing the Insurance Broker Return, and the financial year for the purposes of preparing the shareholder accounts, must coincide.Added: April 2012BR-1.2A.5
For the purposes of Paragraph BR-1.2A.4, the CBB would usually accept that the financial year end of an
overseas insurance broker would be the same as that of the company itself. The only times that the CBB would be likely to consider allowing aninsurance broker to adopt a financial period of other than 12 months would be the year in which it is authorised (i.e. a period of less than 12 months) or when the company itself changes its reporting period for the purposes of its shareholder accounts.Added: April 2012Content of the Insurance Broker Return
BR-1.2A.6
Insurance Brokers must submit the Insurance Broker Return within two months of its financial year end, using the prescribed form IBR from Part B of Volume 3 (Insurance).Amended: October 2023
Amended: February 2014
Amended: April 2013
Added: April 2012BR-1.2A.7
The content of the IBR required to be submitted by an
insurance broker in accordance with Paragraph BR-1.2A.6 must be in the format prescribed by the CBB and completed in accordance with any instructions specified by the CBB.Added: April 2012BR-1.2A.8
The IBR must be completed by every
insurance broker licensed in Bahrain, in the following manner:(a) In the case of aninsurance broker incorporated in Bahrain, the IBR must be completed on an equity basis, detailing all investments in subsidiaries; or(b) In the case of anoverseas insurance licensee , the IBR must be completed in respect of the activities carried out by theoverseas insurance licensee in Bahrain.Added: April 2012BR-1.2A.9
The format of the IBR is included in Part B of the Rulebook as Form IBR.
Added: April 2012Valuation of Assets and Liabilities
BR-1.2A.10
For the purposes of the IBR, the value or amount given for an asset or a liability of the
insurance licensee must be the value or amount of that asset or a liability as determined in accordance with generally accepted accounting principles applicable in the Kingdom and in compliance with any requirements from the Ministry of Industry and Commerce, and where applicable, with CBB requirements.Added: April 2012Directors' Certificate
BR-1.2A.11
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Added: April 2012BR-1.2A.12
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Added: April 2012BR-1.2A.13
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Added: April 2012Audit and Auditor's Report
BR-1.2A.14
The IBR of every
insurance broker must be reviewed, in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements. The review must certify that the information provided in the IBR is in agreement with the books and records of the licensee and its audited financial statements.Added: April 2012BR-1.2A.15
The IBR must be reviewed by the licensee's external
auditor , appointed in accordance with Module AA, or by other qualified persons as directed by the CBB.Added: April 2012BR-1.2A.16
The
insurance licensee must provide to the CBB, within three months of the financial year end, an auditor's report, in the format prescribed by the CBB, stating the auditor's opinion on the matters identified in this Module.Added: April 2012BR-1.2A.17
The format of the Auditor's Report is included in Part B of the Rulebook as Appendix BR-(ii), as part of the Supplementary Information.
Added: April 2012Preparation and Deposit of the IBR
BR-1.2A.18
Every IBR must be submitted to the CBB electronically within 2 months of the financial year end.
Amended: October 2023
Amended: October 2014
Added: April 2012BR-1.2A.19
If the CBB notifies the
insurance licensee that a document deposited under Paragraph BR-1.2A.18 appears to be inaccurate or incomplete, theinsurance licensee must consider the matter and within one month of the CBB notification it must correct any inaccuracies and make good any omissions and submit the amended parts of the IBR.Added: April 2012BR-1.2A.20
The external
auditor must consider the impact on his report of any amendment referred to in Paragraph BR-1.2A.19, and withdraw and correct his original report based on the revised information.Added: April 2012BR-1.2A.21
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Added: April 2012BR-1.2A.22
[This Paragraph was deleted in October 2023].
Deleted: October 2023
Added: April 2012Submission of Audited Financial Statements and Management Letter
BR-1.2A.23
The audited financial statements submitted to the shareholders of the
insurance licensee and the management letter issued by the externalauditor must be submitted to the CBB no later than three months following theinsurance broker's financial year end.Added: April 2012Public Disclosure
BR-1.2A.24
The IBR is not a public document and as such will not, unless otherwise provided in the CBB's Rulebook, be disclosed to third parties by the CBB without the
insurance licensee's consent.Added: April 2012BR-1.2A.25
Whilst the IBR is not a public document, the CBB may from time to time publish aggregate information derived from IBR relating to the classes of licensees and the Bahrain insurance industry as a whole.
Added: April 2012BR-1.2A.26
Whilst the IBR is not a public document, as per Paragraph BR-1.2A.24,
insurance brokers are not prevented from providing complete copies (including all relevant certifications and reports) to third parties.Added: April 2012BR-1.3 BR-1.3 Group Financial Reporting
Group Insurance Firm Return
BR-1.3.1
Group financial reporting is required for the following
insurance firms :(a)Overseas insurance firms ; and(b)Bahraini insurance firms that are part of a group.Amended: January 2007BR-1.3.2
Captive insurers are exempt from submitting a Group Insurance Firm Return.
BR-1.3.3
Group financial reporting is required in order for the CBB to better assess the financial condition of the group as a whole and the possible impact this may have on the operations of the
Bahraini insurance firm .Amended: January 2007BR-1.3.4
For those insurance firms referred to in Paragraph BR-1.3.1 that are required to submit an Insurance Firm Return they must prepare and submit to the CBB a Group Insurance Firm Return in respect of the
ultimate parent undertaking for each financial year.Amended: January 2007BR-1.3.5
The financial year for the purposes of Paragraph BR-1.3.4 must coincide with that of the
ultimate parent undertaking . In instances where the financial year end of the parent undertaking is other than 31 December, the insurance licensee must provide written notification to the CBB, within three months of 31 December detailing the financial year end of the parent undertaking.Amended: January 2007BR-1.3.6
For the purposes of this Chapter, the
ultimate parent undertaking means (in relation to aninsurance firm ) the highest parent insurance undertaking of theinsurance firm or the holding company whose predominant investment are shares of theinsurance firm(s) (wherever established) that is not itself thesubsidiary of another undertaking.BR-1.3.7
The Group Insurance Firm Return must be submitted to the CBB within 6 months of the relevant
parent undertaking's financial year end, using the prescribed form GIFR from Part B of Volume 3 (Insurance).Amended: January 2007BR-1.3.8
For purposes of Paragraph BR-1.3.7, the Group Insurance Firm Return must contain consolidated information extracted from the consolidated financial statements prepared in respect of the relevant
parent undertaking and itssubsidiaries as a whole, that carry onregulated insurance services as defined in accordance with Section AU-1.4.Amended: October 2007BR-1.4 BR-1.4 Quarterly Financial Reporting
BR-1.4.1
Except as provided for under Paragraph BR-1.4.2, every
insurance firm required to submit an Insurance Firm Return must prepare and submit to the CBB selected Sections of the Insurance Firm Return for each quarters ending 3, 6 and 9 months after its financial year end, except where the written consent of the CBB has been obtained to modify the length of these quarters.Amended: January 2007BR-1.4.2
This Chapter does not apply to
captive insurers in recognition of the structure of these licensees and limited exposure topolicyholders .Insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.8, are grandfathered and not required to apply the requirements of Paragraph BR-1.4.1.Amended: July 2022
Amended: January 2007
Amended: October 2007BR-1.4.3
The format of the information required to be submitted on a quarterly basis is included in Part B of Volume 3 (Insurance) of the Rulebook, as Insurance Firm Quarterly Return (IFRQ).
BR-1.4.4
For the purposes of BR-1.4.1 the financial year end will be the year end as determined for the purposes of the preparation and submission of the Insurance Firm Return (Form IFR) required under Chapter BR-1.1 of this Module.
BR-1.4.5
The circumstances where the CBB will consider requests to modify BR-1.4.1 are equivalent to those set out in BR-1.1.
Amended: January 2007BR-1.4.6
Quarterly financial reporting consists of such parts of the Insurance Firm Return as may be specified by the CBB and must be completed in accordance with the rules, formats and instructions applicable to those parts that apply to the Insurance Firm Return.
Amended: January 2007BR-1.4.7
Quarterly financial reporting must be submitted to the CBB within 30 calendar days of the relevant quarter end.
Amended: January 2007
Amended: April 2022BR-1.4.8
The first quarterly return (IFRQ) for
insurance firms must be submitted to the CBB for the quarter ending 31 March 2007 (refer to ES-2.7.3).Amended: January 2007
Amended: October 2007BR-1.4A BR-1.4A Semi-annual Prudential Reporting by Insurance Brokers
BR-1.4A.1
Every
insurance broker required to submit an Insurance Broker Return under Section BR-1.2A, must prepare and submit to the CBB selected Sections of the Insurance Broker Return semi-annually 6 months after its financial year end.Added: April 2012BR-1.4A.2
The first semi-annual return (IBRS) for
insurance brokers is to be submitted to the CBB for the semi-annual period ending 30th June 2012 (refer to ES-2.7.5).Added: April 2012BR-1.4A.3
The format of the information required to be submitted on a semi-annual basis is included in Part B of Volume 3 (Insurance) of the Rulebook, as Insurance Broker Semi-Annual Return (IBRS).
Added: April 2012BR-1.4A.4
For the purposes of BR-1.4A.1, the financial year end will be the year end as determined for the purposes of the preparation and submission of the Insurance Broker Return (Form IBR) required under Section BR-1.2A of this Module.
Added: April 2012BR-1.4A.5
Semi-annual financial reporting consists of such parts of the Insurance Broker Return as may be specified by the CBB and must be completed in accordance with the rules, formats and instructions applicable to those parts that apply to the Insurance Broker Return or as specified by the CBB.
Added: April 2012BR-1.4A.6
Semi-annual financial reporting must be submitted to the CBB 30 calendar days of the end of semi-annual period, by 30th July.
Added: April 2012
Amended: April 2022BR-1.5 BR-1.5 Other Reporting Requirements
IIS Reporting Requirements
BR-1.5.1
Insurance licensees ,registered actuaries andloss adjusters are required to complete online non-financial information related to their institution by accessing the CBB's institutional information system (IIS).Insurance licensees registered actuaries andloss adjusters must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, theinsurance licensees ,registered actuaries andloss adjusters must still access the IIS quarterly and confirm that the information contained in the IIS is correct. Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.Amended: January 2013
Amended: April 2012
Added: January 2011BR-1.5.2
Insurance licensees ,registered actuaries andloss adjusters failing to comply with the requirements of Paragraph BR-1.5.1 or reporting inaccurate information may be subject to financial penalties or other enforcement actions as outlined in Module (EN) Enforcement.Amended: April 2012
Amended: April 2011
Added: January 2011Complaint Handling Procedures Report
BR-1.5.3
Insurance licensees must submit quarterly to the CBB's Compliance Directorate a report summarising the outcome of their complaint handling procedures in accordance with the requirements of Paragraph BC-4.7.1.Added: October 2011Compliance with Module CL (Client Assets)
BR-1.5.4
Every
insurance broker must submit to the CBB within three months from the financial year-end, a report as to the quality of theinsurance broker's procedures dealing with theinsurance broker's fiduciary assets/liabilities and compliance with Module CL (Client Assets).Added: April 2012BR-1.5.5
The report required under Paragraph BR-1.5.4 must be prepared by the licensee's external
auditor , in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements.Added: April 2012BR-1.5.6
The format of the Auditor's Report required under Paragraph BR-1.5.4 is included in Part B of the Rulebook as Appendix BR-(iv), as part of the Supplementary Information.
Added: April 2012BR-1A.5 BR-1A.5 Onsite Inspection Reporting
BR-1A.5.1
For the purpose of onsite inspection by the CBB,
Insurance licensees must submit requested documents and completed questionnaires to the Inspection Directorate at the CBB three working days ahead of inspection team entry date.Added: April 2017BR-1A.5.2
Insurance licensees must review the contents of the draft Inspection Report and submit to the Inspection Directorate at the CBB a written assessment of the observations/issues raised within fifteen working days of receipt of such report. Evidentiary documents supporting management’s comments must also be included in the response package.Amended: January 2022
Added: April 2017BR-1A.5.3
Insurance licensees' board are required to review the contents of the Inspection Report and submit within one month, of the report issue date, a final response to such report along with an action plan addressing the issues raised within the stipulated timeline.Added: April 2017BR-2 BR-2 Notifications and Approvals
BR-2.1 BR-2.1 Introduction
BR-2.1.1
Insurance licensees are required to provide the CBB with a wide range of information to enable it to meet its responsibilities for monitoring theinsurance licensee's compliance with requirements imposed by or under the CBB Law. Some of this information is provided through regular reports, whereas others are in response to the occurrence of a particular event such as a change in name or address. The following sets out several of the commonly occurring reports for which aninsurance licensee will be required to notify the CBB or seek its approval.Amended: January 2007
Amended: October 2007BR-2.1.2
All notifications and approvals required in this Chapter are to be submitted by
insurance licensees in writing.BR-2.2 BR-2.2 Notification Requirements
Matters Having a Serious Supervisory Impact
BR-2.2.1
An
insurance licensee must provide written notification to the CBB immediately it becomes aware, or has information which reasonably suggests, that any of the following has occurred, may have occurred or may occur in the foreseeable future:(a) Theinsurance licensee failing to satisfy one or more of the Principles of Business referred to in Module PB;(b) Any matter which could have a significant adverse impact on theinsurance licensee's reputation;(c) Any matter which could affect theinsurance licensee's ability to continue to provide adequate services to itscustomers and which could result in serious detriment to acustomer of theinsurance licensee ; or(d) Any matter in respect of theinsurance licensee that could result in serious financial consequences to the financial system or to otherinsurance licensees .Amended: January 2007
Amended: October 2007BR-2.2.2
The circumstances that may give rise to any of the events in Paragraph BR-2.2.1 are wide-ranging and the probability of any matter resulting in such an outcome, and the severity of the outcome, may be difficult to determine. However, the CBB expects
insurance licensees to consider properly all potential consequences of events.Amended: January 2007BR-2.2.3
In determining whether an event that may occur in the foreseeable future should be notified to the CBB, an
insurance licensee should consider both the probability of the event happening and the severity of the outcome should it happen. Matters having a supervisory impact could also include matters relating to aparent undertaking orcontroller that may indirectly have an effect on theinsurance licensee .Amended: January 2007Breaches of Rules and Other Requirements
BR-2.2.4
An
insurance licensee must notify the CBB of:(a) A significant breach of any provision of the Rulebook (including a Principle);(b) A breach of any requirement imposed by the relevant law or by Regulations or an order made under any relevant law by the CBB; or(c) The bringing of a prosecution for, or conviction of, any offence under any relevant law against theinsurance licensee that would prevent theinsurance licensee from meeting the Principles or Business (Module PB) or any of itsDirectors ,officers ,approved persons , orappointed representatives from meeting the fit and proper requirements of Module AU.Amended: January 2007
Amended: October 2007BR-2.2.5
An
insurance licensee must make the notification in Paragraph BR-2.2.4 immediately it becomes aware, or has information which reasonably suggests, that any of the matters in Paragraph BR-2.2.4 has occurred, may have occurred or may occur in the foreseeable future (refer also to Paragraph EN-8.2.3).Amended: January 2007Legal, Professional, Administrative or other Proceedings Against an Insurance Licensee
BR-2.2.6
An
insurance licensee must notify the CBB immediately of any legal, professional or administrative or other proceedings instituted against theinsurance licensee ,controller or aclose link including aparent undertaking of theinsurance licensee that is known to theinsurance licensee and is significant in relation to theinsurance licensee's financial resources or its reputation.Amended: January 2007BR-2.2.7
The requirement imposed on
insurance licensees under Paragraph BR-2.2.6 applies whether the event relates to a matter that has occurred in Bahrain or in any other jurisdiction.Fraud, Errors and other Irregularities
BR-2.2.8
An
insurance licensee must notify the CBB immediately if one of the following events arises and the event is significant:(a) It becomes aware that anemployee may have committed a fraud against one of itscustomers ;(b) It becomes aware that a person, whether or not employed by it, is acting with intent to commit fraud against it;(c) It identifies irregularities in its accounting or other records, whether or not there is evidence of fraud;(d) It suspects that one of itsemployees may be guilty of serious misconduct concerning his honesty or integrity and which is connected with theinsurance licensee's regulated or ancillary activities; or(e) Conflicts of interest.Amended: April 2010
Amended: October 2007
Amended: January 2007Meaning of the term 'significant'
BR-2.2.9
For the purposes of this Chapter, in determining whether a matter is significant, an
insurance licensee should have regard to:(a) The size of any monetary loss or potential monetary loss to itself or itscustomers (either in terms of a single incident or group of similar or related incidents);(b) The risk of reputational loss to theinsurance licensee ; and(c) Whether the incident or a pattern of incidents reflects weaknesses in theinsurance licensee's internal controls.Amended: January 2007
Amended: October 2007BR-2.2.10
In addition, if the
insurance licensee may have suffered significant financial losses as a result of the incident, or may suffer reputational loss, the CBB will wish to consider this and whether the incident suggests weaknesses in theinsurance licensee's internal controls.Amended: January 2007Insolvency, Bankruptcy and Winding Up
BR-2.2.11
Except in instances where the CBB has initiated the following actions, an
insurance licensee must notify the CBB immediately of any of the following events:(a) The calling of a meeting to consider a resolution for winding up theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee ;(b) An application to dissolve theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee or to strike theinsurance licensee off the Register of Insurance Companies;(c) The presentation of a petition for the winding up of theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee ;(d) The making of any proposals for the making of a composition or arrangement with any one or more of theinsurance licensee's creditors;(e) An application for the appointment of an administrator or trustee in bankruptcy to theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee ;(f) The appointment of a receiver to theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee (whether an administrative receiver or a receiver appointed over particular property); or(g) An application for an interim order against theinsurance licensee , acontroller orclose link , including aparent undertaking of theinsurance licensee under the Bankruptcy and Composition Law, Decree Law No (11), 1987 or similar legislation in another jurisdiction.Amended: April 2010
Amended: January 2007Other Supervisors
BR-2.2.12
An
insurance licensee must notify the CBB immediately if it becomes subject to or ceases to be subject to the supervision of any overseas supervisor (including ahome supervisor ).Amended: January 2007BR-2.2.13
The supervisory regime and any legislative or foreign provisions to which the
insurance licensee , including itsbranches , is subject, influence the CBB's approach to the supervision of theinsurance licensee .Amended: January 2007
Amended: October 2007BR-2.2.13A
If, as a result of circumstances outside the
Bahraini insurance licensee's knowledge and/or control, one of the changes to theircontrollers specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, theBahraini insurance licensee must notify the CBB as soon as it becomes aware of the fact and no later than 15 calendar days after the change occurs (ref. GR-5.1.5).Added: October 2015BR-2.2.13B
Overseas insurance licensees must notify the CBB of any new significant ownership in excess of 50% of the issued and paid up capital of the concernedlicensee's directparent undertaking as soon as thelicensee becomes aware of the change (see Paragraph GR-5.5.1).Added: October 2015Other Notifications
BR-2.2.14
An
insurance licensee must notify the CBB of the following:(a) Removal or resignation of auditors (ref. AA-1.2.1);(b) Change in audit partner (ref. AA-1.3.2);(c) Removal or resignation of theactuary (ref. AA-4.4.1).(d) Appointment ofappointed representatives , variations in terms of appointment and cancellations of appointment (ref. GR-9.1.13); and(e) Reinsurance exposure in excess of 25% limit (ref. RM-2.1.7); and(f) When anapproved person ceases to hold acontrolled function (ref AU-5.2.6).Amended: January 2007
Amended: October 2007
Amended: April 2009BR-2.3 BR-2.3 Approval Requirements
Change in Name
BR-2.3.1
In accordance with Paragraph GR-2.1.1, an
insurance licensee must seek prior written approval from the CBB and give reasonable advance notice of a change in:(a) Theinsurance licensee's name (which is the registered name if theinsurance licensee is a body corporate); or(b) Any business name under which theinsurance licensee carries on a regulated activity or ancillary activity from an establishment in Bahrain.Amended: January 2007
Amended: October 2007BR-2.3.2
A notification under Paragraph BR-2.3.1 must include the details of the proposed new name and the date on which the
insurance licensee intends to implement the change of name.Change of Address
BR-2.3.3
An
insurance licensee must seek approval from the CBB and give reasonable advance notice of a change in any of the following addresses:(a) Theinsurance licensee's principal place of business in Bahrain; or(b) In the case of anoverseas insurance licensee insurance licensee , its registered office (or head office) address.Amended: January 2007
Amended: October 2007BR-2.3.4
A notification under Paragraph BR-2.3.3 must include the details of the proposed new address and the date on which the
insurance licensee intends to implement the change of address.Change in Legal Status
BR-2.3.5
An
insurance licensee must seek CBB approval and give reasonable advance notice of a change in its legal status that may, in any way, affect its relationship with or limit its liability to itspolicyholders orcustomers .Amended: January 2007
Amended: October 2007Business Transfer
BR-2.3.6
In accordance with Chapter GR-4, an
insurance licensee must seek prior written approval from the CBB before transferring to a third party all or a significant portion of all its rights and obligations undercontracts of insurance that it has underwritten or provided topolicyholders .Amended: January 2007
Amended: October 2007Controllers and Close Links
BR-2.3.7
In accordance with Section GR-5.1, a
Bahraini insurance licensee must seek CBB approval and give reasonable advance notice of any of the following events concerning theinsurance licensee :(a) A person acquiring control or ceasing to have control;(b) An existingcontroller acquiring an additional type of control (such as ownership or significant influence) or ceasing to have a type of control;(c) An existingcontroller increasing his or her percentage in the issued or paid up capital or voting power beyond 10%, 20%, 30% or 40%; and(d) An existingcontroller becoming or ceasing to be aparent undertaking .Amended: October 2015
Amended: January 2007BR-2.3.8
As part of the CBB's function of monitoring an
insurance licensee's continuing satisfaction of the Principles of Business, the CBB needs to consider the impact of any significant change in the circumstances of one or more of itscontrollers , for example: changes in their financial standing; changes in respect of their corporatecontrollers ; and changes in their governing bodies. Consequently, the CBB needs to know if there are any such changes.Amended: January 2007BR-2.3.9
Every
insurance licensee authorised in Bahrain is required to submit an annual report on itscontrollers , as per Paragraph GR-5.1.7 and GR-5.5.3, and close links as set out in Paragraph GR-6.1.3.Amended: October 2015BR-2.3.10
An
overseas insurance licensee must seek CBB approval and give reasonable advance notice of any of the following events concerning theoverseas insurance licensee :(a) A person acquiring control or ceasing to have control; and(b) An existingcontroller becoming or ceasing to be aparent undertaking .Amended: January 2007BR-2.3.11
If there is uncertainty whether a particular relationship constitutes control, it may be appropriate for the
insurance licensee orcontroller or proposedcontroller to ask the CBB for guidance and to obtain its own legal advice.Amended: January 2007BR-2.3.12
In accordance with Paragraph GR-6.1.3, an
insurance licensee must submit within 3 months of its financial year end, a report on itsclose links . This report must identify all undertakings closely linked to the licensee, as defined in Section GR-6.2. In addition, where at any time requested by the CBB,insurance licensees must provide information on undertakings with which they are closely linked.Amended: January 2007
Amended: October 2007BR-2.3.13
Insurance licensees must satisfy the requirements of Paragraph GR-6.1.3 by submitting a corporate structure chart, identifying all undertakings closely linked to the licensee.Carrying out Business in Another Jurisdiction
BR-2.3.14
An
insurance licensee must seek CBB approval and give three months notice of its intention to undertake insurance business in a jurisdiction other than Bahrain, or in the case of an overseas company licensed in Bahrain, a jurisdiction other than Bahrain and its country of incorporation or establishment, prior to commencing that business and where the effect of commencing that business may have a significant impact on:(a) Theinsurance licensee's business in Bahrain; or(b) The capital resources,required solvency margin or Bahrain required solvency margin (whichever applies) of theinsurance licensee .This requirement applies whether or not the
insurance licensee is required to be regulated locally in the jurisdiction where it proposes to undertake insurance business.Amended: January 2020
Amended: April 2013
Amended: October 2007
Amended: January 2007BR-2.3.15
In the case of an
insurance licensee incorporated in Bahrain, the CBB will use this information to consider whether or not it should object to or impose additional requirements on the licensee. In the case of anoverseas insurance licensee , the CBB would normally expect that were such action deemed necessary that it would be taken by the company'shome supervisor and not the CBB.Amended: January 2007
Amended: October 2007BR-2.3.16
Insurance licensees are reminded that with limited exceptions (refer Section AU-1.1.10) that aninsurance licensee must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than insurance business and activities directly arising from or incidental to that business. In instances where aninsurance licensee carries on a commercial business, at the time where the Insurance Rulebook becomes effective, theinsurance licensee must notify the CBB to establish the transitional rules in relation to this prohibited activity.Amended: January 2007Mergers, Acquisitions, Disposals and Establishment of New Subsidiaries
BR-2.3.17
An
insurance licensee incorporated in Bahrain must seek CBB approval and give reasonable advance notice of its intention to:(a) Enter into a merger with another undertaking;(b) Enter into a proposed acquisition, disposal or establishment of a newsubsidiary ; or(c) Open a new place of business as a subsidiary, a branch or a representative office within the Kingdom of Bahrain or other jurisdiction.Amended: January 2020
Amended: April 2013
Amended: October 2007
Amended: January 2007BR-2.3.18
Bahraini Insurance licensees will in addition to this approval requirement need to consider the implications of a merger, acquisition, disposal or establishment of a newsubsidiary undertaking in the context of thecontrollers andclose links Rules set out in Module GR. Where aninsurance licensee proposes to enter into a merger, the CBB would ordinarily expect to be notified in the context of thecontroller notification requirements set out in Module GR and Paragraph BR-2.3.17.Amended: January 2007
Amended: October 2007BR-2.3.19
Overseas insurance licensees , whilst not having to give advance notice of a proposed merger with another undertaking, a proposed acquisition, disposal or establishment of a newsubsidiary undertaking under Paragraph BR-2.3.17, will still need to consider the implications of such transactions in the context of thecontrollers andclose links rules set out in Module GR. Where an overseas insurance licensee proposes to enter into a merger, the CBB would ordinarily expect to be notified in the context of thecontroller notification requirements set out in Module GR and Paragraph BR-2.3.16.Amended: January 2007
Amended: October 2007New or Additional Premises
BR-2.3.20
An
insurance licensee must seek prior approval from the CBB of its intention to carry on its business from new or additional premises in Bahrain. This requirement applies whether or not the premises are to be used for the purposes of transacting business withpolicyholders orcustomers , administration of the business or as the head office in Bahrain of theinsurance licensee .Amended: January 2007
Amended: October 2007BR-2.3.21
Insurance licensees are not required to notify the CBB of premises where business on behalf of theinsurance licensee is carried out byappointed representatives of theinsurance licensee . However, the CBB expects theinsurance licensee to maintain a record of all such premises and to be able to produce that record should it be requested by the CBB.Amended: January 2007Transactions with Related Parties
BR-2.3.22
An
insurance firm that is not acaptive insurer must obtain the prior approval of the CBB of any proposed transaction with a related party (arelated party transaction ) where the fair value of that related party transaction exceeds 10 per cent, or where several smaller transactions that appear to be linked fall above this threshold, of theinsurance firm's capital available, as defined in Paragraph CA-1.2.21.Amended: January 2007
Amended: October 2007BR-2.3.23
In the case of insurance contracts, for purposes of Paragraph BR-2.3.22, prior approval of the CBB is required where the sum insured under the insurance contract exceeds 10 per cent of the
insurance firm's capital available.Amended: January 2007BR-2.3.24
For the purposes of this Section, 'fair value' is the market value being the amount that would be paid or received in a transaction between a willing buyer and a willing seller that are themselves not related parties.
Amended: January 2007
Amended: October 2007BR-2.3.25
The only exceptions to Paragraph BR-2.3.22 are:
(a) In the case of anoverseas insurance firm , Paragraph BR-2.3.22 applies only in relation to transactions initiated or made on behalf of theoverseas insurance firm or with anapproved person of theoverseas insurance firm ; or(b) Where therelated party transaction is one involving the effecting or carrying out of acontract of insurance and that transaction is on terms no more favourable than those that would apply were the transacting parties not related parties.Amended: January 2007
Amended: October 2007BR-2.3.26
For the purpose of this Section, a related party of an
insurance firm includes:(c) An associate of acontroller as defined in Module GR;(d) The extended family of acontroller including a father, mother, father-in-law, mother-in-law, brother, sister, brother-in-law, sister-in-law, or grandparent; and(e) A corporate entity, whether or not licensed or incorporated in Bahrain, where any of the persons identified in Sub-Paragraphs (c) and (d) is aDirector or would be considered acontroller were the definition ofcontroller set out in Paragraph GR-5.2.1 applied to that corporate entity.Amended: January 2007
Amended: October 2007BR-2.3.27
For the purposes of this Section, a
related party transaction means the transfer of assets or liabilities or the performance of services by, to or for a related party irrespective of whether a price is charged.Amended: October 2007BR-2.3.28
For purposes of Paragraph BR-2.3.26,
insurance firms should note the use of "includes" in the definition of related party. The CBB is of the view that whilst the definition should be sufficient to identify most related parties there may be individual circumstances were a related party exists that is not explicitly within the definition. Accordingly where aninsurance firm is in any doubt as to whether or not a party is a related party they should notify and seek the CBB's advice accordingly.Amended: January 2007Other Prior Approvals Required
BR-2.3.29
An
insurance licensee must seek prior approval from the CBB for the following:(a) [This Sub-paragraph was deleted in January 2023];(d) Appointment of persons undertaking acontrolled function in aninsurance licensee (ref. AU-1.2.1);(e) Appointment or cancellation of appointment of aninsurance manager in accordance with AU-2.2.4; and(f) Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs after authorisation has been granted.Insurance licensees must, in particular, seek prior CBB approval before undertaking activities in new classes of insurance. (ref. AU-5.4.1).Amended: January 2023
Amended: October 2014
Amended: January 2007
Amended: October 2007No Objection Requirement
BR-2.3.30
Before submitting a proposal for a distribution of profits (dividends) to a shareholder vote, an
insurance licensee must obtain a letter of no objection from the CBB (ref: Paragraph GR-3.1.1).Added: October 2014
BR-3 BR-3 Information Gathering by the CBB
BR-3.1 BR-3.1 Power to Request Information
BR-3.1.1
In accordance with Article 111 of the CBB Law,
insurance licensees must provide all information that the CBB may reasonably request in order to discharge its regulatory obligations.Amended: January 2007BR-3.1.1A
Insurance licensees must provide all relevant information and assistance to the CBB inspectors andappointed experts on demand as required by Articles 111 and 114 of the CBB Law. Failure byinsurance licensees to cooperate fully with the CBB's inspectors orappointed experts , or to respond to their examination reports within the time limits specified, will be treated as demonstrating a material lack of cooperation with the CBB which will result in other enforcement measures being considered, as described elsewhere in Module EN. This rule is supported by Article 114(a) of the CBB Law.Added: April 2012BR-3.1.1B
Article 163 of the CBB Law provides for criminal sanctions where false or misleading statements are made to the CBB or any person/
appointed expert appointed by the CBB to conduct an inspection or investigation on the business of theinsurance licensee or the listed licensee.Added: April 2012Information Requested on Behalf of other Supervisors
BR-3.1.2
The CBB may ask an
insurance licensee to provide it with information at the request of or on behalf of other supervisors to enable them to discharge their functions properly. Those supervisors may include overseas supervisors or government agencies in Bahrain. The CBB may also, without notifying aninsurance licensee , pass on to those supervisors or agencies information that it already has in its possession.Amended: January 2007BR-3.2 BR-3.2 Access to Premises
BR-3.2.1
In accordance with Article 114 of the CBB Law, an
insurance licensee must permit representatives of the CBB, or persons appointed for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the CBB's functions under the relevant law.Amended: January 2007BR-3.2.2
An
insurance licensee must take reasonable steps to ensure that its agents, suppliers under outsourcing arrangements andappointed representatives permit such access to their business premises, to the CBB.Amended: January 2007BR-3.2.3
An
insurance licensee must take reasonable steps to ensure that each of its suppliers under material outsourcing arrangements deals in an open and cooperative way with the CBB in the discharge of its functions under the CBB Law in relation to theinsurance licensee .Amended: January 2007
Amended: October 2007BR-3.2.4
The cooperation that an
insurance licensee is expected to procure from such suppliers is similar to that expected of theinsurance licensee , in the light of the Guidance in Paragraph BR-3.4.3.Amended: October 2007BR-3.3 BR-3.3 Accuracy of Information
BR-3.3.1
An
insurance licensee must take reasonable steps to ensure that all information it gives to the CBB in accordance with any parts of the Insurance Rulebook and CBB Law is:(a) Factually accurate or, in the case of estimates and judgements, fairly and properly based after appropriate enquiries have been made by theinsurance licensee ; and(b) Complete, in that it should include everything which the CBB would reasonably and ordinarily expect to have.Amended: April 2012
Amended: October 2007
Amended: January 2007BR-3.3.2
If an
insurance licensee becomes aware, or has information that reasonably suggests that it has or may have provided the CBB with information that was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material way, it must notify the CBB immediately. The notification must include:(a) Details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;(b) An explanation why such information was or may have been provided; and(c) The correct information.Amended: January 2007BR-3.3.3
If the information in Paragraph BR-3.3.2 cannot be submitted with the notification (because it is not immediately available), it must instead be submitted as soon as possible afterwards.
BR-3.4 BR-3.4 Methods of Information Gathering
BR-3.4.1
The CBB uses various methods of information gathering on its own initiative which require the cooperation of
insurance licensees :(a) Representatives of the CBB may make onsite visits at the premises of theinsurance licensee . These visits may be made on a regular basis, or on a sample basis, for special purposes such as theme visits (looking at a particular issue across a range ofinsurance licensees ), or when the CBB has a particular reason for visiting aninsurance licensee ;(b) Appointees of the CBB may also make onsite visits at the premises of theinsurance licensee . Appointees of the CBB may include persons who are not CBB staff, but who have been appointed to undertake particular monitoring activities for the CBB, such as in the case ofappointed experts (refer to Section BR-3.5).(c) The CBB may request theinsurance licensee to attend meetings at the CBB's premises or elsewhere;(d) The CBB may seek information or request documents by telephone, at meetings or in writing, including electronic communication;(e) The CBB may requireinsurance licensees to submit various documents or notifications, as per Chapter BR-2, in the ordinary course of their business such as financial reports or on the happening of a particular event in relation to theinsurance licensee such as a change in control.Amended: April 2012
Amended: October 2011
Amended: January 2007BR-3.4.2
When seeking meetings with an
insurance licensee or access to the licensee's premises, the CBB or the CBB appointee needs to have access to aninsurance licensee's documents and personnel. Such requests will be made during reasonable business hours and with proper notice. There may be instances where the CBB may seek access to the licensee's premises without prior notice. While such visits are not common, the prospect of unannounced visits is intended to encourageinsurance licensees to comply at all times with the requirements and standards imposed by the CBB as per the CBB Law and Insurance Rulebook.Amended: April 2012
Amended: October 2007
Amended: January 2007BR-3.4.3
The CBB considers that an
insurance licensee should:(a) Make itself readily available for meetings with representatives or appointees of the CBB;(b) Give representatives or appointees of the CBB reasonable access to any records, files, tapes or computer systems, which are within theinsurance licensee's possession or control, and provide any facilities which the representatives or appointees may reasonably request;(c) Produce to representatives or appointees of the CBB specified documents, files, tapes, computer data or other material in theinsurance licensee's possession or control as may be reasonably requested;(d) Print information in theinsurance licensee's possession or control which is held on computer or on microfilm or otherwise convert it into a readily legible document or any other record which the CBB may reasonably request;(e) Permit representatives or appointees of the CBB to copy documents of other material on the premises of theinsurance licensee at theinsurance licensee's expense and to remove copies and hold them elsewhere, or provide any copies, as may be reasonably requested; and(f) Answer truthfully, fully and promptly all questions which representatives or appointees of the CBB reasonably put to it.Amended: April 2012
Amended: January 2007BR-3.4.4
The CBB considers that an
insurance licensee should take reasonable steps to ensure that the following persons act in the manner set out in Paragraph BR-3.4.3:(a) Itsemployees andappointed representatives ; and(b) Any other members of its group and their employees andappointed representatives .Amended: April 2012
Amended: October 2007
Amended: January 2007BR-3.4.5
In gathering information to fulfill its supervisory duties, the CBB acts in a professional manner and with due regard to maintaining confidential information obtained during the course of its information gathering activities.
Amended: January 2007BR-3.5 BR-3.5 The Role of the Appointed Expert
Introduction
BR-3.5.1
The content of this Chapter is applicable to all
insurance licensees andappointed experts .Added: October 2011BR-3.5.2
The purpose of the contents of this Chapter is to set out the roles and responsibilities of
appointed experts when appointed pursuant to Article 114 or 121 of the CBB Law (see EN-2.1.1). These Articles empower the CBB to assign some of its officials or others to inspect or conduct investigations ofinsurance licensees .Added: October 2011BR-3.5.3
The CBB uses its own inspectors to undertake on-site examinations of
licensees as an integral part of its regular supervisory efforts. In addition, the CBB may commission reports on matters relating to the business oflicensees in order to help it assess their compliance with CBB requirements. Inspections may be carried out either by the CBB's own officials, by duly qualifiedappointed experts appointed for the purpose by the CBB, or a combination of the two.Added: October 2011BR-3.5.4
The CBB will not, as a matter of general policy, publicise the appointment of an
appointed expert , although it reserves the right to do so where this would help achieve its supervisory objectives. Both theappointed expert and the CBB are bound to confidentiality provisions restricting the disclosure of confidential information with regards to any such information obtained in the course of the investigation.Added: October 2011BR-3.5.5
Unless the CBB otherwise permits,
appointed experts should not be the same firm appointed as external auditor of theinsurance licensee .Added: October 2011BR-3.5.6
Appointed experts will be appointed in writing, through an appointment letter, by the CBB. In each case, the CBB will decide on the range, scope and frequency of work to be carried out byappointed experts .Added: October 2011BR-3.5.7
All proposals to appoint
appointed experts require approval by an Executive Director or more senior official of the CBB. The appointment will be made in writing, and made directly with theappointed experts concerned. A separate letter is sent to thelicensee , notifying them of the appointment. At the CBB's discretion, atrilateral meeting may be held at any point, involving the CBB and representatives of thelicensee and theappointed experts , to discuss any aspect of the investigation.Added: October 2011BR-3.5.8
Following the completion of the investigation, the CBB will normally provide feedback on the findings of the investigation to the
licensee .Added: October 2011BR-3.5.9
Appointed experts will report directly to and be responsible to the CBB in this context and will specify in their report any limitations placed on them in completing their work (for example due to thelicensee's group structure). The report produced by theappointed experts is the property of the CBB (but is usually shared by the CBB with the firm concerned).Added: October 2011BR-3.5.10
Compliance by
appointed experts with the contents of this Chapter will not, of itself, constitute a breach of any other duty owed by them to a particularinsurance licensee (i.e. create aconflict of interest ).Added: October 2011BR-3.5.11
The CBB may appoint one or more of its officials to work on the
appointed experts' team for a particularinsurance licensee .Added: October 2011The Required Report
BR-3.5.12
The scope of the required report will be determined and detailed by the CBB in the appointment letter. Commissioned
appointed experts would normally be required to report on one or more of the following aspects of alicensee's business:(a) Accounting and other records;(b) Internal control systems;(c) Returns of information provided to the CBB;(d) Operations of certain departments; and/or(e) Other matters specified by the CBB.Added: October 2011BR-3.5.13
Appointed experts will be required to form an opinion on whether, during the period examined, thelicensee is in compliance with the relevant provisions of the CBB Law and the CBB's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.Added: October 2011BR-3.5.14
The
appointed experts' report should follow the format set out in Appendix BR-(iii), in part B of the CBB Rulebook.Added: October 2011BR-3.5.15
Unless otherwise directed by the CBB or unless the circumstances described in Section BR-3.5.19 apply, the report must be discussed with the Board of directors and/or
senior management in advance of it being sent to the CBB.Added: October 2011BR-3.5.16
Where the report is
qualified by exception , the report must clearly set out the risks which thelicensee runs by not correcting the weakness, with an indication of the severity of the weakness should it not be corrected.Appointed experts will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.Added: October 2011BR-3.5.17
If the
appointed experts conclude, after discussing the matter with thelicensee , that they will give a negative opinion (as opposed to onequalified by exception ) or that the issue of the report will be delayed, they must immediately inform the CBB in writing giving an explanation in this regard.Added: October 2011BR-3.5.18
The report must be completed, dated and submitted, together with any comments by directors or management (including any proposed timeframe within which the
licensee has committed to resolving any issues highlighted by the report), to the CBB within the timeframe applicable.Added: October 2011Other Notifications to the CBB
BR-3.5.19
Appointed experts must communicate to the CBB, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the CBB, including the criteria for licensing alicensee (see Module AU), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concernedlicensee , or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of alicensee . Notwithstanding the above, it is primarily thelicensee's responsibility to report such matters to the CBB.Added: October 2011BR-3.5.20
The CBB recognises that
appointed experts cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the CBB as outlined above. It is only whenappointed experts , in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.Added: October 2011BR-3.5.21
If
appointed experts decide to communicate directly with the CBB in the circumstances set out in Paragraph BR-3.5.19, they may wish to consider whether the matter should be reported at an appropriate senior level in thelicensee at the same time and whether an appropriate senior representative of thelicensee should be invited to attend the meeting with the CBB.Added: October 2011Permitted Disclosure by the CBB
BR-3.5.22
Information which is confidential and has been obtained under, or for the purposes of, this chapter or the CBB Law may only be disclosed by the CBB in the circumstances permitted under the Law. This will allow the CBB to disclose information to
appointed experts to fulfil their duties. It should be noted, however, thatappointed experts must keep this information confidential and not divulge it to a third party except with the CBB's permission and/or unless required by Bahrain Law.Added: October 2011Trilateral Meeting
BR-3.5.23
The CBB may, at its discretion, call for a
trilateral meeting (s) to be held between the CBB and representatives of the relevantinsurance licensee and theappointed experts . This meeting will provide an opportunity to discuss theappointed experts' examination of, and report on, theinsurance licensee .Added: October 2011PD PD Public Disclosure
PD-A PD-A Introduction
PD-A.1 PD-A.1 Purpose
Executive Summary
PD-A.1.1
The purpose of this Module is to set out the minimum requirements applied by the Central Bank of Bahrain (‘CBB’) to
insurance firms , with respect to corporate and financial transparency through meaningful public disclosures. Such disclosures help protectcustomers ofinsurance firms and facilitate market discipline.Amended: January 2007PD-A.1.2
The CBB's disclosure requirements vary according to the Category of
insurance licensee . Certain categories are exempt from these requirements, because of the limited nature of their business. The scope of application of these requirements is given in Section PD-B.1.Amended: January 2007PD-A.1.3
The CBB encourages
insurance firms to go beyond the minimum requirements specified in this Module. Further guidance on international best practice in this regard is provided in Chapter PD-3.Amended: January 2007PD-A.1.4
In setting out certain detailed disclosure requirements, this Module supports various other parts of the Rulebook, namely:
(a) Principles of Business (Module PB);(b) Authorisation (Module AU);(c) Auditors and Actuaries (Module AA);(d) CBB Reporting (Module BR);(e) Capital Adequacy (Module CA); and(f) Business Conduct (Module BC).Amended: January 2007Legal Basis
PD-A.1.5
This Module contains the CBB's Directive (as amended from time to time) relating to public disclosure and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees .Amended: January 2011
Amended: July 2009
Amended: October 2007
Added: January 2007PD-A.1.6
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007PD-A.2 PD-A.2 Module History
PD-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007PD-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements
Added: January 2007PD-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes PD-1.1 01/10/05 Amended the requirement that the Annual Report be available only in printed form (electronic format is optional). PD-2.1 01/10/05 Reference added to IAS 34; clarified the semi-annual financial statements are subject to "review" and not "audit". PD-1.1.6 01/04/06 Clarified local disclosure requirements. PD-2.1.5 01/07/06 Added a transition period for semi-annual disclosure requirements. PD-A1.5 01/2007 New Rule introduced referring to the CBB Law and categorising this Module as a Directive. PD-2.1.2 01/2007 Clarified that insurance firms are to disclose prior year comparative figures as part of the requirements for semi-annual disclosure requirements. PD-1.1.6A, 1.2.5A and 2.1.4A 10/2007 Clarified that insurance firms must submit the newspaper copy of the required published financial statements.PD-2.1.4B 01/2007 Clarified that pure reinsurers need not published in local newspapers their semi-annual results. Publication of these results on their website will meet CBB requirements. PD-A.1.5 07/2009 Corrected application of legal basis. PD-1.1.12 07/2009 Clarified format of auditor's opinion for audited financial statements to be submitted PD-A.1.5 01/2011 Clarified legal basis. PD-2.2 01/2011 Added a new Section for newly-established insurance firms. PD-1.1.12A, PD-1.1.13A, and PD-2.1.2A 04/2014 Added public disclosure requirements for Takaful firms. PD-1.1.21 10/2019 Amended Paragraph on disclosure of financial penalties of insurance firms. PD-1.2.4 10/2019 Amended Paragraph on disclosure of financial penalties of overseas insurance firms. PD-1.1.6A, PD-1.2.5A & PD-2.1.4A 07/2023 Amended Paragraphs on submission of newspaper extracts of financial statements. PD-A.2.3 [Deleted]
Deleted: January 2007PD-A.2.4
Further guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
PD-B PD-B Scope of Application
PD-B.1 PD-B.1 Scope
PD-B.1.1
The contents of this Module apply to both
Bahraini insurance firms andoverseas insurance firms .Amended: July 2007
Amended: October 2007PD-B.1.2
The disclosures required generally relate to all the corporate activities of the licensee concerned, including activities undertaken outside Bahrain through overseas branches or an overseas head office. Specific rules and guidance in this respect are included in Chapter PD-1.
PD-B.1.3
Where licensees are part of a group, then certain disclosures also require information relating to the licensee's
subsidiaries ,parents and affiliates. Specific requirements in this respect are also included in Chapter PD-1.Amended: January 2007PD-B.1.4
This Module does not apply to
captive insurers ;insurance brokers ;insurance consultants ;insurance managers ; andappointed representatives .Amended: July 2007PD-B.1.5
Captive insurers for the most part expose only connected counterparties to financial risks. The remaining categories listed in Paragraph PD-B.1.4 pose limited financial risk topolicyholders because of the limited nature of their activities.Amended: January 2007PD-1 PD-1 Annual Disclosure Requirements
PD-1.1 PD-1.1 Disclosure by Bahraini Insurance Firms
Publication of Annual Reports
PD-1.1.1
Bahraini insurance firms must publish an Annual Report, in the manner prescribed in this Section, within 3 months of the end of the firm's financial year.PD-1.1.2
In addition to the requirements specified in this Module,
Bahraini insurance firms are also required to comply with the requirements regarding the publication of audited financial accounts, as specified in Article 62 of the CBB Law, the Bahrain Commercial Companies Law 2001 (as amended) and the Bahrain Stock Exchange Regulations (where applicable).Amended: January 2007PD-1.1.3
Bahraini insurance firms must apply financial years that end on 31 December, unless prior written approval has been obtained from the CBB for a different year-end.Amended: January 2007PD-1.1.4
The Annual Report must be made available in printed form.
PD-1.1.5
The Annual Report must be published in both Arabic and English.
PD-1.1.6
The requirement to publish an Annual Report will be met where firms publish financial information (balance sheet and income statement) and any financial penalties paid to the CBB, in two local (Bahrain) daily newspapers (one in Arabic, one in English), containing details of where interested parties may obtain a copy of the full Annual Report in either electronic or paper form.
Amended: October 2007PD-1.1.6A
Bahraini insurance firms must submit a newspaper copy of the published financial statements (referred to under Paragraph PD-1.1.1) to the CBB within three months from the statements’ date clearly showing on which date and in which publication(s) the statements were published.Amended: July 2023
Added: October 2007PD-1.1.7
The Annual Report must include the information that
insurance firms are required to disclose on an annual basis as set out in this Module, together with additional information that may facilitate the understanding by prospective and existingpolicyholders and other market participants of the financial position of the firm and the risks to which it is subject.Amended: January 2007PD-1.1.8
Bahraini insurance firms whose business is limited to reinsurance activities, are exempt from publishing summary financial information in local newspapers. However, their Annual Report must be made available in electronic format via the firm's web site.PD-1.1.9
Bahraini insurance firms must provide printed copies of their Annual Report on request, but may charge a fee for providing a printed copy to persons who are neitherpolicyholders norshareholders of the firm.Amended: January 2007Categories of Information to be Disclosed
PD-1.1.10
Bahraini insurance firms must, in their Annual Report, provide timely information that facilitates market participants' assessment of the firm. There are five broad categories of information, each of which must be addressed in clear terms and with appropriate details to help achieve a satisfactory level of transparency. The five categories are:(a) Financial position;(b) Financial performance;(c) Corporate governance;(d) Compliance; and(e) Risk management strategies and practices.Amended: January 2007PD-1.1.11
The disclosure requirements listed in this Module are in addition to or serve to clarify the disclosure requirements under International Financial Reporting Standards ('IFRS'). These requirements may either be integrated into the Notes to the Accounts, or addressed in the Directors' Report.
Amended: October 2007Financial Position
PD-1.1.12
The Annual Report must contain a copy of the firm's annual, audited financial statements in accordance with the requirements contained in the CBB Law, the Bahrain Commercial Companies Law 2001 (as amended) and the Bahrain Stock Exchange regulations (where applicable). The financial statements must contain the auditor's opinion which must be made in accordance with the International Standards on Auditing, established by the International Federation of Accountants. The Annual Report must also contain a solvency statement and the auditor's report.
Amended: July 2009
Amended: January 2007PD-1.1.12A
For
Takaful firms , the published financial statements must provide a detailed breakdown of the statement of financial position and statement of comprehensive income for the shareholder fund and for any participant fund(s) of theTakaful firm .Added: April 2014PD-1.1.13
The solvency statement specified in Paragraph PD-1.1.12 must include a breakdown of the firm's CBB capital available (as specified in Paragraph CA-1.2.21) and a summary of the firm's CBB solvency margin requirements (as prescribed in Chapter CA-2).
Amended: January 2007
Amended: October 2007PD-1.1.13A
In instances where a Takaful firm has opted to write-off a Qard Hassan granted to meet solvency requirements under the CBB Rules at that time, the amount of the Qard Hassan must be disclosed as an off-balance sheet item in accordance with Subparagraph CA-8.4.16.
Added: April 2014PD-1.1.14
Firms must disclose in their published accounts all information which
policyholders andshareholders would reasonably expect to enable them to form a view of the firm's ability to meet its obligations.Amended: January 2007PD-1.1.15
Firms are encouraged to include within the annual reports key ratios that would assist readers in understanding the firm's financial performance, performance on its insurance account and in making comparisons with previous financial periods on a like-for-like basis. Possible ratios include those contained in the Insurance Firm Return (cf. Module BR (CBB Reporting)).
Amended: January 2007Financial Performance
PD-1.1.16
The following information relating to the financial performance and position of the firm must, where relevant to an understanding of the firm's financial performance, be included in the Annual Report:
(a) A discussion of the main factors that influenced the firm's financial performance for the year, explaining any differences in performance between the current year and previous years and the reasons for such changes, and discussing factors that will have a significant influence on the firm's future financial performance;(b) Comparisons with the previous period's financial performance (unless this is the firm's first reporting period), including comparisons between business segments;(c) The performance of the technical account, including, but not necessarily limited to, comparisons with past performance of claims ratios, claims development and how the underwriting portfolio is made up;(d) Performance of the technical account both net and gross of reinsurance;(e) Investment performance;(f) Claims trends and key claims, where relevant to an understanding of the financial performance;(g) A discussion of the impact of acquisitions of new businesses; and(h) The impact of any changes in the capital structure on earnings and dividends.Amended: January 2007Corporate Governance
PD-1.1.17
The Annual Report of
insurance firms must contain details of any shares in the firm held by itsDirectors andChief Executive /General Manager . Such details must include:(a) The total number of shares held by such individuals as at the financial year-end (broken down by class of share where applicable); and(b) Any acquisitions or disposals in such shares during the financial year in question, including the numbers of such shares and the price at which they were acquired or sold.Amended: January 2007PD-1.1.18
For the purpose of the disclosures required under Paragraph PD-1.1.17, shares held by
Directors andChief Executives /General Managers also include any shares held in the firm by their spouses, children or any other person whose share holdings may fall under their control.PD-1.1.19
The following information relating to corporate governance must also be included in the firm's Annual Report:
(a) Information about the Board and Board committees (if any). This must include details of Board membership (including a summary of each Board member's professional experience, qualifications, date of appointment and other Directorships held); details of the membership and mandates of any Board Committees; and the number of Board and any Board committee meetings held during the financial year in question;(b) Information about the managerial structure. This must include a summary of theChief Executive Officer's /General Manager's professional experience, qualifications and date of appointment; a summary of any management committees, their mandates and membership; and a summary of the senior management structure and reporting lines; and(c) Information about the firm's basic organisational structure. This must include a clear description of the lines of business and legal entity structures.Amended: January 2007Compliance
PD-1.1.20
The Annual Report must include a declaration by the external
auditor that no violations have taken place of:(a) The Bahrain Commercial Companies Law of 2001 (as amended);(b) The CBB Law; and(c) The CBB's insurance Directives and Regulations (as contained in Volume 3 of the CBB Rulebook),insofar as the violations have any material impact on the financial statements of the firm.
Amended: January 2007
Amended: October 2007PD-1.1.21
In accordance with Paragraph EN-B.4.5,
insurance firms must disclose in their Annual Report the amount of any financial penalties paid to the CBB, together with a factual description of the reason(s) given by the CBB for the penalty.Insurance firms which fail to comply with this requirement will be required to make the disclosure in the annual report of the subsequent year and will be subject to an enforcement action for non-disclosure.Amended: October 2019
Amended: January 2007
Amended: October 2007Risk Management Strategies and Practices
PD-1.1.22
The following information relating to the firm's risk management strategies and practices must be included in the Annual Report:
(a) A summary of the significant internal and external risks facing the firm;(b) A summary of the firm's risk management policies (including, but not limited to, underwriting, credit, investment, reserving, legal, operational and group risks); and(c) A summary of the firm's risk monitoring organisation and processes, including details on the firm's risk management and internal audit functions; the use of reinsurance; and controls on underwriting, credit and investment risk.Amended: January 2007PD-1.2 PD-1.2 Disclosure by Overseas Insurance Firms
PD-1.2.1
Overseas insurance firms must publish on an annual basis audited financial statements for their Bahrain operations, in the manner described in this Section, within 3 months of the end of the firm's financial year.PD-1.2.2
The disclosure requirements referred to in Paragraph PD-1.2.1 are in addition to those required under International Financial Reporting Standards ('IFRS').
Amended: October 2007PD-1.2.3
Overseas insurance firms must disclose in their published accounts all information whichpolicyholders would reasonably expect to be given in order to form a view of the branch's ability to meet its obligations.Amended: January 2007PD-1.2.4
In accordance with Paragraph EN-B.4.5,
overseas insurance firms must also disclose the amount of any financial penalties paid to the CBB, together with a factual description of the reason(s) given by the CBB for the penalty.Overseas insurance firms which fail to comply with this requirement will be required to make the disclosure in the annual audited financial statements of the subsequent year and will be subject to an enforcement action for non-disclosure.Amended: October 2019
Amended: January 2007
Amended: October 2007PD-1.2.5
The requirement to publish audited financial statements will be met where
overseas insurance firms publish financial information (balance sheet and income statement) and financial penalties paid to theCBB, in two local daily newspapers (one in Arabic, one in English), containing details of where interested parties may obtain a copy of the full audited financial statements in either electronic or paper form.Amended: January 2007
Amended: October 2007PD-1.2.5A
Overseas insurance firms must submit a newspaper copy of the published financial statements (referred to under Paragraph PD-1.2.1) to the CBB within three months from the statements’ date clearly showing on which date and in which publication(s) the statements were published.Amended: July 2023
Added: October 2007PD-1.2.6
Overseas insurance firms whose business is limited to reinsurance activities are exempt from publishing information in local newspapers. However, their audited financial statements and information related to any financial penalties paid to the CBB must be made available in electronic format via the firm's web site.Amended: January 2007PD-1.2.7
Overseas insurance firms must provide printed copies of their audited financial statements on request, but may charge a fee for providing a printed copy to persons who are neitherpolicyholders norshareholders of the company.Amended: January 2007PD-1.2.8
Overseas insurance firms must make available in Bahrain information on the overall financial position of the firm (i.e. including head office operations), to enable an understanding of the company as a whole. This requirement can be discharged by:(a) Publication of information on the overall financial position of the whole firm as part of the publication of branch financial statements in Bahrain; or(b) Reference in the publication in Bahrain to the firm's web site where information that meets these requirements can be found (in English and/or Arabic).Amended: January 2007PD-2 PD-2 Semi-Annual Disclosure Requirements
PD-2.1 PD-2.1 General Requirements
Application
PD-2.1.1
This Chapter applies to all
insurance firms .The Requirements
PD-2.1.2
Insurance firms must publish interim summary financial statements, in accordance with IAS 34 (International Accounting Standards). Insurance firms must also provide prior year comparative figures, as dictated by IAS 34, when disclosing semi-annual results.Amended: January 2007
Amended: October 2007PD-2.1.2A
For
Takaful firms , the published interim financial statements must provide a detailed breakdown of the statement of financial position and statement of comprehensive income for the shareholder fund and for any participant fund(s) of theTakaful firm .Added: April 2014PD-2.1.3
The statements referred to under Paragraph PD-2.1.2 must be reviewed by the firm's external
auditor , in accordance with International Standards on Auditing (ISA) applicable to Review engagements.Amended: January 2007
Amended: October 2007PD-2.1.4
The statements referred to under Paragraph PD-2.1.2 must be published in two local newspapers (one in Arabic, one in English), within two months of the statements' date.
Amended: October 2007PD-2.1.4A
Insurance firms must submit a newspaper copy of the published financial statements (referred to under Paragraph PD-2.1.4) to the CBB within two months from the statements’ date clearly showing on which date and in which publication(s) the statements were published.Amended: July 2023
Added: October 2007PD-2.1.4B
Bahraini insurance firms , whose business is limited to reinsurance activities, are exempt from publishing semi-annual interim financial statements in local newspapers. However, interim results must be made available in electronic format via the firm's web site.Added: January 2008PD-2.1.5
Insurance firms are required to comply with the requirements of Chapter PD-2, effective for the period ending 30 June 2008. (Refer to ES-2.8.1).Amended: January 2007PD-2.2 PD-2.2 Special Arrangements for Newly-Established Insurance Firms
PD-2.2.1
Newly-established
insurance firms are not required to follow the publication requirements of Section PD-2.1 for the first semi-annual results of their operation or until the commencement of their second financial year of operation (whichever period is the latest).Added: January 2011PD-2.2.2
After the period referred to in Paragraph PD-2.2.1 has expired, all newly-established
insurance firms must follow the publication requirements of Section PD-2.1. Newly-establishedinsurance firms must follow the requirements for annual public disclosure outlined in Chapter PD-1.Added: January 2011PD-3 PD-3 Further Guidance and Best Practice
PD-3.1 PD-3.1 Introduction
PD-3.1.1
This Chapter provides references to sources of additional guidance issued by international bodies. The CBB encourages
insurance licensees to go beyond the minimum disclosure standards contained in this Module, and to refer to guidance issued by international bodies on best practice.Amended: January 2007PD-3.1.2
Should any guidance referred to in this Chapter conflict with specific CBB requirements, then the CBB requirements will prevail.
Amended: January 2007PD-3.2 PD-3.2 Guidance Provided by Other International Bodies
International Association of Insurance Supervisors: 'Guidance Paper on Public Disclosure by Insurers'
PD-3.2.1
This paper provides guidance on the public disclosure of reliable and timely information, involving both the quality of disclosure by insurers and the nature of the information being disclosed. Disclosure improves the understanding of
policyholders and market participants of the financial position of insurers. The CBB encouragesinsurance licensees to refer to this document and to apply the disclosure principles it contains (see www.iaisweb.org).Amended: January 2007
Amended: October 2007AAOIFI Financial Accounting Standard 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies)
PD-3.2.2
The CBB requires takaful companies to follow Financial Accounting Standard 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies) published by the Accounting and Auditing Organisation for Islamic Financial Institutions — www.aaoifi.com (refer to Section BC-3.4).
Amended: January 2007Enforcement & Redress
EN EN Enforcement
EN-A EN-A Introduction
EN-A.1 EN-A.1 Purpose
Executive Summary
EN-A.1.1
This Module sets out the Central Bank of Bahrain’s (‘CBB’) approach to enforcement, and the measures used by the CBB to address failures by
authorised persons to comply with its regulatory requirements (whether they beinsurance licensees ,approved persons or registered persons). The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk topolicyholders and the financial system.Amended: January 2007
Amended: October 2007Legal Basis
EN-A.1.2
This Module contains the CBB's Directive (as amended from time to time) relating to enforcement and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 and its amendments ('CBB Law'). The Directive in this Module is applicable to all
insurance licensees (including theirapproved persons ), and to registered persons.Amended: April 2016
Amended: January 2011
Adopted: January 2007EN-A.1.3
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
Adopted: January 2007EN-A.2 EN-A.2 Module History
EN-A.2.1
This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007EN-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to the actual requirements.
Amended: January 2007EN-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes EN-A.1 01/2007 New Rule EN-A.1.2 introduced, categorising this Module as a Directive. EN-1.1,
EN-2.1,
EN-3.1,
EN-4.1,
EN-5.1,
EN-6.1,
EN-7.1,
EN-8.1, and
EN-9.101/2007 Insertion of new 'Legal Source' Sections, reflecting CBB Law. EN-2.2.10 01/2007 New Rule inserted on Appointed Experts reflecting CBB Law. EN-10.3,
EN-10.4,
EN-10.5 and
EN-10.601/2007 Revised new Sections describing criminal sanctions contained in CBB Law. EN-1.2.3,
EN-2.3.1,
EN-2.4,
EN-2.5,
EN-8.1 and
EN-8.310/2009 Amended terminology to be consistent with other Volumes of CBB Rulebook EN-2.2.7 10/2009 Added reference to 'actuary' for investigations. EN-5.2.7 10/2009 Paragraph deleted and replaced as it is a repetition of EN-5.2.6. EN-5.3A 10/2009 Added section on Financial Penalties for Non-Compliant Registered Appointed Representatives. EN-9-1 and
EN-9.210/2009 Reference added to appointed representatives as registered persons. EN-A.1.2 01/2011 Clarified legal basis EN-2 10/2011 Chapter has been streamlined and repetitive information has been eliminated and reference is now made to Section BR-3.5. EN-5.1.1 10/2012 Amended guidance. EN-5.3B 10/2012 Added new Section on financial penalties for date sensitive requirements EN-10.3A.1 01/2013 Section added to refer to Article 161 of the CBB Law. EN-5.2.2 10/2013 Clarified guidance to be in line with CBB Law. EN-5.3B 10/2013 Clarified Rules for financial penalties for date sensitive requirements. EN-A.1.2 04/2016 Reference added to amendments to the CBB Law. EN-B.1.4 04/2016 New guidance Paragraph added to broaden the scope of the application of financial penalties to persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law. EN-5 04/2016 Amended to be in line with amendments to Article 129 of the CBB Law. EN-5.3B.3 04/2017 Amendment to financial penalties for Data Sensitive Requirements. EN-B.2.9 04/2019 Guideline moved from Section EN-4.3. EN-4.3.3 04/2019 Moved guideline to Section EN-B.2. EN-6 04/2019 Deleted Chapter. EN-5.3C 04/2021 Added a new Section on ‘Financial Penalties for Non-compliance with Blocking / Unblocking Requirements’. EN-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
EN-B EN-B Scope of Application
EN-B.1 EN-B.1 Scope
EN-B.1.1
The contents of this Module mostly consist of Guidance material, explaining the different measures that the CBB can employ to ensure compliance with Volume 3 (Insurance). Certain Rules, applicable to
insurance licensees , are however contained in Paragraphs EN-B.3.1, EN-B.4.5, EN-B.4.6, EN-2.2.4, EN-2.2.10 and EN-8.2.4.Amended: January 2007
Amended: October 2007EN-B.1.2
With the exception of Chapter EN-9, Chapters EN-1 to EN-10 of this Module are generally relevant to
insurance licensees . In the case ofoverseas insurance licensees , the CBB's enforcement powers apply only to the branch operating in the Kingdom of Bahrain.Amended: January 2007EN-B.1.3
In addition, Chapters EN-8 and EN-10 of this Module are relevant to
approved persons , whilst Chapter EN-9 is relevant to registered persons.Amended: January 2007
Amended: October 2007EN-B.1.4
Section EN-5 dealing with financial penalties is applicable to
insurance licensees as well as to persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law.Added: April 2016EN-B.2 EN-B.2 The CBB's Approach
EN-B.2.1
The CBB favours an open, pragmatic and collaborative relationship with
authorised persons , within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements. Shouldauthorised persons fail to cooperate, then the CBB will use the means described in this Module to achieve compliance.Amended: January 2007EN-B.2.2
In the CBB's view, it is generally neither practical nor effective to prescribe in detail the exact supervisory response for each and every potential contravention. There are a large number of potential contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.
Amended: January 2007EN-B.2.3
In deciding any given supervisory response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the principles set out in this Module. The CBB's overall approach is to take into account:
(a) The seriousness of the contravention concerned (including the risks posed tocustomers and other market participants);(b) The compliance track record of theauthorised person concerned (including the extent to which a contravention reflects systemic weaknesses or reckless behaviour); and(c) Which measures are most likely to achieve the desired result of remedying the contravention.Amended: January 2007EN-B.2.4
Such an approach reduces the risk of inappropriate enforcement actions, by allowing supervisory measures to be tailored to individual circumstances. By taking into account an
authorised person's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve overall consistency in its supervisory actions.Amended: January 2007EN-B.2.5
Underlying the CBB's approach outlined in Paragraph EN-B.2.3 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as cancellation of license or withdrawal of 'fit and proper' status — for the most serious contraventions.
Amended: January 2007
Amended: October 2007EN-B.2.6
In keeping with the proportionality principle, and to the extent consistent with the CBB's enforcement approach described above, the CBB will usually opt for the least severe of appropriate enforcement measures. In most cases, the CBB expects to use a formal warning before resorting to more severe measures. The need for further measures will then usually be dependent on the response of the
authorised person concerned.Amended: January 2007EN-B.2.7
Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the
authorised person concerned, before using one of this Module's enforcement mechanisms. This is likely to be the case, for example, with respect to requirements for adequate systems and controls. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually resort immediately to one or more of these enforcement mechanisms outlined in this Module. This is more likely to occur in cases where quantitative requirements — such as those relating to capital adequacy — are concerned. In most such cases, though, the CBB also expects to continue an active dialogue with the person concerned, aimed at remedying the contravention.Amended: January 2007EN-B.2.8
Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the person concerned has been given a suitable opportunity to make representations. In the case of measures described in Chapters EN-6 and EN-7, certain procedures are set out in the CBB Law.
Amended: January 2007EN-B.2.9
In extreme circumstances, where the CBB believes that immediate action is required to prevent real damage to Bahrain's financial markets, its users or to
policyholders of the licensee concerned, it may amend or cancel a license, place a licensee under administration, or suspend a license (cf. Articles 48(g), 130(b) and 131 of the CBB Law).Added: April 2019EN-B.3 EN-B.3 Prohibition on Insurance
EN-B.3.1
To help the CBB achieve the purpose of this Module,
insurance licensees may not enter or make a claim under acontract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in this Module.Amended: January 2007
Amended: October 2007EN-B.4 EN-B.4 Publicity
EN-B.4.1
The CBB will not as a matter of general policy publicise individual cases when it uses the measures described in Chapters EN-2 to EN-5, and EN-8. However, in such cases, the CBB may inform (where relevant) an
authorised person's externalauditor and — in the case of licensees with overseas operations — relevant overseas regulators.Amended: January 2007
Amended: October 2007EN-B.4.2
In exceptional circumstances, the CBB may decide to publicise individual cases when the measures set out in Chapters EN-2 to EN-5 and EN-8, are used, where there is a strong case that doing so would help achieve the CBB's supervisory objectives. In such instances, the CBB will usually allow the licensee or person concerned the opportunity to make representations to the CBB before a public statement is issued.
Amended: January 2007EN-B.4.3
Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of enforcement measures, without identifying the licensees or persons concerned.
Amended: January 2007EN-B.4.4
By their nature, the penalties in Chapters EN-6, EN-7 and EN-9 inclusive are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.
Amended: January 2007EN-B.4.5
If a financial penalty is imposed on an
insurance licensee under the provisions of Chapter EN-5, and it is subject to the requirements of Module PD (Public Disclosures), then it must disclose in the manner prescribed by Module PD the amount of any financial penalties imposed by the CBB, together with a factual description of the reason(s) given by the CBB for the penalty. (See Chapter PD-2.)Amended: January 2007EN-B.4.6
Insurance licensees subject to a CBB enforcement measure (with the exception of formal requests for information) must inform their externalauditor of the fact.Amended: January 2007
Amended: October 2007EN-1 EN-1 Formal Requests for Information
EN-1.1 EN-1.1 Legal Source
EN-1.1.1
As part of its on-going supervision, under Articles 111 and 123 of the CBB Law, the CBB may make specific ad-hoc requests for information, beyond the regular reporting or notifications specified in Module BR (CBB Reporting). Recipients of such requests are bound to respond to such requests under the terms of their license (see Paragraph BR-3.1.1).
Adopted: January 2007
Amended: October 2007EN-1.2 EN-1.2 Procedure
EN-1.1.1
As part of its on-going supervision, the BMA may make specific ad-hoc requests for information, beyond the regular reporting or notifications specified in Module BR (BMA Reporting). Recipients of such requests are bound to respond to such requests under the terms of their license (see Paragraph BR-4.2.1).
EN-1.2.1
To clearly identify formal information requests, these will always be made in writing, under the signature of a Director or more senior official of the CBB. They will include the statement, "This is a formal request for information as defined in Chapter 1 of Module EN (Enforcement) of Volume 3 (Insurance) of the CBB Rulebook"; and will state the deadline by which the information is to be communicated to the CBB.
Amended: January 2007
Amended: October 2007EN-1.2.2
Failure to respond to such formal requests within the deadline set will be viewed as a significant breach of supervisory requirements and may result in a formal warning or other enforcement measure, specified under Articles 163 and 170 of the CBB Law, as decided by the CBB depending on the circumstances of the case.
Amended: January 2007EN-1.2.3
The deadline set in the request will vary depending on individual circumstances. A recipient may submit a case for an extension to the deadline; it should do so as soon as possible if it believes that an extension will be required, and in any event prior to the passing of the original deadline. The Central Bank will respond before the original deadline has passed; if it fails to do so, then the requested extension will apply. Whilst waiting for a reply, the recipient must assume that the original deadline will apply.
Amended: October 2009
Amended: January 2007EN-1.2.4
The above procedures do not prevent individual CBB supervisors from making oral requests for information as part of their day-to-day interaction with
authorised persons . The CBB expectsauthorised persons to maintain their cooperative response to such requests; however, in the interests of clarity, the CBB will not view failures to respond to oral requests as a breach of supervisory requirements.Amended: January 2007EN-2 EN-2 Investigations
EN-2.1 EN-2.1 Legal Source
EN-2.1.1
Articles 121 to 123 of the CBB Law empower the CBB to order investigations of licensees, in order to help it assess a licensee's compliance with the provisions of the CBB Law. Such investigations may be carried out by its own officials or
appointed experts . Articles 111 and 124 requirelicensees to make available to the CBB's inspectors their books and records, and to provide all relevant information within the time limits deemed reasonable by the inspectors.Amended: October 2011
Adopted: January 2007EN-2.2 EN-2.2 CBB Policy
EN-2.2.1
The CBB uses its own inspectors to undertake on-site examinations of licensees as an integral part of its regular supervisory efforts. In addition, the CBB may commission special investigations of
insurance licensees in order to help it assess their compliance with CBB requirements, as contained in Article 121 of the CBB Law. Such investigations may be carried out either by the CBB's own officials, by duly qualified experts appointed for the purpose by the CBB ('Appointed Experts '), or a combination of the two.Amended: January 2007EN-2.2.2
Failure by
insurance licensees to cooperate fully with the CBB's inspectors, or itsAppointed Experts , will be treated as demonstrating a material lack of cooperation with the CBB which will result in other enforcement measures being considered, as described elsewhere in this Module. This guidance is supported by Article 114(a) of the CBB Law.Amended: January 2007EN-2.2.3
The CBB may appoint an individual or a firm as an
Appointed Expert . Examples ofAppointed Experts are reporting accountants, expert witnesses and independent actuaries. The appointment ofAppointed Experts is not necessarily indicative of a contravention of CBB requirements or suspicion of such a contravention. For instance, anAppointed Expert may typically be commissioned to provide an expert opinion on a technical matter.Amended: January 2007EN-2.2.4
Appointed Experts report in a form and within a scope defined by the CBB, and are solely responsible to the CBB for the work they undertake in relation to the investigation concerned. The report produced by theAppointed Experts is the property of the CBB (but is usually shared by the CBB with the firm concerned). The cost of theAppointed Experts' work must be borne by the licensee concerned.Amended: January 2007EN-2.2.5
In selecting an
Appointed Expert , the CBB will take into account the level of fees proposed and aim to limit these to the lowest level consistent with an adequate review of the matters at hand, given the qualifications, track record and independence of the persons concerned. Because the costs of such investigations are met by the licensee, the CBB makes only selective use ofAppointed Experts , when essential to supplement CBB's other supervisory tools and resources.Amended: January 2007EN-2.2.6
[This paragraph was deleted in October 2011]
Deleted: October 2011EN-2.2.7
[This paragraph was deleted in October 2011]
Deleted: October 2011
EN-2.2.8
[This paragraph was deleted in October 2011]
Deleted: October 2011EN-2.2.6
The CBB may commission reports, which require
Appointed Experts to review information from another company within the reportinginsurance licensee's group even when that other entity is not subject to any CBB requirements.Amended: October 2011
Adopted: January 2007EN-2.2.7
In accordance with Articles 114 and 123 of the CBB Law,
insurance licensees must provide all relevant information and assistance toAppointed Experts on demand.Amended: October 2011
Adopted: January 2007EN-2.2.11
[This Paragraph was moved to Section BR-3.5]
Deleted: October 2011
Adopted: January 2007EN-2.3 EN-2.3 Procedure
[The content of this Section was moved to Section BR-3.5 in October 2011]
EN-2.3.1
All proposals for
investigators require approval by an Executive Director or more senior official of the CBB. The appointment will be made in writing, and made directly with theinvestigators concerned. A separate letter is sent to the licensee, notifying them of the appointment. At the CBB's discretion, a trilateral meeting may be held at any point, involving the CBB and representatives of the licensee and theinvestigators , to discuss any aspect of the investigation.Amended: October 2009
Amended: January 2007EN-2.3.2
Following the completion of the investigation, the CBB will normally provide feedback on the findings of the investigation to the
insurance licensee concerned.Amended: January 2007EN-2.4 EN-2.4 The Required Report
[The content of this Section was moved to Section BR-3.5 in October 2011]
EN-2.4.1
The scope of the required report will be determined and detailed by the CBB in the appointment letter. Commissioned investigators will normally be required to report on one or more of the following aspects of an
insurance licensee's business:a) Accounting and other records;b) Actuarial estimates;c) Internal control systems;d) Returns of information provided to the CBB;e) Operations of certain departments; and/orf) Other matters specified by the CBB.Adopted: October 2009EN-2.4.2
Investigators will be required to form an opinion on whether, during the period examined, theinsurance licensee is in compliance with the relevant provisions of the CBB Law and the CBB's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.Adopted: October 2009EN-2.4.3
The
investigators' report should follow the format set out in Appendix EN-1 in Part B of Rulebook Volume 3 (Insurance).Adopted: October 2009EN-2.4.4
Unless otherwise directed by the CBB, the
investigators should discuss the report with the Board of Directors and/or senior management in advance of it being sent to the CBB.Adopted: October 2009EN-2.4.5
Where the report is
qualified by exception , the report must clearly set out the risks which theinsurance licensee runs by not correcting the weakness, with an indication of the severity of the weakness, should it not be corrected.Investigators will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.Adopted: October 2009EN-2.4.6
If the
investigators conclude, after discussing the matter with theinsurance licensee , that they will give a negative opinion (as opposed to onequalified by exception ) or that the issue of the report will be delayed, they must immediately inform the CBB in writing giving an explanation in this regard.Adopted: October 2009EN-2.4.7
The report must be completed, dated and submitted, together with any comments by Directors or management (including any proposed timeframe within which the
insurance licensee has committed to resolving any issues highlighted by the report), to the CBB within the timeframe applicable.Adopted: October 2009EN-2.5 EN-2.5 Other Notifications to the CBB
[The content of this Section was moved to Section BR-3.5 in October 2011]
EN-2.5.1
Investigators must communicate to the CBB, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the CBB, including the criteria for licensing aninsurance licensee (see Module AU), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concernedinsurance licensee , or that the interests ofpolicyholders are at risk because of adverse changes in the financial position or in the management or other resources of aninsurance licensee . Notwithstanding the above, it is primarily theinsurance licensee's responsibility to report such matters to the CBB.Adopted: October 2009EN-2.5.2
The CBB recognises that
investigators cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the CBB as outlined above. It is only wheninvestigators , in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.Adopted: October 2009EN-2.5.3
If
investigators decide to communicate directly with the CBB in the circumstances set out in Paragraph EN-2.5.1 above, they may wish to consider whether the matter should be reported at an appropriate senior level in theinsurance licensee at the same time and whether an appropriate senior representative of theinsurance licensee should be invited to attend the meeting with the CBB.Adopted: October 2009EN-3 EN-3 Formal Warnings
EN-3.1 EN-3.1 CBB Legal Source
EN-3.1.1
Article 38 of the CBB Law empowers the CBB to issue formal warnings to insurance licensees or individuals. The CBB will issue such warnings where it reasonably believes that these are required to achieve its statutory objectives.
Adopted: January 2007EN-3.2 EN-3.2 CBB Policy
EN-3.1.1
The BMA may issue formal warnings to licensees or individuals where it reasonably believes that these are required to achieve its statutory objectives.
EN-3.2.1
Formal warnings are clearly identified as such and represent the CBB's first level of formal enforcement measure. They are intended to clearly set out the CBB's concerns to a licensee or individual regarding an issue, and should be viewed by a recipient with the appropriate degree of seriousness.
Amended: January 2007EN-3.2.2
As indicated in Paragraph EN-B.2.7, the CBB will usually discuss concerns it may have prior to resorting to a formal enforcement measure, especially where a significant element of judgement is required in assessing compliance with a regulatory requirement.
Amended: January 2007EN-3.2.3
Where such discussions fail to resolve matters to the CBB's satisfaction, then it may issue a formal warning. Failure to respond adequately to a formal warning will lead the CBB to consider more severe enforcement measures. However, more severe measures do not require the prior issuance of a formal warning — depending on its assessment of the circumstances, the CBB may decide to have immediate recourse to other measures. Similarly, there may be circumstances where the CBB issues a formal warning without prior discussion with the licensee or person concerned. This would usually be the case where a clear-cut compliance failing has occurred.
Amended: January 2007EN-3.2.4
When considering whether to issue a formal warning, the criteria taken into consideration by the CBB include the following:
(a) The seriousness of the actual or potential contravention, in relation to the requirement(s) concerned and the risks posed to the licensee'spolicyholders and other stakeholders;(b) In the case of an actual contravention, its duration and/or frequency of the contravention; the extent to which it reflects more widespread weaknesses in controls and/or management; and the extent to which it was attributable to deliberate or reckless behaviour; and(c) The extent to which the CBB's supervisory objectives would be better served by issuance of a formal warning as opposed to another type of supervisory action.Amended: January 2007EN-3.3 EN-3.3 Procedure
EN-3.3.1
Proposals to issue formal warnings are carefully considered against the criteria listed in Paragraph EN-3.2.4. They require approval of a Director or more senior CBB official, and include the statement "This is a formal warning as defined in Chapter 3 of Module EN (Enforcement) of Volume 3 (Insurance) of the CBB Rulebook".
Amended: January 2007
Amended: October 2007EN-3.3.2
Depending on the issue in question, recipients of a formal warning may be required to respond to the contents of the notice. Where a formal warning is served prior to imposing any penalties or administrative proceedings, Articles 125(c) and 126 of the CBB Law provide the recipients the right to object or challenge the formal warning.
Amended: January 2007EN-4 EN-4 Directions
EN-4.1 EN-4.1 Legal Source
EN-4.1.1
Article 38 of the CBB Law empowers the CBB to issue Directions to
insurance licensees or individuals. The powers conveyed allow the CBB to issue whatever Directions, it reasonably believes, are required to achieve its statutory objectives.Amended: January 2007
Amended: October 2007EN-4.2 EN-4.2 CBB Policy
EN-4.1.1
The BMA may issue Directions to licensees or individuals where it reasonably believes that these are required to achieve its statutory objectives.
EN-4.2.1
The types of Directions that the CBB may issue in practice vary and will depend on the individual circumstances of a case. Generally, however, Directions require a licensee or individual either to undertake or to stop certain specific actions in order to address or mitigate certain perceived risks. They may also include restrictions on a licensee's activities until those risks have been addressed — for instance, a ban on the writing of new business.
Amended: January 2007EN-4.2.2
The CBB is conscious of the powerful nature of a Direction and, in the case of a licensee, the fact that it subordinates the role of its Board and management on a specific issue. The CBB will carefully consider the need for a Direction, and whether alternative measures may not achieve the same end. Where feasible, the CBB will try to achieve the desired outcome through persuasion, rather than recourse to a Direction.
Amended: January 2007EN-4.2.3
In considering whether to issue a Direction, the criteria taken into consideration by the CBB include the following:
(a) The seriousness of the actual or potential contravention, in relation to the requirement(s) concerned and the risks posed to the licensee'spolicyholders , market participants and other stakeholders;(b) In the case of an actual contravention, its duration and/or frequency of the contravention; the extent to which it reflects more widespread weaknesses in controls and/or management; and the extent to which it was attributable to deliberate or reckless behaviour; and(c) The extent to which the CBB's supervisory objectives would be better served by issuance of a Direction as opposed to another type of supervisory action.Amended: January 2007
Amended: October 2007EN-4.3 EN-4.3 Procedure
EN-4.3.1
Proposals to issue Directions are carefully considered against the criteria listed in Paragraph EN-4.2.3. They require approval of an Executive Director or more senior official of the CBB, and include the statement "This is a formal Direction as defined in Chapter 4 of Module EN (Enforcement) of Volume 3 (Insurance) of the CBB Rulebook".
Amended: January 2007
Amended: October 2007EN-4.3.2
The subject of the Direction will normally be given 30 calendar days from the Direction's date of issuance in which to make representations to the CBB concerning the actions required. This must be done in writing, and addressed to the issuer of the original Direction. Should a representation be made, the CBB will make a final determination, within 30 calendar days of the date of the representation, as specified in Articles 125(c) and 126 of the CBB Law.
Amended: January 2007EN-4.3.3
[This Paragraph was moved to Section EN-B.2 in April 2019].
Amended: January 2007
Amended: October 2007
Amended: April 2019EN-5 EN-5 Financial Penalties
EN-5.1 EN-5.1 Legal Source
EN-5.1.1
Article 129 of the CBB Law, provides the CBB the power to impose financial penalties on licensees or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law. Their use is generally limited to situations where major breaches of regulatory requirements have taken place and a licensee has failed to respond in an acceptable manner to the concerns expressed by the CBB. Financial penalties may be preceded by the issuance of a written formal warning and/or Direction.
Amended: April 2016
Amended: October 2012
Amended: January 2007EN-5.2 EN-5.2 CBB Policy
EN-5.2.1
The level of financial penalty applied is determined by the nature of the contravention and the amount of additional supervisory attention and resources taken up by a licensee's or persons' referred to in paragraph (b) of Article (68 bis 1) of the CBB Law behaviour and by limits set in the CBB Law. The CBB intends that the impact of a penalty should derive more from its signalling effect than from the actual amount of money involved.
Amended: April 2016
Amended: January 2007EN-5.2.2
As indicated in Paragraph EN-B.4.5 and as required by Module PD (Public Disclosure), the CBB requires disclosure by those licensees subject to the requirements of Module PD, of any financial penalties served on them, together with a factual description of the reasons given by the CBB for applying the penalty. In addition, in accordance with Article 132 of the CBB Law, in the case of all
insurance licensees , registered persons orapproved persons , the CBB may publicise the issuance of a financial penalty notice, by way of its website or through other means, where there is a strong case that doing so would help achieve the CBB's supervisory objectives.Amended: October 2013
Amended: January 2007EN-5.2.3
In assessing whether to serve a financial penalty notice, the CBB takes into account the following criteria:
(a) The seriousness of the contravention, in relation to the requirement(s) concerned;(b) The duration and/or frequency of the contravention, and the extent to which it reflects more widespread weaknesses in controls and/or management;(c) The extent to which the contravention was deliberate or reckless;(d) The licensee's past compliance record and conduct following the contravention; and(e) The scope of any other action taken by the CBB or other supervisors against the licensee, in response to the compliance failures in question.Amended: January 2007EN-5.1.5
Examples of the types of compliance failings that may lead to the serving of a financial penalty notice include (but are not limited to):
(a) failures to address persistent delays and/or significant inaccuracies in regulatory reporting to the BMA;(b) repeated failures to respond to formal requests for information from the BMA, within the deadlines set;(c) the submission of information to the BMA known to be false or misleading; and(d) major failures in maintaining adequate systems and controls in accordance with BMA requirements, subjecting policyholders and other customers to significant risk of financial loss.EN-5.2.4
Part 11 of the CBB Law outlines instances where financial penalties may be imposed. Examples of the types of compliance failings that may lead to the serving of a financial penalty notice include (but are not limited to):
(a) Failures to address persistent delays and/or significant inaccuracies in regulatory reporting to the CBB;(b) Repeated failures to respond to formal requests for information from the CBB, within the deadlines set;(c) The submission of information to the CBB known to be false or misleading; and(d) Major failures in maintaining adequate systems and controls in accordance with CBB requirements, subjectingpolicyholders and othercustomers to significant risk of financial loss.Adopted: January 2007EN-5.2.5
In accordance with Article 125 of the CBB Law, a written notice of a financial penalty must be issued before imposing any financial penalty. The written notice must contain the following information:
(a) The violations committed by the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law with respect to the CBB Law; the CBB Rulebook; any Directions, Warnings of Formal Requests for Information; or violations of the terms and conditions of the license issued to the licensee;(b) Evidence of proof to support the above;(c) The level of financial penalty to be imposed; and(d) The grace period to be allowed to the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law for challenging the intended penalty (which will not be less than 30 calendar days).Amended: April 2016
Adopted: January 2007EN-5.2.6
The licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law may either pay the penalty or, pursuant to Article 126 of the CBB Law, may object within the period noted in Sub-Paragraph EN-5.2.5(d). In accordance with Article 127 of the CBB Law, the CBB will consider any objection and make a formal resolution within 30 calendar days of receiving the objection. Thereafter, the resolution and any accompanying penalties are final and must be paid within 30 calendar days.
Amended: April 2016
Adopted: January 2007EN-5.2.7
[This Paragraph was deleted October 2009]
Deleted: October 2009EN-5.2.8
The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Amended: January 2007EN-5.3 EN-5.3 Module FC (Financial Crime)
EN-5.3.1
In addition to the general circumstances set out in Section EN-5.2, a financial penalty of up to BD 100,000 may be applied by the CBB, in cases where an
insurance licensee fails to comply with any of the requirements of Module FC (Financial Crime). The fine shall be multiplied by the number of violations.Amended: April 2016
Amended: January 2007EN-5.3.2
As with the imposition of financial penalties in response to breaches of other supervisory requirements, the CBB will apply financial penalties with respect to Module FC, based on the criteria set out in Paragraph EN-5.2.3. Financial penalties applied under this Section are also subject to the same disclosure requirements as described in Paragraph EN-B.4.5.
Amended: January 2007
Amended: October 2007EN-5.3.3
A failure to comply with the Module FC (Financial Crime) that warrants a financial penalty would not trigger also a financial penalty under Section EN-5.2.
Amended: January 2007EN-5.3.4
Any financial penalties applied by the CBB as regards the implementation of Module FC, are without prejudice to the criminal sanctions available to the Bahraini courts under the Decree — Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money. As with other financial penalties, the imposition of a financial penalty with regards to breaches of Module FC does not prevent the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Amended: January 2007EN-5.3A EN-5.3A Financial Penalties for Non-Compliant Registered Appointed Representatives
EN-5.3A.1
Section AU-1.3A and Chapter GR-9 dealing with
appointed representatives , outlines specific requirements whichinsurance firms must comply with, particularly with regard to the registration and the fit and proper requirements ofappointed representatives and their dealings with potentialpolicyholders .Adopted: October 2009EN-5.3A.2
This Section outlines specific financial penalties dealing with the non-compliance of specific provisions of Section AU-1.3A and Chapter GR-9. The CBB views the breach of these requirements as a serious concern.
Adopted: October 2009EN-5.3A.3
Where an
insurance firm has appointed an individualappointed representative or the designated individuals of an incorporatedappointed representative and these individuals do not comply with the requirements of Section AU-1.3A and/or Chapter GR-9, a financial penalty of BD500 will be imposed to theinsurance firm for each individual found in breach of these provisions.Adopted: October 2009EN-5.3A.5
A decision to impose a financial penalty for non-compliance with Section AU-1.3A and/or Chapter GR-9 is unrelated to whether the CBB issues a formal warning; it is the
insurance firm's responsibility to ensure that itsappointed representatives comply with the requirements of Section AU-1.3A and Chapter GR-9.Adopted: October 2009EN-5.3B EN-5.3B Financial Penalties for Date Sensitive Requirements
EN-5.3B.1
Modules AU, FC, BR and PD contain specific requirements where
insurance licensees and/or registered persons must comply with, by a precise date. Where a specific due date is involved, the CBB's financial penalties are based on a per diem basis.Added: October 2012EN-5.3B.2
This Section applies to due dates for:
(a) Reporting requirements included in Module BR;(b) Public disclosure requirements included in Module PD;(c) The report of the external auditor or approved consultancy firm required as per Paragraph FC-3.3.1 (d); and(d) Annual licensing and registration fees required as per Section AU-6.3.Amended: October 2013
Added: October 2012EN-5.3B.3
Financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:
(a) Where theinsurance firm's gross premiums written are less than or equal to BD 10 million, the financial penalty for late filing is BD 40 per day;(b) Where theinsurance firm's gross premiums written are greater than BD 10 million but less than or equal to BD 30 million, the financial penalty for late filing is BD 100 per day;(c) Where theinsurance firm's gross premiums written are greater than BD 30 million, the financial penalty for late filing is BD 200 per day;(d) For newly licensedinsurance firms who have yet to provide audited financial statements, the financial penalty is BD 40 per day; and(e) Forinsurance brokers ,insurance consultants ,insurance managers ,loss adjusters andactuaries , the financial penalty is BD 20 per day.Amended: April 2017
Amended: October 2013
Added: October 2012EN-5.3B.3A
For purposes of Paragraph EN-5.3B.3, reference to gross premiums written refers to the amount of gross premiums reported in the latest consolidated annual audited financial statements of the
insurance firm .Added: October 2013EN-5.3B.3B
Where an
insurance firm must pay the annual CBB fixed fees for its appointed representatives under Paragraph AU-6.3.6A and has failed to meet the deadline of the 1st December of the prior year for which the fees are due, the financial penalty imposed for each day late will be:(a) For incorporatedappointed representatives that have 1 to 10 individuals, the financial penalty is BD 10 per day;(b) For incorporatedappointed representatives that have 11 to 20 individuals, the financial penalty is BD 15 per day;(c) For incorporatedappointed representatives that have more than 20 individuals, the financial penalty is BD 20 per day; and(d) For individualappointed representatives , the financial penalty is BD 10 per day.Added: October 2013EN-5.3B.4
For
overseas insurance licensees , only those gross written premiums reported as part of the year-end filing for their Bahraini operations, shall be considered in determining the per diem financial penalty.Amended: October 2013
Added: October 2012EN-5.3B.5
In accordance with Article 129 of the CBB Law, the maximum financial penalty levied for failing to comply with date sensitive requirements is BD 100,000. The fine shall be multiplied by the number of violations. The CBB may opt to limit the amount of the financial penalty and use other enforcement measures as outlined in Module EN (Enforcement), such as imposing restrictions on an insurance license limiting the scope of operations.
Amended: April 2016
Added: October 2012EN-5.3B.6
The various deadlines for submission of reports and annual fees referred to in Modules BR, FC, PD and AU are defined:
(a) In terms of a specified number of days following a given date, such as the last date of a calendar quarter;(b) A specified number of days after the occurrence of a specific event; or(c) A specific date.Added: October 2012EN-5.3B.7
In imposing financial penalties for date sensitive requirements, the following criteria apply:
(a) Where the due date falls on a holiday as designated by the CBB, the first business day following the holiday will be considered as being the due date;(b) Where a due date is not complied with by the end of the day on which it is due, holidays and weekend days are included in the number of days the item is considered late;(c) For returns and other filings, the date received is the date recorded by the CBB's systems in case of returns filed electronically;(d) In the case of returns filed in hard copy, the CBB stamp is the date received;(e) All returns are to be sent to the respective Supervision Directorate and the annual fees to the Accounts Directorate, on or before the due date, to be considered filed on time;(f) A day ends at midnight in the case of returns that must be filed electronically, or at the close of CBB business day, in the case returns are filed in hard copy; and(g) An incomplete return, where completeness is determined in relation to the requirements of the relevant instructions and Module BR, is considered 'not filed' until the CBB receives all necessary elements of the return.Added: October 2012EN-5.3B.8
The CBB does not require any particular method of delivery for returns and filings that are filed in hard copy. The use of the Bahrain postal services, private courier services or other methods of delivery is entirely at the discretion and risk of the licensee or registered person. For the payment of annual fees, licensees must follow the requirements of Form ALF, included under Part B of Volume 3.
Added: October 2012EN-5.3B.9
A decision to impose a financial penalty for date sensitive requirements is unrelated to whether the CBB issues a reminder; it is the licensee's or registered person's responsibility to file and disclose on time as per the requirements of Volume 3 (Insurance) Rulebook.
Added: October 2012EN-5.3C EN-5.3C Financial Penalties for Non-compliance with Blocking / Unblocking Requirements
EN-5.3C.1
The financial penalty for late execution of blocking/unblocking orders issued by the Court/Public Prosecution is BD 10 per day per customer account/claim. Such financial penalties will be charged through billing on a weekly basis.
Added: April 2021EN-5.4 EN-5.4 Procedure
EN-5.4.1
A written financial penalty notice will be addressed to the
Chief Executive Officer orGeneral Manager of the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law concerned. This written notification will describe the contravention concerned, the CBB's evidence supporting a financial penalty, and the factors justifying the level of penalty proposed. Only an Executive Director or more senior member of the CBB's management may sign the notification.Amended: April 2016
Amended: January 2007EN-5.4.2
The licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law has 30 calendar days from the notification's date of issuance to submit any representations it wishes to make to the CBB, in writing and addressed to the issuer of the original notification. If the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law decides not to submit representations, it has 30 calendar days from the notification's date of issuance in which to pay the penalty.
Amended: April 2016
Amended: January 2007EN-5.4.3
Should the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law make representations challenging the proposed penalty, the CBB has 30 calendar days from the issuance of those representations in which to re-examine the facts of the case and its conclusions. If the CBB confirms application of a penalty, payment is required within 30 calendar days of a final notice being issued.
Amended: April 2016
Amended: January 2007EN-5.4.4
Failure to pay a penalty within the required deadlines will be considered a breach of CBB regulatory requirements, and will also result in other measures being considered, as described elsewhere in this Module.
Amended: January 2007EN-5.5 EN-5.5 Addressing a Compliance Failure
EN-5.5.1
Payment of a financial penalty does not by itself absolve a licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law from addressing the compliance failure concerned. The CBB will expect the licensee or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law to address the contravention within a reasonable timescale, to be agreed on a case-by-case basis. Failure to do so will result in other measures being considered.
Amended: April 2016
Amended: January 2007EN-6 EN-6 [This Chapter was deleted in April 2019]
EN-6.1 EN-6.1 [This Section was deleted in April 2019]
EN-6.1.1
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Adopted: January 2007EN-6.1.2
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Adopted: January 2007EN-6.1.3
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Adopted: January 2007EN-6.2 EN-6.2 [This Section was deleted in April 2019]
EN-6.1.1
Subject to the approval of H.E. The Governor, in certain circumstances, the BMA may assume the administration of a licensee. These circumstances are where:
(a) the licensee has become insolvent;(b) the licensee's liquidity or solvency are in jeopardy;(c) the licensee's continued activity is detrimental to the rights of policyholders; or(d) the licensee commits serious contravention of the provisions of theInsurance Legislation or Volume 3 (Insurance).EN-6.1.2
Where the BMA assumes the administration of a licensee, the licensee concerned may appeal to H.E. The Governor and, subsequently, the courts, in order to challenge its administration by the BMA.
EN-6.2.1
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-6.2.2
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-6.2.3
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-6.3 EN-6.3 [This Section was deleted in April 2019]
EN-6.3.1
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-6.3.2
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-6.3.3
[This Paragraph was deleted in April 2019].
Deleted: April 2019
Amended: January 2007EN-7 EN-7 Cancellation or Amendment of License
EN-7.1 EN-7.1 Legal Source
EN-7.1.1
Article 48 of the CBB Law, empowers the CBB to cancel or amend a license under certain circumstances. These include cases where a licensee has:
(a) Failed to satisfy its license conditions;(b) Violated the terms of the CBB Law, Regulations or Rulebook;(c) Failed to start business within six months from the date of the license being issued;(d) Ceased to carry out the licensed activities permitted; or(e) Not acted in the legitimate interest of itscustomers or creditors.Amended: January 2007
Amended: October 2007EN-7.1.2
An example of amending the permitted activities of an
insurance licensee is to remove the permission to effectcontracts of insurance , which would have the effect of restricting the firm's activities to 'running off' existing business.Amended: January 2007
Amended: October 2007EN-7.1.3
Article 48(d) of the CBB Law requires the CBB to give the licensee concerned at least 30 calendar days in which to appeal any proposed cancellation or amendment of its license.
Adopted: January 2007EN-7.2 EN-7.2 CBB Policy
EN-7.1.3
The BMA will only propose the cancellation of the firm's license once it is satisfied that there are no longer any regulated activities for which it is necessary to keep the authorisation in force. In situations where it is necessary to keep the authorisation in force, for example where there are existing policyholder liabilities that have not been transferred under a portfolio transfer to another insurance licensee, the BMA will generally take alternative action, such as to place the firm in administration (in accordance with the procedures in Section EN-8.2) and only consider the cancellation of the license after other options such as the transfer of all or part of the portfolio to other insurers have been considered and, where appropriate, implemented.
EN-7.1.4
Where the BMA proposes to cancel a firm's license, it must provide the licensee concerned reasonable time to object to the proposed cancellation.
EN-7.2.1
When used as an enforcement tool, the CBB views cancelling a license as appropriate only in the most serious of circumstances, when faced with the gravest of contraventions or when left with no other reasonable means of successfully addressing the regulatory failings in question. Cancellation or amendment of a license, however, may also be required in circumstances outside an enforcement context, for instance because of a change in the business profile of a licensee.
Adopted: January 2007EN-7.2.2
When used as an enforcement tool, the criteria used by the CBB in assessing whether to seek the cancellation or amendment of a license include:
(a) The extent to which the interests of thepolicyholders and others who have a claim on the licensee would be best served by the cancellation or amendment of the license;(b) The extent to which other supervisory penalties could reasonably be expected to achieve the CBB's desired supervisory objectives;(c) The extent to which the licensee has contravened the condition of its license and/or the CBB Law, including the seriousness, duration and/or frequency of the contravention(s) concerned, and the extent to which the contraventions reflect more widespread or systemic weaknesses in controls and/or management;(d) The extent to which the licensee has been involved in financial crime or other criminal conduct; and(e) The licensee's past compliance record and conduct following the contravention(s).Amended: January 2007EN-7.2.3
When the CBB issues a notice of cancellation or amendment as an enforcement tool, it will only implement the actual change once it is satisfied that there are no longer any regulated activities for which it is necessary to keep the current authorisation in force. Until such time as these activities have been run off or moved to another licensee, the CBB will control these activities through other means (such as taking the licensee into administration or through issuing Directions).
Adopted: January 2007EN-7.3 EN-7.3 Procedure
EN-7.3.1
All proposals for cancelling or amending a license are subject to a thorough review by the CBB of all relevant facts, assessed against the criteria outlined in Paragraphs EN-7.2.1 and EN-7.2.2. After being assessed at the Executive Director level, proposals are submitted to H.E. the Governor for approval.
Amended: January 2007EN-7.3.2
Once approved within the CBB, a formal notice of cancellation or amendment is issued to the licensee concerned. The notice of cancellation or amendment will describe the factual circumstances of the contraventions concerned, and the CBB's rationale for the proposed cancellation or amendment, as measured against the criteria outlined in Paragraphs EN-7.2.1 and EN-7.2.2.
Amended: January 2007EN-7.3.3
The licensee has 30 calendar days from the date of the notice in which to lodge an appeal. The appeal should be addressed to the Board of the CBB, and copied to H.E. the Governor of the CBB.
Amended: January 2007EN-7.3.4
If an appeal is lodged, the Board of the CBB will make a final ruling within 60 calendar days of its date of issuance.
Amended: January 2007EN-7.3.5
A licensee may appeal to a competent court within 60 calendar days of the above final ruling for a decision. The court’s decision will then be final.
Adopted: January 2007EN-8 EN-8 Cancellation of 'Fit and Proper' Approval
EN-8.1 EN-8.1 Legal Source
EN-8.1.1
Article 65 of the CBB Law allows the CBB to determine the level of qualifications, experience and training of a licensee’s
officers oremployees . Article 65(c) of the CBB Law empowers the CBB the right to remove any official, being a Board member or in an executive position, that is unqualified or unsuitable for the assigned position.Adopted: January 2007
Amended: October 2007EN-8.1.2
[This Paragraph was deleted October 2009]
Deleted: October 2009EN-8.2 EN-8.2 CBB Policy
EN-8.2.1
Chapter AU-3 of Module AU (Authorisation), specifies that
approved persons must be assessed by the CBB as 'fit and proper' to hold such a position. The Chapter specifies various factors that the CBB takes into account when reaching such a decision.Adopted: January 2007EN-8.2.2
The CBB is conscious of the impact that assessing someone as not 'fit and proper' may have on an individual
approved person . Such assessments are carefully reviewed in the light of all relevant facts. The criteria used in reaching a decision include the following:(a) The extent to which the factors set out Chapter AU-3 have not been met;(b) The extent to which the person has deliberately or recklessly breached requirements of the CBB Law or Volume 3 (Insurance);(c) The person's past compliance record and conduct following any such breaches;(d) The length of time since factors indicating a lack of fitness or propriety occurred; and(e) The risk the person poses to licensees and theirpolicyholders .Amended: January 2007
Amended: October 2007EN-8.2.3
Amongst other matters, the CBB will normally consider as grounds for the revocation of
approved person status the following events affecting theapproved person :(a) The conviction by a court, whether in Bahrain or elsewhere, for a crime affecting honesty;(b) A declaration of bankruptcy by a court of law;(c) A court ruling that theapproved person's legal capacity is totally or partially impaired; or(d) The sanction by a professional body of a fine, suspension, expulsion or censure.Amended: January 2007EN-8.2.4
Insurance licensees must inform the CBB immediately when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of theirapproved persons (refer to Paragraph BR-2.2.5).Amended: January 2007
Amended: October 2007EN-8.2.5
If the CBB has grounds for considering that an individual is no longer fit and proper to continue to hold their existing
controlled function(s) , it will revoke theapproved person status granted to that individual. The individual will then be required to resign from each of thecontrolled functions to which this revocation applies. This revocation does not automatically preclude them from applying to hold othercontrolled functions in the future, but will be taken into account in considering new requests frominsurance licensees that pertain to that individual.Amended: January 2007EN-8.2.6
Depending on the seriousness of the situation, the CBB may impose further measures, which may include disqualification from:
(a) Holding anycontrolled function ;(b) Performing any function in relation to any regulated activity carried out by a licensed firm; or(c) Being acontroller of any licensed firm.Amended: January 2007EN-8.2.6
In assessing evidence, the CBB applies a lower threshold than is applied in a criminal court of law, reflecting the administrative nature of the sanction. The CBB may also take into account the cumulative effect of factors which, when considered individually, may not in themselves be sufficient to justify an adverse 'fit and proper' finding.
Amended: January 2007EN-8.2.7
The CBB may also take into account the particular function being undertaken in the licensee by the individual concerned, and the size and nature of the licensee itself, particularly when assessing the suitability of a person's experience or qualifications. Thus, the fact that a person was deemed 'fit and proper' for a particular position in a particular firm does not necessarily mean he would be suitable in a different position or in a different firm.
Amended: January 2007EN-8.3 EN-8.3 Procedure
EN-8.3.1
All proposals for issuing an adverse 'fit and proper' finding are subject to a thorough review by the CBB of all relevant facts, assessed against the criteria outlined in Paragraph EN-8.2.2. In some instances, it may be appropriate for the CBB to request the licensee or person concerned to provide further information, in order to help reach a decision.
Amended: January 2007EN-8.3.2
All adverse findings have to be approved by an Executive Director of the CBB. Once approved, a notice of intent is issued to the person concerned and copied to the Board/senior management of the licensee, setting out the circumstances and the basis for the CBB's proposed adverse finding. The person has 30 calendar days from the date of the notice in which to make written representations, addressed to the Executive Director concerned, failing which a final notice is issued by the CBB.
Amended: October 2009
Amended: January 2007EN-8.3.3
If representations are made, then the CBB has 30 calendar days from the date of the representation in which to consider any mitigating evidence submitted and make a final determination.
Amended: October 2009
Amended: January 2007EN-9 EN-9 Cancellation of Registration
EN-9.1 EN-9.1 Legal Source
EN-9.1.1
Article 74 of the CBB Law empowers the CBB to establish the terms and conditions for registration.
Adopted: January 2007EN-9.1.2
In addition,Paragraph AU-4.1.1 of Module AU (Authorisation) requires persons wishing to carry on the business of an
actuary ,loss adjuster orappointed representative in the Kingdom of Bahrain to be registered as such by the CBB. A condition of registration is thatactuaries ,loss adjusters andappointed representatives have relevant expertise and hold professional qualifications from a relevant, recognised professional body.Amended: October 2009
Amended: October 2007
Amended: January 2007EN-9.1.3
Actuaries andloss adjusters and thelicensed principal of theappointed representatives must satisfy the CBB that they are generally suitable to operate as such. The suitability ofactuaries ,loss adjusters andappointed representatives is determined in accordance with Sections AU-4.1 and AU-4.2. If the CBB is satisfied that they meet the necessary requirements, they will be granted registration. Should the CBB not be satisfied of the suitability of anactuary ,loss adjuster orappointed representatives it has the right to cancel their registration.Amended: October 2009
Amended: January 2007EN-9.2 EN-9.2 CBB Policy
EN-9.1.3
Where the BMA proposes to cancel the registration of an
actuary orloss adjuster , it must provide theactuary orloss adjuster concerned reasonable time to object to the proposed cancellation.EN-9.2.1
The CBB is conscious of the impact of revoking the registration of
actuaries ,loss adjusters andappointed representatives . Such assessments are carefully reviewed in light of all the relevant facts. In reaching a decision to cancel the registration, the CBB will consider the extent to which the factors set out in Chapter AU-4 have not been met.Amended: October 2009
Adopted: January 2007EN-9.2.2
The CBB will normally consider as grounds for the revocation of registration the following events affecting an
actuary ,loss adjuster orappointed representative :(a) The conviction by a court, whether in Bahrain or elsewhere, for a crime affecting honesty;(b) A bankruptcy declaration by a court of law;(c) A court ruling that theactuary's ,loss adjuster's orappointed representative's legal capacity is totally or partially impaired; or(d) The sanction by a professional body of a fine, suspension, expulsion or censure.Amended: October 2009
Adopted: January 2007EN-9.3 EN-9.3 Procedure
EN-9.3.1
All proposals to cancel a registration are subject to a thorough review of all relevant facts and must be approved by an Executive Director of the CBB.
Amended: January 2007EN-9.3.2
Once approved within the CBB, a notice of intent is issued to the registrant concerned, setting out the basis for the decision. The notice of intent will describe the factual circumstances and the CBB's rationale for the proposed cancellation.
Amended: January 2007EN-9.3.3
The registrant has 30 calendar days from the date stated in the notice in which to appeal the decision. The appeal should be addressed to the Executive Director that has approved the proposal for cancellation.
Amended: January 2007EN-9.3.4
If representations are made, then the CBB has 30 calendar days from the date of the representation in which to consider any mitigating evidence submitted and make a final determination.
Amended: January 2007EN-10 EN-10 Criminal Sanctions
EN-10.1 EN-10.1 Overview
EN-10.1.1
The CBB Law provides for a number of criminal sanctions in cases where certain provisions are contravened. This Section provides a summary of those sanctions most relevant to licensees, their
Directors andemployees . What follows is not a complete list of all sanctions provided for in the CBB Law, nor is it a substitute for reading the Law and being fully aware of its provisions.Amended: January 2007
Amended: October 2007EN-10.1.2
Licensees, their
Directors andemployees should also be aware of the criminal sanctions provided for under other relevant Bahraini Laws, such as the Decree No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money.Amended: January 2007
Amended: October 2007EN-10.1.3
In all cases to do with criminal sanctions, the CBB can only refer the matter to the Office of the Public Prosecutor. The CBB has no authority to apply such sanctions without recourse to the courts.
Amended: January 2007EN-10.1.4
Examples of fraudulent acts for which a Director, manager, official, agent or representative of any
insurance licensee may be subject to penalty under the Penal Code include:(a) making false or misleading statements with fraudulent intent; and(b) omission, with fraudulent intent, to make any statement or any entry in the books or accounts of aninsurance licensee .EN-10.2 EN-10.2 CBB Policy
EN-10.2.1
Because of their criminal status, and their provision for custodial sentences, the sanctions provided for under the CBB Law are viewed by the CBB as very powerful measures, to be pursued sparingly. In most situations, the CBB will seek to address regulatory failures through administrative sanctions, as outlined in the preceding Chapters, rather than pursuing the criminal sanctions outlined here.
Adopted: January 2007EN-10.2.2
Where, however, the nature of the offence is such that there is strong evidence of a reckless or intentional breach of the CBB Law relevant to the following Articles, then the CBB will refer the matter to the Office of the Public Prosecutor.
Adopted: January 2007EN-10.3A EN-10.3A Article 161
EN-10.3A.1
Article 161 of the CBB Law provides for a penalty of up to BD 1 million, without prejudice to any other penalty prescribed in any other law, in case of any person who breaches the provisions of Resolution No.(16) for the year 2012 issued pursuant to Article 42 of the CBB Law. The Court may also confiscate the proceeds resulting from breaching the Resolution.
Added: January 2013EN-10.3 EN-10.3 Article 163
EN-10.3.1
Article 163 of the CBB Law provides for a term of imprisonment and/or fine of up to BD 20,000 without prejudice to any other penalty prescribed in any other law, in case of conviction of a
Director , manager, official, agent or representative of any licensee who:(a) Conceals any records, information or documents requested by the CBB (or any person appointed by the CBB to conduct an investigation or inspection);(b) Provides statements or information in bad faith which do not reflect the actual financial position of the licensee;(c) Conceals from an externalauditor any records, information or documents necessary for auditing the accounts of the licensee; or(d) Provides in bad faith any misleading or inaccurate statements to an externalauditor which do not reflect the actual financial position of the licensee.Adopted: January 2007
Amended: October 2007EN-10.4 EN-10.4 Article 169
EN-10.4.1
Article 169 provides for a term of imprisonment, and/or a fine of up to BD 20,000 for any
Director , manager, official oremployee , who acts or permits an act in violation of Article 134 of the CBB Law, dealing with the effects of insolvency, where he knows (or should have known) that the licensee is insolvent.Adopted: January 2007
Amended: October 2007EN-10.5 EN-10.5 Article 170
EN-10.5.1
Article 170(2) of the CBB Law provides for terms of imprisonment and/or a fine not exceeding BD 3,000 if any
Director , manager, official oremployee intentionally obstructs an investigation by the CBB or anAppointed Expert .Adopted: January 2007
Amended: October 2007EN-10.6 EN-10.6 Article 171
EN-10.6.1
Article 171 of the CBB Law provides for a term of imprisonment and/or a fine not exceeding BD 10,000, if any
Director , manager, official oremployee discloses in bad faith any confidential information relating to acustomer of a licensee.Adopted: January 2007
Amended: October 2007CP Compensation
[This module in Volume 3 has been intentionally left blank: requirements relating to Compensation will be developed in due course.]
Sector Guides
CI CI Captive Insurance
CI-A CI-A Introduction
CI-A.1 CI-A.1 Purpose
Executive Summary
CI-A.1.1
This Module summarises the key aspects of CBB requirements applicable to
captive insurance firms licensed in Bahrain, which are set out in full elsewhere in the different subject Modules of Volume 3 (Insurance). This Module is intended as an introductory guide to these Regulations and Directives, for potential license applicants,captive insurance firms , captive management firms and other interested parties. This Module only contains guidance material; in the event of discrepancy between this Module and the rules themselves, the latter will prevail.Amended: January 2007Legal Basis
CI-A.1.2
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) relating to
captive insurers and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable toinsurance licensees (including theirapproved persons ).Amended: January 2011
Added: January 2007CI-A.1.3
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007CI-A.2 CI-A.2 Module History
CI-A.2.1
This Sector Guide was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007CI-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007CI-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes CI-2.3 01/10/05 Clarified that captive insurers are exempt from several requirements dealing with Board composition, including the requirement to have a minimum of 5 Directors. CI-3.4 01/10/05 Updated cross-references to Module FC. CI-A.1.2 01/2007 Updated to reflect new CBB Law and new Rule CI-A.1.2 introduced categorising this Module as a Directive. CI-2.4 10/2007 Amended section to be in line with changes made for actuaries. CI-A.1.2 01/2011 Clarified legal basis CI-1.2.1 and CI-2.3 04/2011 Amended to reflect changes to Module HC. CI-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007CI-1 CI-1 Overview
CI-1.1 CI-1.1 Captive Insurance in Bahrain
CI-1.1.1
Captive insurers are companies established by industrial or commercial groups (who are themselves notinsurance firms ) primarily to insure the risks of their owning groups. Worldwide, there are over 4,000 captive insurance companies in existence.Amended: January 2007CI-1.1.2
Like many regulatory authorities, Bahrain differentiates between
captive insurers , andinsurance firms whose business does not generally originate from within their owning group. This differentiation is on the basis that:(a) A captive's obligations (through its insurance policies) are to its owners, not third parties (some captives, though may insureliability risks );(b) A captive's risk exposures (through its insurance policies) will generally be more concentrated and, at the same time, potentially more limited than conventional insurers; and(c) A captive will usually be managed by a specialised third partyinsurance manager .Amended: January 2007CI-1.1.3
The CBB's capital and solvency requirements are lower for captives than for other categories of insurer, though the CBB also monitors the 'risk gap' between policy liabilities and available assets. However, capital and solvency requirements for captives are increased where
liability risks are included, due to the possibility of third party claimants. The CBB licensesinsurance managers and there are specific differences in the governance, management and systems and controls requirements for captives to take account of this.Amended: January 2007CI-1.2 CI-1.2 Structure of this Guidance
CI-1.2.1
The following table lists the Modules of the CBB Insurance Rulebook and indicates those that apply to
captive insurance firms . The remaining Chapters of this guide will describe in more detail the principal requirements of each Module of the Regulations and Directives that apply tocaptive insurance firms .HIGH LEVEL STANDARDS
Module AU (Authorisation) Regulations and Directives dealing with the licensing requirements and conditions for providers of regulated insurance services . All sections applicable toinsurance firms are also applicable tocaptive insurers .Module PB (Principles of Business) Principles that are applicable to all insurance licensees regulated in Bahrain; these apply in full to captive firms.Module HC (High-Level Controls) Directives in respect of governance, systems and controls of licensees. Captive firms are subject to a different level of requirements due to the nature of their activities. Module AA (Auditors and Actuaries) Directives on the appointment and functions of external auditors andactuaries ofinsurance licensees . These apply in full apart from some minor exemptions.Module GR (General Requirements) Regulations and Directives dealing with requirements covering matters not included in other Modules. These include: books and records, corporate and trade names, dividends, business transfers, controllers ,close links , statutory deposits, cessation of business andappointed representatives . These Regulations and Directives apply for the most part tocaptive insurers , but there are lighter requirements particularly for business transfers due to the nature of the business undertaken and the relationship of thecaptive insurer with the owning firm.BUSINESS STANDARDS
Module CA (Capital Adequacy) Directives governing minimum capital and solvency requirements and the valuation of assets and liabilities. Some of these Directives apply to all insurance firms ; some are specific to captive firms, though due to the nature of their business, these are lighter requirements than those imposed oninsurance firms .Module BC (Business Conduct) The Code of Business Conduct governs the sale of insurance and applies to all insurance licensees .Module RM (Risk Management) Risk management standards applicable to licensees. Captive firms are exempted from some of the detailed requirements. Several of the requirements for risk management can be outsourced to insurance managers .Module FC (Financial Crime) Directives governing the monitoring and reporting of financial crime. Captive firms are exempted from some of the detailed requirements. Module TC (Training & Competency) Directives to be developed but are not expected to apply to captive firms directly where the management is sub-contracted to an insurance manager . Some of the Directives may apply to self-managedcaptive insurance firms .
REPORTING REQUIREMENTS
Module BR (CBB Reporting) Requirements for reporting to the CBB. Annual reporting requirements apply to captive firms. Captives are exempted from group and quarterly reporting requirements. Module PD (Public Disclosure) This Module, governing public disclosure, does not apply to captive firms.
ENFORCEMENT AND REDRESS
Module EN (Enforcement) This Module outlines enforcement powers and processes that may be applied by the CBB and applies in full to all insurance licensees .Module DP (Dispute Resolution) Directives will be developed later but are not expected to apply to captive firms. Module CP (Compensation) Directives will be developed later but are not expected to apply to captive firms.
Amended: April 2011
Amended: January 2007
Amended: October 2007CI-2 CI-2 High Level Standards
CI-2.1 CI-2.1 Authorisation
CI-2.1.1
An entity in Bahrain must be authorised if it wishes to conduct
regulated insurance services , including effecting insurance contracts, the broking of insurance contracts, the offering of advice to third parties and the provision of insurance management services.Insurance firms must restrict their business to insurance under their memorandum and articles of association.Rulebook Reference AU-A.1.2 Amended: January 2007
Amended: October 2007CI-2.1.2
An
insurance firm's license will state the classes of insurance that the firm is authorised to conduct. In recognition that thepolicyholders ofcaptive insurers are limited to their owners (orshareholders ),captive insurers may be licensed to underwrite eithergeneral insurance business orlong-term insurance business , or both. In the latter case, however, they are required to maintain separate funds for general and long term insurance business and to apply the appropriate capital requirements to each fund.Rulebook Reference AU-1.1.14
Amended: January 2007
Amended: October 2007CI-2.1.3
For
captive insurers , the legal status of aninsurance firm must be:(i) A Bahraini special purpose vehicle (SPV), specifically established to carry out the activities of acaptive insurer ;(ii) A Bahraini joint stock company (BSC); or(iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance firm in that territory.Rulebook Reference AU-2.1.2 Amended: January 2007
Amended: October 2007CI-2.1.4
Subject to CBB approval, an
insurance licensee that is acaptive (re-) insurance company may maintain its Head Office or place of business at the offices of theinsurance manager appointed to manage its affairs.Rulebook Reference AU-2.2.4 Amended: January 2007CI-2.1.5
A firm that is authorised as a
captive insurance firm will have one of the following permissions granted by the CBB:Category C1 — a Bahrain authorised insurer whose business is restricted to insuring only the insurance risks (other than
liability risks ) of itsshareholder (s) or those of subsidiary or associated companies of itsshareholder (s); orCategory C2 — A Bahrain authorised insurer whose business is restricted to insuring only the risks of its
shareholder (s) or of subsidiary or associated companies of itsshareholder (s), and whose business may includeliability risks , subject to the CBB being satisfied that the activity, capital structure and management provide sufficient protection to potential third party claimants.Some examples of business models that could qualify for captive licensing include:
(a) A group of businesses or professional firms insuring similar risks (who would, effectively, pool these risks through a captive);(b) A car hire firm insuring collision damage risk, where the premium is paid by the hire firm. (Where the premium is paid by the hirer, an application for a conventional firm, not a captive, must be made.); and(c) A firm, or group of firms insuring professional indemnity risks (in which case the captive would be classed as C2 and the business includes liability risks).Rulebook Reference Glossary of terms CI-2.1.6
A
captive insurance firm may be licensed to write either insurance and reinsurance business or may restrict its business to reinsurance only.Amended: January 2007CI-2.1.7
A
captive insurer may also be licensed either as atakaful firm (in which case it will appoint aShari'a Supervisory Board and will operate in accordance with the principles of the Shari'a). For further details please refer to the Module TA (Takaful).Rulebook Reference Module TA Amended: January 2007CI-2.2 CI-2.2 Principles of Business
CI-2.2.1
There are 10 Principles of Business that apply to all
insurance licensees includingcaptive insurers .Amended: January 2007CI-2.2.2
Non compliance with the Principles of Business can lead to enforcement action, which can include the calling into question of whether the firm or its management continue to meet the fitness and propriety criteria for approval.
Rulebook Reference PB-B.2.1 CI-2.2.3
The Principles of Business are:
1. Observing high standards of integrity and fair dealing.Insurance licensees andapproved persons should be honest and straightforward in their dealings withcustomers. 2. Taking all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of acustomer , and disclose fully all relevant information tocustomers , as required by the CBB’s Regulations and Directives.3. Acting with due skill, care and diligence.4. Observing in full any obligations of confidentiality, including with respect toclient information . This requirement does not over-ride lawful disclosures.5. Observing proper standards of market conduct, and avoiding action that would generally be viewed as improper.6. Taking reasonable care to safeguard the assets ofcustomers .7. Paying due regard to the legitimate interests ofcustomers and communicating with them in a fair and transparent manner and, when dealing withcustomers who are entitled to rely on advice or discretionary decisions, taking reasonable care to ensure the suitability of such advice or decisions.8. Maintaining an open and co-operative relationship with the CBB and other competent regulatory bodies and taking reasonable care to ensure that activities comply with all applicable laws and Regulations.9. Maintaining adequate resources, whether human, financial or otherwise, sufficient to run the business in an orderly manner.10. Taking reasonable care to ensure that affairs are managed effectively and responsibly, with appropriate management, and systems and controls in relation to the size and complexity of operations.Rulebook Reference PB-1 Amended: January 2007
Amended: October 2007CI-2.3 CI-2.3 High-Level Controls
CI-2.3.1
In accordance with Principle of Business 10,
insurance licensees must put in place effective management, systems and controls for their business. The High-Level Controls Module sets out the Directives that put this principle into practice.Rulebook Reference PB-1.10 Amended: January 2007
Amended: October 2007CI-2.3.2
Some of these Rules govern the establishment, composition, functions and responsibilities of Boards of
Directors . All incorporatedinsurance licensees must have a Board that is ultimately accountable and responsible for the management and performance of the firm.Captive insurers are subject to various provisions relating to corporate governance contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ("Commercial Companies Law 2001"). In case of conflict, the Commercial Companies Law shall prevail.Rulebook Reference HC-10 Amended: April 2011
Amended: January 2007
Amended: October 2007CI-2.3.3
Responsibility for the day-to-day management of a
captive insurer is vested in theChief Executive Officer , which is acontrolled function .Captive insurers , unlike otherinsurance licensees , are not required to consider the need to operate Committees.Rulebook Reference HC-10 Amended: April 2011
Amended: January 2007
Amended: October 2007CI-2.3.4
The CBB expects, for
Bahraini insurance licensees , for Bahrain to be the principal place of business and for Bahrain to be the centre of its governance and management. In the case of acaptive insurance firm , this must include:(a) The majority of its Board meetings taking place in Bahrain;(b) Appointing a locally-residentGeneral Manager ; and(c) Premises and records being located in the Kingdom of Bahrain.In order to satisfy the second and third of these requirements, it is expected that most captive insurance companies will outsource their day-to-day operations to a firm licensed by the CBB to manage captives (
insurance manager ) although captives may use their own staff and premises. The appointment of aninsurance manager must be approved by the CBB and should be in accordance with the outsourcing requirements of the Rulebook (refer to the Risk Management Section of this guide).Rulebook Reference AU-2.2.1 and
GR-1Amended: April 2011
Amended: January 2007
Amended: October 2007CI-2.3.5
As part of their management structure, captive insurance firms should include an internal auditor.
Rulebook Reference HC-10.6 Amended: April 2011
Amended: January 2007CI-2.3.6
An
insurance manager must nominate a Compliance Officer, who must also be designated as the Compliance Officer for the managed firms. A self-managedcaptive insurer must also appoint a Compliance Officer, although this role may be combined with other functions.Rulebook Reference HC-3.4.5 Amended: January 2007
Amended: October 2007CI-2.3.7
Chapters HC-10 contains additional guidance applicable to all
captive insurance firms in respect of financial statements certification, appointment, training and evaluation of the Board, remuneration ofapproved persons , management structure, corporate ethics, communication between the Board and shareholders and corporate governance disclosure.Rulebook Reference HC-10 Amended: April 2011
Amended: January 2007CI-2.4 CI-2.4 Auditors and Actuaries
CI-2.4.1
Captive insurance firms must have an annual external audit. Firms must obtain prior written approval from the CBB before appointing or re-appointing theirauditor .Rulebook Reference AA-1.1.1 Amended: January 2007
Amended: October 2007CI-2.4.2
There are specific Rules and Guidance governing the duties and restrictions of external
auditors .Rulebook Reference AA-1 Amended: January 2007
Amended: October 2007CI-2.4.3
All
insurance firms — including captives — who conductlong-term insurance business must appoint anactuary that must provide an annual actuarial evaluation and report.Rulebook Reference AA-4.1 Amended: January 2007
Amended: October 2007CI-2.4.4
Insurance firms that undertakegeneral insurance business only must consider the need for an annual actuarial evaluation and report, from anactuary , at least once every three-year period.Rulebook Reference AA-4.1 Amended: October 2007CI-2.4.4A
Insurance firms can appoint aRegistered Actuary orSigning Actuary to meet the CBB requirements.Rulebook Reference AA-4.2 CI-2.4.5
The CBB maintains on its website a list of
Registered Actuaries that can practise in the Kingdom of Bahrain. ARegistered Actuary must be independent of the insurance firm for which he is providing an actuarial evaluation and report.Rulebook Reference AU-1.3 and AA-4.2 Amended: January 2007
Amended: October 2007CI-2.5 CI-2.5 General Requirements
CI-2.5.1
Captive insurers are expected to maintain books and records sufficient to produce financial statements and show a record of the business undertaken. Where this function is carried out by aninsurance manager , thecaptive insurer should ensure that the CBB has access to these records at any time and these should be sufficient to allow an audit of the insurer's business or an on-site examination of thecaptive insurer by the CBB.Rulebook Reference GR-1.1 Amended: January 2007CI-2.5.2
Where the
clients ofcaptive insurance firms are limited to related companies,captive insurers are exempted from the due diligence requirement for client records.Rulebook Reference GR-1.2.4 Amended: January 2007
Amended: October 2007CI-2.5.3
As the business of
captive insurers is limited to related parties,captive insurers do not require prior approval from the CBB for their corporate name and any trade names.Rulebook Reference GR-2.1 Amended: January 2007CI-2.5.4
Captive insurers do not require CBB pre-approval for the distribution of dividends toshareholders .Rulebook Reference GR-3.1 Amended: January 2007CI-2.5.5
Where a
captive insurer transfers its portfolio to a third party, prior written approval from the CBB is required. Where all thepolicyholders affected by the transfer have given their consent in advance, then the disclosure requirements in Paragraph GR-4.2.1 do not apply. The CBB may waive some or all of the requirements in Section GR-4.2 where, in its opinion, they are not necessary in order to protect the interests ofpolicyholders .Rulebook Reference GR-4.1
GR-4.2Amended: January 2007CI-2.5.6
Where the transferor is a Category C1 captive
captive insurance firm , it is not subject to the publication requirements set out in Section GR-4.4.Rulebook Reference GR-4.4 Amended: January 2007CI-2.5.7
The management company of a
captive insurance firm is not automatically acontroller of thecaptive insurer .Rulebook Reference GR-5.2.4 Amended: January 2007CI-2.5.8
All requirements dealing with
close links apply in full tocaptive insurance firms .Rulebook Reference GR-6 CI-2.5.9
Insurance firms are required to maintain statutory deposits as per Article 181 of the CBB Law. Forcaptive insurers , the statutory deposit referred to in Article 181 is to be zero (nil).Rulebook Reference GR-7.1.2 Amended: January 2007
Amended: October 2007CI-2.5.10
In accordance with the Bahrain Commercial Companies Law,
captive insurance firms are required to 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 50 per cent of the paid-up capital.Rulebook Reference GR-7.2 Amended: January 2007CI-3 CI-3 Business Standards
CI-3.1 CI-3.1 Capital Adequacy
CI-3.1.1
Principle 9 requires
insurance licensees to hold adequate financial resources for the needs of the business. Module CA (Capital Adequacy) sets out in detail the minimum financial resources requirements forinsurance licensees . In addition, it is the responsibility of Boards ofinsurance licensees to make their own assessment of the financial resources needed to meet their liabilities.Rulebook Reference PB-1.9 CI-3.1.2
The base requirement is for firms to maintain at all times capital available in excess of the higher of its
required solvency margin andminimum fund .Rulebook Reference CA-1.2.1 Amended: January 2007CI-3.1.3
The
minimum fund , thatcaptive insurance firms must maintain (at all times) is:Category C1 firm: — BD 75,000; and
Category C2 firm: — BD 300,000.These minimum requirements for C1 firms are lower than the corresponding amounts for conventional
insurance firms , in recognition of captives' risk exposure being to its owning group rather than third parties.Rulebook Reference CA-2.1.5 Amended: January 2007
Amended: October 2007CI-3.1.4
For general insurance, the
required solvency margin is calculated on the basis of the premiums written and claims incurred by the firm. A risk factor is applied, to reflect the differing risk profiles of different classes of insurance. For long-term insurance, therequired solvency margin is calculated on the basis of the aggregate of themathematical reserves calculation and thecapital sum at risk calculation . Refer to Chapter CA-2 for the detailed rules governing the calculation of therequired solvency margin .Rulebook Reference CA-2 Amended: January 2007CI-3.1.5
Captive insurers must maintain a capital available at all times in accordance with the rules in Chapter CA-1.Rulebook Reference CA-1 Amended: January 2007CI-3.1.6
The Valuation and Admissibility of Assets Regulations are contained in Chapter CA-4. Assets of an
insurance firm may only be given value for regulatory purposes in accordance with the Valuation of Assets Regulations. Surplus (inadmissible) assets are valued at zero for the purposes of calculating the firm's capital available. Assets considered inadmissible include those that exceed permitted categories and counterparty limits and intangible assets (e.g. brand value).Rulebook Reference CA-4 CI-3.1.7
The Valuation of Liabilities Regulations are contained in Chapter CA-5. Liabilities must be valued in accordance with International Accounting Standards (to the extent available) or, until such standards come into effect, with Section CA-5.1.
Rulebook Reference CA-5.1 Amended: January 2007CI-3.1.8
There are also Rules concerning the matching of assets and liabilities, to minimise the risk of maturity and/or currency mismatch in the portfolio.
Rulebook Reference CA-6.1 Amended: October 2007CI-3.1.9
Captive insurers are exempted from the requirements to report on their group solvency position.Rulebook Reference CA-7.1 Amended: January 2007CI-3.2 CI-3.2 Business Conduct
CI-3.2.1
Module BC (Business Conduct) comprises general rules (BC-1) and a Code of Practice (BC-2). These rules apply in full to
captive insurers . However, it should be noted that BC is principles-based. Because acaptive insurer is insuring the risks of its parent group, it would be acceptable for the level of sales documentation and written disclosure to be less than would be required for retail customers. The CBB considers this to be compatible and consistent with maintaining a professional insurer-insured relationship between the parties.Rulebook Reference BC-A.1 Amended: January 2007CI-3.2.2
The CBB expects the
insurance manager to consider the requirements of the Code in relation to the service provided, on behalf of the captive, to its 'clients', namely insured members of the group. In most situations, for captives, the CBB would expect however that the requirements of the Code could be met by putting in place a simple protocol between the captive and the insured members of the group.Amended: January 2007CI-3.3 CI-3.3 Risk Management
CI-3.3.1
Principle 10 (CI-2.2.3) requires firms to have systems and controls that are appropriate for their business. Consequently, Module RM (Risk Management) contains Rules and Guidance on how, specifically, firms should monitor and manage risk. This Module applies to all licensees, and it is for firms to consider the scale and complexity of the procedures that are required, given the nature of their operations.
Rulebook Reference PB-1.10 Amended: January 2007
Amended: October 2007CI-3.3.2
The Module contains both:
• General requirements (on the overall management of risk); and• Specific requirements on the management of specific risk classes.In meeting these requirements for
captive insurers , the CBB expects thatinsurance managers will put in place the systems and controls for on-going identification and monitoring of risks on behalf of the companies that they manage, and that these will be reported periodically to Boards. However, the overall responsibility for the management of risk ('the establishment and oversight of effective risk management systems'), and ensuring the adequacy of this reporting, lies with Boards.Rulebook Reference RM-1
RM-2 to RM-8
RM-1.1.2Amended: January 2007CI-3.3.3
There are specific requirements for outsourcing. For a
captive insurer , who outsources the day-to-day management (and perhaps other functions such as claims handling), it is a requirement that these should be governed by a written service agreement that meets the requirements of Chapter RM-7.Rulebook Reference RM-7 Amended: January 2007CI-3.3.4
The CBB has exempted
captive insurance firms from the specific requirement to undertake stress and scenario testing to test the resilience of their financial resources to specific areas of significant risk. This does not in any way exempt the Board from its general requirement to ensure the effectiveness of its risk management systems (including, but not limited to, ensuring the appropriateness of its premium structure and carrying out any financial modelling considered necessary as part of its underwriting process). The CBB would consider it good practice, as part of this review of the Board, for the firm to carry out stress testing to evaluate the effect of the principal risks identified on the financial resources of the firm. The CBB would also expect an application for licensing to include such stress-testing of its financial projections with its application.Rulebook Reference RM-3.1.8
RM-4.1.5Amended: January 2007CI-3.4 CI-3.4 Financial Crime
CI-3.4.1
The general law of Bahrain imposes obligations on individuals and firms in relation to the prevention and prohibition of the laundering of money. Module FC applies to all
insurance licensees .Rulebook Reference Decree Law No.4 CI-3.4.2
In addition, Module FC contains specific Rules and Guidance for
insurance licensees that require them to have effective money laundering controls and to report suspicious transactions to therelevant authorities .Rulebook Reference Module FC
FC-8 (details of penalties)Amended: October 2007CI-3.4.3
Chapter FC-1 outlines the requirements for customer due diligence. In the case of
captive insurance firms it is expected that this identity will be apparent both from the ownership of the captive and the origin of insurance premiums from traceable bank accounts. In this case, no further verification will be needed as a matter of routine, although this does not exempt firms and individuals from reporting any transaction that they consider suspicious in nature.Rulebook Reference FC-1 Amended: January 2007CI-3.4.4
The reporting of suspicious transactions is the responsibility of the firm's Money Laundering Reporting Officer ('MLRO').
Captive insurance firms that are managed by aninsurance manager are specifically exempted from appointing a MLRO, as theinsurance manager must appoint one to perform these responsibilities for all firms under its management.Rulebook Reference FC-3.1.1 and
FC-3.1.2Amended: January 2007
Amended: October 2007CI-3.4.5
The MLRO will prepare an annual report on compliance with the anti-money laundering and combating terrorism financing controls and procedures. The Boards of captive firms will need to include the consideration of this report as a standing item for Board meetings each year.
Rulebook Reference FC-3.3 CI-3.4.6
Appendix FC-(iv) contained in Part B of the CBB Rulebook provides guidance material and examples of transactions that would be considered suspicious for the purposes of this Directive.
Rulebook Reference Appendix FC-(iv) Amended: January 2007CI-4 CI-4 Reporting Requirements
CI-4.1 CI-4.1 CBB Reporting
CI-4.1.1
Captive insurance firms are required to file an Insurance Firm Return to the CBB providing details of the financial condition of the firm and the business undertaken. They are exempted from quarterly and group financial reportings to the CBB.Amended: January 2007CI-4.1.2
Details of the content of the Insurance Firm Return can be found in Section BR-1.1. The content of the Insurance Firm Return is identical to that required for conventional
insurance firms , except that additional information is required forcaptive insurers (see CI-4.1.3). The Return must be:(a) Deposited with the CBB within 3 months of the year end;(b) Reviewed by the externalauditor based on agreed-upon procedures;(c) Be accompanied by aDirectors' Certificate; and(d) Where applicable, include an actuarial certificate and report.Rulebook Reference BR-1.1 Amended: January 2007
Amended: October 2007CI-4.1.3
The insurance business written by
captive insurance firms lacks the diversity of risk of conventional firms. Because of this lack of diversity, the CBB seeks additional information from captive firms about their overall risk exposure and the level of reinsurance protection available. This additional information is included for captive insurers as part of the Insurance Firm Return as:(a) Risk Gap — the degree to which the firm's potential liabilities (under the policy limits) exceed available assets and the resources available to meet this gap; and(b) Reinsurance — the firm's providers, limits and claims.Rulebook Reference BR-1.1.6 Amended: January 2007CI-4.1.4
Captive insurance firms must disclose to the CBB material information about changes in their situation including (but not limited to):(a) Significant breaches in Rules and other requirements;(b) Legal, professional, administrative and other proceedings, fraud, errors and other irregularities;(c) Financial difficulties, breach of minimum solvency requirements, insolvency, bankruptcy, winding-up;(d) Changes inauditors andactuaries ;(e) Changes in address, legal status etc.; and(f) Changes incontrollers andclose links .Rulebook Reference BR-2.2.4
BR-2.2.6 to BR-2.2.8
BR-2.2.11
BR-2.3.29
BR-2.3.3 and BR-2.3.4
BR-2.3.7Amended: January 2007
Amended: October 2007CI-4.1.5
It is envisaged that, for captive firms, the information provided to the CBB through the Insurance Firm Return and periodic notification of changes of
controller etc. will be adequate for their supervisory purposes, other than in exceptional circumstances.Captive insurance firms are reminded, however, that they are required to maintain an open relationship with the supervisor and that the CBB does have powers to visit the premises of firms orinsurance managers (other than in exceptional circumstances, with reasonable notice), request information and commission a report on the firm's business.Rulebook Reference BR-3.1
BR-3.2Amended: January 2007CI-4.2 CI-4.2 Public Disclosure
CI-4.2.1
The Public Disclosure Module of the CBB Rulebook does not apply to
captive insurers .Rulebook Reference Module PD Amended: January 2007CI-5 CI-5 Enforcement and Redress
CI-5.1 Enforcement
The Enforcement Module of the CBB Rulebook applies in full to all
insurance licensees , includingcaptive insurers .Rulebook Reference Module EN Amended: January 2007IM IM Insurance Intermediaries and Managers
IM-A IM-A Introduction
IM-A.1 IM-A.1 Purpose
Executive Summary
IM-A.1.1
This Module summarises the key aspects of requirements applicable to
insurance intermediaries andinsurance managers licensed in Bahrain, which are set out in full elsewhere in the different subject Modules of Volume 3 (Insurance). This Module is intended as an introductory guide to these Regulations and Directives, for potential license applicants,insurance brokers ,insurance consultants ,insurance managers and other interested parties. This Module only contains guidance material; in the event of discrepancy between this Module and the rules themselves, the latter will prevail.Amended: January 2007
Amended: October 2007IM-A.1.2
For the purposes of this Module, the following terms will apply:
Insurance Broker
As per Paragraph AU-1.4.10, the broking of insurance contracts means:
(a) Acting as an agent for anotherperson in relation to the buying of insurance for that otherperson ;(b) Making arrangements with a view to anotherperson , whether as principal or agent, buying insurance; or(c) Advising on insurance.Insurance Consultant
As per Paragraph AU-1.4.16, the offering of insurance advice (insurance consultant) means advising on insurance to third parties, without also acting as agent or making arrangements with a view to another
person buying insurance.Insurance Manager
As per Paragraph AU-1.4.20, the provision of insurance management services means the provision of management services to, or the exercising of managerial functions on behalf of, an
insurance firm . Aninsurance manager is appointed by aninsurance firm and is licensed in Bahrain to perform, under a contract of service, any managerial functions that are performed, or authority exercised, by aperson who is not aDirector nor anemployee of theinsurance firm , acting on the express or implied authority of its Board and/orGeneral Manager . 'Managerial functions' include, but are not limited to, the effecting ofcontracts of insurance and the issuing of instructions for the settlement of claims.Insurance Intermediary
For purposes of this Module, the term
insurance intermediary refers toinsurance brokers andinsurance consultants .Amended: January 2007
Amended: October 2007Legal Basis
IM-A.1.3
This Module contains the Central Bank of Bahrain's (CBB) Directive (as amended from time to time) relating to
insurance intermediaries andinsurance managers and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable toinsurance licensees (including theirapproved persons ).Amended: January 2011
Amended: October 2007
Adopted: January 2007
IM-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
Adopted: January 2007IM-A.2 IM-A.2 Module History
IM-A.2.1
This Sector Guide was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007IM-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Amended: January 2007IM-A.2.3
A list of recent changes made to this module are detailed in the table below:
Module Ref. Change Date Description of Changes IM-1.2 01/07/05 Corrected that only insurance consultants and insurance managers are exempt from statutory deposits. IM-2.5 01/07/05 Corrected that insurance brokers are subject to statutory deposits. IM-3.4 01/07/05 Clarified scope of application of Decree Law No. 4. IM-2.1 01/10/05 Added the option for insurance manager to operate as a branch resident in Bahrain of a company incorporated in another jurisdiction. IM-3.4 01/10/05 Updated cross-references to Module FC. IM-A.1.3 01/2007 Updated to reflect new CBB Law and new Rule IM-A.1.3 introduced categorising this Module as a Directive. IM-2.3.3 10/2007 Amended the minimum number of Directors required to three as per amendment to Module HC. IM-2.1.7 and 2.1.8 04/2010 Amended legal status of insurance broker and insurance consultant to be in line with amendments made to Module AU. IM-A.1.3 01/2011 Clarified legal basis IM-1.2.1 and IM-2.3 04/2011 Amended to reflect changes to Module HC. IM-1.2.1 04/2012 Added summary of newly released Module CL (Client Money). IM-2.5.7 04/2012 Updated requirements for report on close links. IM-3.1.2 04/2012 Updated capital requirements for insurance brokers. IM-3.2.6 04/2012 Added requirement to have customer complaints handling procedures. IM-3.2A 04/2012 Added Section to deal with newly released Module CL (Client Money). IM-4.1 04/2012 Deleted reference to IMR and added new reference to Insurance broker return (Form IBR). Also added new requirement for agreed upon procedures related to compliance with Module CL. IM-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007IM-1 IM-1 Overview
IM-1.1 IM-1.1 Insurance Intermediaries and Managers in Bahrain
IM-1.1.1
The functions of
insurance broker andinsurance consultant were in existence under the former Bahraini insurance law. The function ofinsurance manager as a regulated activity has been introduced with Volume 3 of the Rulebook.Amended: October 2007IM-1.1.2
The CBB has introduced a regulatory regime aimed at
captive insurers — Module CI. In most cases,captive insurers sub-contract their day-to-day management to a professional management firm. The licensing ofinsurance managers will simplify the licensing requirements ofcaptive insurers , as the parties with whom thecaptive insurer may sub-contract its management will have been considered in detail by the CBB's licensing requirements.Amended: January 2007IM-1.1.3
In accordance with the CBB's definition, the activities of
insurance managers are not limited to acting on behalf ofcaptive insurers but may also relate to non-captive insurance firms, both conventional and takaful.Amended: January 2007IM-1.2 IM-1.2 Structure of this Guidance
IM-1.2.1
The following table lists the Modules of the CBB Insurance Rulebook and indicates those that apply to
insurance brokers ,insurance consultants andinsurance managers . The remaining chapters of this guide will describe in more detail the principal requirements of each Module of the Regulations and Directives that apply toinsurance intermediaries andinsurance managers .HIGH LEVEL STANDARDS
Module AU (Authorisation) Regulations and Directives dealing with the licensing requirements and conditions for providers of regulated insurance services . The Sections dealing with the authorisation requirements, licensing conditions,approved persons conditions and information requirements and processes are applicable toinsurance intermediaries andinsurance managers .Module PB (Principles of Business) Principles that are applicable to all insurance licensees regulated in Bahrain; these apply in full toinsurance intermediaries andinsurance managers .Module HC (High-Level Controls) Directives in respect of governance, systems and controls of licensees. Different Rules and Guidance apply depending on the type of insurance intermediaries andinsurance managers .Module AA (Auditors and Actuaries) Directives on the appointment and functions of external auditors andactuaries ofinsurance licensees . Only those Directives dealing withauditors apply toinsurance intermediaries andinsurance managers .Module GR (General Requirements) Regulations and Directives dealing with requirements covering other areas not included in other Modules. These include: books and records, corporate and trade names, dividends, business transfers, controllers ,close links , statutory deposits, cessation of business and professional indemnity coverage. Statutory cash deposits are required forinsurance brokers .
BUSINESS STANDARDS
Module CA (Capital Adequacy) Directives governing minimum capital and solvency requirements and the valuation of assets and liabilities. Some of these Directives apply specifically to insurance intermediaries andinsurance managers . Considering the nature of their business, the requirements for capital and solvency forinsurance firms are far more detailed than forinsurance intermediaries andinsurance managers .Module BC (Business Conduct) The Code of Business Conduct governs the sale of insurance and applies to all insurance licensees .Module CL (Client Money) Directives applicable to insurance brokers andappointed representatives dealing with the holding ofclient money .Module RM (Risk Management) Risk management standards applicable to licensees. Several of the requirements for risk management can be outsourced to insurance managers .Module FC (Financial Crime) Directives governing the monitoring and reporting of financial crime, including the prevention of money laundering and terrorism financing and insurance fraud. Module TC (Training & Competency) Directives to be developed will apply to insurance intermediaries andinsurance managers .
REPORTING REQUIREMENTS
Module BR (CBB Reporting) Requirements for reporting to the CBB. Annual reporting requirements apply to insurance intermediaries andinsurance managers .Insurance intermediaries andinsurance managers are exempted from group and quarterly reporting requirements.Module PD (Public Disclosure) Module PD does not apply to insurance brokers ,insurance consultants andinsurance managers .
ENFORCEMENT AND REDRESS
Module EN (Enforcement) This Module outlines enforcement powers and processes that may be applied by the CBB and applies in full to all insurance licensees .Module DP (Dispute Resolution) Directives will be developed later. Module CP (Compensation) Directives will be developed later. Amended: April 2012
Amended: April 2011
Amended: January 2007
Amended: October 2007IM-2 IM-2 High Level Standards
IM-2.1 IM-2.1 Authorisation
IM-2.1.1
An entity in Bahrain must be authorised if it wishes to conduct
regulated insurance services , including effecting insurance contracts, the broking of insurance contracts, the offering of advice to third parties and the provision of insurance management services.Rulebook Reference AU-A.1.2 Amended: October 2007IM-2.1.2
An
insurance intermediary may be licensed for several types of business, including general insurance, unit linked long-term insurance, long-term insurance (other than unit-linked business), reinsurance and takaful products.Rulebook Reference AU-1.1.16,
AU-1.1.18,
AU-1.1.19 and
AU-1.1.21Amended: July 2007
Amended: October 2007IM-2.1.3
The broking of insurance contracts refers to advising on insurance, acting as agent for another person in relation to the buying of insurance for that other person or making arrangements with a view to another person, whether as principal or agent, buying insurance. A person does not carry on the broking of insurance contracts if he falls under the definition of
exempt introducer .Rulebook Reference AU-1.4.10 and
AU-1.4.13Amended: October 2007IM-2.1.4
The offering of insurance advice by
insurance consultants refers to providing advice to a person in his capacity as agent for apolicyholder or potentialpolicyholder , on the merits of entering into acontract of insurance as principal or agent.Rulebook Reference AU-1.4.16 Amended: January 2007
Amended: October 2007IM-2.1.5
The provision of insurance management services by
insurance managers refers to the provision of management services or exercising the managerial functions on behalf of aninsurance firm .Rulebook Reference AU-1.4.20 Amended: October 2007IM-2.1.6
Licensees who were carrying out activities that fall within the definition of the regulated activity of
insurance broker prior to 1 April 2005 may be unincorporated entities or natural persons and may continue as such until 31 December 2006.Rulebook Reference AU-2.1.7 IM-2.1.7
New applicants for licensing as
insurance brokers , after 1 April 2005 must be:(i) A Bahraini joint stock company (BSC);(ii) A Bahraini company with limited liability ('WLL');(iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory, and licensed to conduct insurance business in Bahrain prior to 1st April 2009;(iv) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005; or(v) A Bahraini single person company which was incorporated and licensed to conduct insurance business prior to 1st April 2009..
Rulebook Reference AU-2.1.8
Amended: April 2010
Amended: January 2007IM-2.1.8
For
insurance consultants , the legal status must be:(i) A sole proprietorship registered with the Ministry of Commerce;(ii) A Bahraini single person company;(iii) A Bahraini joint stock company (BSC);(iv) A Bahraini company with limited liability ('WLL'); or(v) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005.
Rulebook Reference AU-2.1.11
Amended: April 2010
Amended: January 2007IM-2.1.9
Insurance intermediaries applying for a license must do so in the form prescribed by the CBB and such application must include inter alia, details of proposed professional indemnity coverage.Rulebook Reference AU-1.1.6 Amended: January 2007IM-2.1.10
An
insurance broker's business activity must be restricted by its Memorandum and Articles of Association to insurance broking.Rulebook Reference AU-2.1.10 IM-2.1.11
For
insurance managers , the legal status must be:(i) A Bahraini joint stock company (BSC);(ii) A Bahraini company with limited liability ('WLL'); or(iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory.Rulebook Reference AU-2.1.12 Amended: January 2007IM-2.1.12
insurance intermediaries andinsurance managers with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom.Overseas insurance licensees must maintain a local management presence and premises in the Kingdom appropriate to the nature and scale of their activities.Rulebook Reference AU-2.2.1 IM-2.1.13
All persons wishing to undertake a
controlled function in aninsurance intermediary orinsurance manager must be approved by the CBB prior to their appointment. (Approved Person ).Rulebook Reference AU-1.2 Amended: January 2007IM-2.1.14
Insurance intermediaries andinsurance managers seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is fit and proper to undertake thecontrolled function .Rulebook Reference AU-3 Amended: January 2007IM-2.2 IM-2.2 Principles of Business
IM-2.2.1
There are 10 Principles of Business that apply to all
insurance licensees includinginsurance intermediaries andinsurance managers .Amended: January 2007IM-2.2.2
Non compliance with the Principles of Business can lead to enforcement action, which can include the calling into question of whether the firm or its management continue to meet the fitness and propriety criteria for approval.
Rulebook Reference PB-B.2.1 IM-2.2.3
The Principles of Business are:
1. Observing high standards of integrity and fair dealing.Insurance licensees andapproved persons should be honest and straightforward in their dealings withcustomers , and disclose fully all relevant information tocustomers , as required by the CBB's Regulations and Directives.2. Taking all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of acustomer .3. Acting with due skill, care and diligence.4. Observing in full any obligations of confidentiality, including with respect toclient information. This requirement does not over-ride lawful disclosures.5. Observing proper standards of market conduct, and avoiding action that would generally be viewed as improper.6. Taking reasonable care to safeguard the assets ofcustomers .7. Paying due regard to the legitimate interests ofcustomers and communicating with them in a fair and transparent manner and, when dealing withcustomers who are entitled to rely on advice or discretionary decisions, taking reasonable care to ensure the suitability of such advice or decisions.8. Maintaining an open and co-operative relationship with the CBB and other competent regulatory bodies and taking reasonable care to ensure that activities comply with all applicable laws and Regulations.9. Maintaining adequate resources, whether human, financial or otherwise, sufficient to run the business in an orderly manner.10. Taking reasonable care to ensure that affairs are managed effectively and responsibly, with appropriate management, and systems and controls in relation to the size and complexity of operations.Rulebook Reference PB-1 Amended: January 2007
Amended: October 2007IM-2.3 IM-2.3 High Level Controls
IM-2.3.1
In accordance with Principle of Business 10,
insurance intermediaries andinsurance managers must put in place effective management, systems and controls for their business. The High-Level Controls Module sets out the Directives that put this principle into practice.Rulebook Reference PB-1.10 Amended: January 2007
Amended: October 2007IM-2.3.2
Insurance brokers andinsurance consultants operating as a Bahraini single person company are exempt from the requirements of Module HC.Rulebook Reference HC-B.1.1 Amended: April 2011IM-2.3.3
Some of these Rules govern the establishment, composition, functions and responsibilities of Boards of
Directors . Except for Bahraini single person companies, all incorporatedinsurance intermediaries andinsurance managers must have a Board, composed of a minimum of threeDirectors , which is ultimately accountable and responsible for the management and performance of the firm, in line with the Commercial Companies Law of 2001.Amended: April 2011
Amended: January 2007
Amended: October 2007IM-2.3.4
Responsibility for the day-to-day management of an
insurance intermediary andinsurance manager is vested in theChief Executive Officer , which is acontrolled function . Forinsurance brokers , they should consider having in place an audit committee, but are not required to have in place Nominating and Remuneration Committees.Insurance consultants andinsurance managers are not required to consider the need to operate Committees.Rulebook Reference AU-1.2.9, HC-B.1.2, HC-3.2 and HC-3.3 Amended: April 2011
Amended: January 2007
Amended: October 2007IM-2.3.5
The CBB expects, for
Bahraini insurance licensees , for Bahrain to be the principal place of business and for Bahrain to be the centre of its governance and management.Rulebook Reference HC-1.3.5
AU-2.2.1 and
GR-1Amended: January 2007IM-2.3.6
The CBB requires all
insurance brokers to establish an internal audit function to monitor the adequacy of their systems and controls.Rulebook Reference HC-6.5 Amended: April 2011
Amended: January 2007IM-2.3.7
Insurance intermediaries andinsurance managers must nominate a Compliance Officer. In the case ofinsurance managers , they must also be designated as the Compliance Officer for the managed firms.Rulebook Reference HC-3.4 Amended: October 2007IM-2.3.8
Chapter HC-10 contains guidance applicable to
insurance consultants andinsurance managers in respect of financial statement certification, appointment, training and evaluation of the Board, remuneration ofapproved persons , management structure, corporate ethics, communication between the Board and shareholders and corporate governance disclosure.Rulebook Reference HC-10 Amended: April 2011IM-2.4 IM-2.4 Auditors
IM-2.4.1
Insurance intermediaries andinsurance managers must have an annual external audit. Firms must obtain prior written approval from the CBB before appointing or re-appointing theirauditor .Rulebook Reference AA-1.1.1 Amended: October 2007IM-2.4.2
There are specific Rules and Guidance governing the duties and restrictions of external
auditors .Rulebook Reference AA-1 Amended: January 2007
Amended: October 2007IM-2.5 IM-2.5 General Requirements
IM-2.5.1
Insurance intermediaries andinsurance managers are expected to maintain books and records sufficient to produce financial statements and show a record of the business undertaken.Rulebook Reference GR-1.1 IM-2.5.2
Where an
insurance manager maintains the books and records of acaptive insurer or anotherinsurance firm , these records must be sufficient to allow an audit or an on-site examination by the CBB of thecaptive insurer orinsurance firm .Rulebook Reference GR-1.1.4 Amended: January 2007IM-2.5.3
An
insurance broker must maintain separateclient accounts separate from those used for its own funds.Rulebook Reference GR-1.2.9 to GR-1.2.12 Amended: April 2012
October 2007IM-2.5.4
Insurance intermediaries andinsurance managers require prior approval from the CBB for their corporate name and any trade names.Rulebook Reference GR-2.1 Amended: January 2007IM-2.5.5
Bahraini insurance intermediaries andBahraini insurance managers require CBB pre-approval for the distribution of dividends toshareholders .Rulebook Reference GR-3.1 Amended: January 2007IM-2.5.6
All requirements dealing with
controllers apply in full toinsurance intermediaries andinsurance managers .Rulebook Reference GR-5 IM-2.5.7
Requirements dealing with
close links apply in full toinsurance intermediaries andinsurance managers . Annual reporting requirements of close links apply only toinsurance firms andinsurance brokers .Rulebook Reference GR-6 Amended: April 2012IM-2.5.8
Insurance brokers are required to maintain a statutory cash deposit with a retail bank licensed to do business in Bahrain.Rulebook Reference GR-7.1.4 Amended: January 2007
Amended: October 2007IM-3 IM-3 Business Standards
IM-3.1 IM-3.1 Capital Adequacy
IM-3.1.1
Principle 9 requires
insurance licensees to hold adequate financial resources for the needs of the business. The Capital Adequacy Module sets out in detail the minimum financial resources requirements forinsurance licensees . In addition, it is the responsibility of Boards ofinsurance licensees to make their own assessment of the financial resources needed to meet their liabilities.Rulebook Reference PB-1.9 IM-3.1.2
Bahraini insurance brokers must maintain in their insurance brokerage business at all times the greater of:(a) A minimumnet assets value of BD 50,000;(b) 4% of fiduciary liabilities; or(c) 4% of annual income fromglobal insurance broking activities .There are no minimum capital and net asset requirements for
overseas insurance brokers . However, foroverseas insurance brokers , financial statements of the parent company must be submitted to the CBB for review, in order to assess the financial stability of the group on a global basis.Rulebook Reference CA-1.3 Amended: April 2012
Amended: October 2007
Amended: January 2007IM-3.1.3
Insurance consultants andinsurance managers must possess financial resources commensurate with the scale and nature of their insurance consultancy or management activities. There are no minimum capital and net assets requirements applicable toinsurance consultants andinsurance managers . However, Principle 9 does apply and the CBB may suspend or revoke the license of anyinsurance consultant orinsurance manager whom it reasonably considers does not possess financial resources commensurate with the scale and nature of its insurance consultancy or management activities.Rulebook Reference CA-1.4 Amended: January 2007IM-3.2 IM-3.2 Business Conduct
IM-3.2.1
The Business Conduct Module comprises general rules (BC-1) and a Code of Practice (BC-2). These rules apply in full to
insurance intermediaries . However, it should be noted that Module BC is principles-based.Rulebook Reference BC-A.1 Amended: January 2007IM-3.2.2
The CBB expects the
insurance manager to consider the requirements of the Code in relation to the service provided, on behalf of the captive orinsurance firm , to its 'clients', namely insured members of the group.Rulebook Reference BC-B.1.4 Amended: January 2007IM-3.2.3
Other than a
client who is an unincorporated entity with a turnover exceeding BD 1 million per year, aninsurance intermediary must draw theclient's attention to the status of theinsurance firm — whether or not theinsurance firm is locally licensed (as aBahraini insurance firm oroverseas insurance firm ) and, if not, the reasons for recommending or choosing thatinsurance firm . In respect of theseclients , this advice must be delivered in writing.Rulebook Reference BC-2.6.4 Amended: January 2007IM-3.2.4
Insurance intermediaries acting on behalf ofcustomers in arranging their insurance must, on request, disclose the amount of commission payable to them from the insurance premium, and any other remuneration received for arranging the insurance contract.Rulebook Reference BC-2.6.6 Amended: January 2007IM-3.2.5
Licensees must avoid conflicts of interest, or if conflicts are unavoidable, must explain the position fully and manage the situation so as to avoid prejudice to any party.
Rulebook Reference BC-2.13 IM-3.2.6
Licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints.
Rulebook Reference BC-4 Added: April 2012IM-3.2A IM-3.2A Client Money
IM-3.2A.1
The Client Money Module outlines the requirements that
insurance brokers have to meet with regards to holdingclient money for which they are responsible.Rulebook Reference CL-A.1 Added: April 2012IM-3.2A.2
Where an
insurance broker receives payment from a client, it must maintain one or more premiums/contributions account and heldclient money separate from its own money.Rulebook Reference CL-1.1.1 Added: April 2012IM-3.2A.3
Insurance brokers must ensure that they maintain proper records, sufficient to show and explain their transactions and commitments in respect of theirclient money .Rulebook Reference CL-1.2.1 Added: April 2012IM-3.2A.4
Unremitted insurance premiums held in the
client money account and uncollected premiums from insureds must be recorded asfiduciary assets on the balance sheet of theinsurance broker .
Rulebook Reference CL-1.3.4 Added: April 2012IM-3.2A.5
Insurance brokers must pay toinsurance firms premiums/contributions received no later than 15 calendar days from the date of the receipt of such amounts.
Rulebook Reference CL-2.3.3 Added: April 2012IM-3.2A.6
For brokerage activities,
insurance brokers are prohibited from collecting additional charges (other than the quoted premiums/contributions) from clients.
Rulebook Reference CL-2.3.5 Added: April 2012IM-3.2A.7
Brokerage charged by
insurance brokers cannot exceed 15% of the premiums/contributions quoted byinsurance firms for motor and medical classes of business of direct general insurance business.
Rulebook Reference CL-2.4.2 Added: April 2012IM-3.3 IM-3.3 Risk Management
IM-3.3.1
Principle 10 (IM-2.2.3) requires firms to have systems and controls that are adequate for their business. Consequently, the Risk Management Module of the CBB Rulebook contains Rules and Guidance on how, specifically,
insurance licensees should monitor and manage risk. This Module applies in full toinsurance brokers , except for the Sections dealing with market risk (RM-4.1) and insurance technical risk (RM-5.1). This Module does not apply toinsurance consultants andinsurance managers .Rulebook Reference PB-1.10 and
RM-B.1.1
RM-B.1.6Amended: January 2007
Amended: October 2007IM-3.3.2
The Module contains both:
• General requirements (on the overall management of risk); and• Specific requirements on the management of specific risk classes.Rulebook Reference RM-1
RM-2 to RM-8Amended: January 2007IM-3.3.3
While the business of
insurance managers is not subject to this Module, clients ofinsurance managers that areinsurance firms , such ascaptive insurers , are subject to the requirements of this Module. Theinsurance manager , in fulfilling its obligations to its clients, therefore needs to manage the affairs of its clients in accordance with the requirements of the Rulebook, including this Module.Rulebook Reference RM-B.1.7 Amended: January 2007IM-3.4 IM-3.4 Financial Crime
IM-3.4.1
The general law of Bahrain imposes obligations on individuals and firms in relation to the prevention and prohibition of the laundering of money. All
insurance licensees are subject to the statutory requirements of this Law.Rulebook Reference Decree Law No.4 IM-3.4.2
Chapters FC-1 to FC-9 applies to
insurance firms andinsurance brokers . Wherecaptive insurers are managed by aninsurance manager , these Chapters are also to be applied to theinsurance manager . This Module must be applied when dealing with newclients and when renewing policies or other insurance arrangements.Rulebook Reference FC-B.1.1 Amended: January 2007IM-3.4.3
Chapter FC-10 dealing with insurance fraud, applied to all
insurance licensees .Rulebook Reference FC-B.1.4 IM-3.4.4
Chapter FC-1 outlines the requirements for customer due diligence. In the case of
captive insurance firms it is expected that this identity will be apparent both from the ownership of the captive and the origin of insurance premiums from traceable bank accounts. In this case, no further verification will be needed as a matter of routine, although this does not exempt firms and individuals from reporting any transaction that they consider suspicious in nature.Rulebook Reference FC-1 Amended: January 2007IM-3.4.5
The reporting of suspicious transactions is the responsibility of the firm's Money Laundering Reporting Officer ('MLRO').
Captive insurance firms that are managed by aninsurance manager are specifically exempted from appointing a MLRO, as theinsurance manager must appoint one to perform these responsibilities for all firms under its management.Rulebook Reference FC-3.1.1 and
FC-3.1.2Amended: January 2007
Amended: October 2007IM-3.4.6
The MLRO will prepare an annual report on compliance with the anti-money laundering and combating terrorism financing controls and procedures. The Boards of captive firms will need to include the consideration of this report as a standing item for Board meetings each year.
Rulebook Reference FC-3.3 IM-3.4.7
Appendix FC-(iv), contained in Part B of the CBB Rulebook, provides guidance material and examples of transactions that would be considered suspicious for the purposes of this Directive.
Rulebook Reference Appendix FC-(iv) Amended: January 2007IM-4 IM-4 Reporting Requirements
IM-4.1 IM-4.1 CBB Reporting
IM-4.1.1
Insurance consultants andinsurance managers must submit to the CBB the audited financial statements for each financial year. They are exempted from quarterly reporting and from group financial reporting to the CBB.Rulebook Reference BR-1.2 Amended: April 2012
Amended: January 2007IM-4.1.1A
Insurance brokers must prepare and submit to the CBB an Insurance Broker Return (Form IBR) for each financial year, within 2 months of theinsurance broker's financial year end.Rulebook Reference BR-1.2A Added: April 2012IM-4.1.2
Details of the content of the Insurance Broker Return (Form IBR) can be found in BR-1.2A.6. The Return must be:
(a) Deposited with the CBB within 3 months of the year end;(b) Reviewed by the externalauditor based on agreed-upon procedures; and(c) Be accompanied by aDirectors' Certificate.
Rulebook Reference BR-1.2A.6
BR-1.2A.1
BR-1.2A.14
BR-1.2A.11Amended: April 2012
Amended: October 2007
Amended: January 2007IM-4.1.2A
Insurance brokers must submit to the CBB within 3 months from the financial year-end, a report as to the quality of theinsurance broker's procedures dealing with theinsurance broker's fiduciary assets/liabilities and compliance with Module CL (Client Assets)Rulebook Reference BR-1.5.4 Added: April 2012IM-4.1.3
Insurance intermediaries andinsurance managers must disclose to the CBB material information about changes in their situation including (but not limited to):(a) Significant breaches in Rules and other requirements;(b) Civil, criminal, and disciplinary procedures, fraud, errors and other irregularities;(c) Financial difficulties, breach of minimum solvency requirements, insolvency, bankruptcy, winding-up;(d) Changes inauditors andactuaries ;(e) Changes in address, legal status etc.; and(f) Changes incontrollers andclose links .Rulebook Reference BR-2.2.4
BR-2.2.6 to BR-2.2.8
BR-2.2.11
BR-2.3.29
BR-2.3.3
BR-2.3.7Amended: January 2007
Amended: October 2007IM-4.1.4
Insurance intermediaries andinsurance managers are required to maintain an open relationship with the supervisor and must permit representatives of the CBB, or persons appointed for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of their business premises in relation to the discharge of the CBB's functions under the relevant law. The CBB does have powers to request information and commission a report on the firm's business.Rulebook Reference BR-3.1
BR-3.2Amended: January 2007IM-4.2 IM-4.2 Public Disclosure
IM-4.2.1
The Public Disclosure Module of the CBB Rulebook does not apply to
insurance brokers ,insurance consultants andinsurance managers .Rulebook Reference PD-B.1.4 Amended: January 2007IM-5 IM-5 Enforcement and Redress
IM-5.1 IM-5.1 Enforcement
IM-5.1.1
The Enforcement Module of the CBB Rulebook applies in full to all
insurance licensees .Rulebook Reference Module EN Amended: January 2007TA TA Takaful / Retakaful
TA-A TA-A Introduction
TA-A.1 TA-A.1 Purpose
Executive Summary
TA-A.1.1
This Module summarises the key aspects of CBB requirements applicable to takaful and retakaful firms licensed in Bahrain, which are set out in full elsewhere in the different subject Modules of Volume 3 (Insurance). This Module is intended as an introductory guide to these Regulations and Directives, for potential license applicants,
takaful and retakaful insurance firms and other interested parties. This Module only contains guidance material; in the event of discrepancy between this Module and the rules themselves, the latter will prevail.Amended: January 2007Legal Basis
TA-A.1.2
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) relating to Takaful/Retakaful and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
insurance licensees (including theirapproved persons ).Amended: January 2011
Added: January 2007TA-A.1.3
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2007TA-A.2 TA-A.2 Module History
TA-A.2.1
This Sector Guide was first issued in April 2005 by the BMA together with the rest of Volume 3 (Insurance). Any material changes that have subsequently been made to this Module are annotated with the calendar date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: January 2007TA-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
Added: January 2007TA-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TA-1.1 01/07/05 Minor word change. TA-1.2 01/07/05 Minor word change. TA-2.2 01/07/05 Minor word change. TA-2.4 01/07/05 Minor word change. TA-3.2 01/07/05 Minor word change. TA-4.1 01/07/05 Corrected references. TA-4.2 01/07/05 Clarified language of takaful disclosure. TA-3.4 01/10/05 Update cross-references to Module FC. TA-A.1.2 01/2007 Updated to reflect new CBB Law and new Rule A.1.2 introduced categorising th Module as a Directive. TA-2.4 01/2007 Amended section to be in line with changes made for actuaries. TA-A.1.2 01/2011 Clarified legal basis TA-1.2.1 and TA-2.3 04/2011 Amended to reflect changes to Module HC. TA-1.2.1, TA-2.4.3, TA-2.4.4, TA-3.1.3 and TA-3.1.13A 04/2014 Updated to reflect the consultation on the enhanced operational and solvency framework for Takaful firms. TA-A.2.3 [Deleted]
Deleted: January 2007TA-A.2.4
Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).
Amended: January 2007TA-1 TA-1 Overview
TA-1.1 TA-1.1 The Concept of Takaful
TA-1.1.1
It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shari'a.
Takaful firms (that is, thoseinsurance firms that choose to apply Shari'a to govern their operations and products) provide products and services corresponding to those offered by a conventional insurer to an insured (policyholder ) but in a legitimate co-operative manner consistent with Islamic principles. Accordingly, takaful contracts are designed so as to be free of any gharar (uncertainty that would render them non-compliant with Shari'a), riba (interest) and other prohibitions.Amended: January 2007
Amended: October 2007TA-1.1.2
The concept of
takaful involves the payment of contributions that are wholly or partially donated to form an insurance portfolio. The pooled resources are then used to pay indemnity when the insured risk occurs. The pooling of donations and assisting those in need through indemnity payments does not contradict Shari'a but is in line with the principles of compensation and shared responsibilities among the community.Amended: January 2007
Amended: October 2007TA-1.1.3
Takaful has been undertaken using a number of different operational models or combinations thereof. The two most common bases of operating a takaful fund are as follows:a) The al mudaraba model; andb) The al wakala model.Amended: January 2007
Amended: October 2007TA-1.1.4
The al mudaraba model, as the name suggests, is a profit sharing model whereby investors provide capital and contributions (investment funds/premiums) are received from the takaful participants. The contract specifies how the profit (surplus) from the operations is to be shared according to the principle of al mudaraba. Generally the sharing arrangements allow the operator to share in both the underwriting results from the operations as well as any favourable investment performance on the invested contributions.
Amended: January 2007TA-1.1.5
The al wakala model operates somewhat differently. The takaful participants pay contributions to the takaful fund. However these contributions include the payment of fees and charges due to the operator together with a donation to the community (takaful) fund. All risks are borne by the fund and the annual operating surplus belongs exclusively to the participants. The takaful operator does not share directly in either the risk borne by the fund or any surplus/deficit of the fund. Instead, the operator receives a set fee for managing the operations on the participants' behalf. It should however be noted that the operator's remuneration may (depending on the terms of the contract) include a performance fee, charged against any surplus, as an incentive to effectively manage the takaful fund. Under the al wakala model the operator can only make a profit by ensuring expenses of managing the operations are less than the fees. Those costs and charges that can be charged to the takaful fund must be provided at the lowest possible cost level that the operator can negotiate.
Amended: January 2007TA-1.1.6
In Bahrain, the current practice is to adopt the al wakala model for underwriting activities and the al mudaraba for the investment activities of
takaful . This approach appears to be that favoured by the 'Accounting and Auditing Organisation For Islamic Financial Institutions' ('AAOIFI'). The CBB Rules have been designed to be in line with AAOIFI standards and have been adapted to correspond to current industry practice.Amended: January 2007
Amended: October 2007TA-1.1.7
Each licensed
takaful firm is required to have aShari'a Supervisory Board , whose duty is to direct, review and supervise the activities of the company in order to ensure that they are in compliance with Islamic Shari'a rules and principles.Amended: January 2007TA-1.1.8
The CBB does not propose to establish Rules as to what constitutes a takaful product; this is a matter for each firm's
Shari'a Supervisory Board . However, the CBB has an obligation to ensure that consumers of takaful products are afforded the same level of protection as that afforded to the purchasers of conventional insurance products. In addition, the CBB has an obligation to ensure that the operations oftakaful firms do not represent a threat to the stability of Bahrain's financial services industry or wider economy.Amended: January 2007
Amended: October 2007TA-1.2 TA-1.2 Structure of this Guidance
TA-1.2.1
The table below lists the Modules of the CBB Insurance Rulebook and indicates those that apply to
takaful andretakaful firms . The remaining chapters of this guide describe, in more detail, the principal requirements of each Module of the Regulations and Directives that apply totakaful andretakaful firms .HIGH LEVEL STANDARDS
Module AU (Authorisation) Regulations and Directives dealing with the licensing requirements and conditions for providers of regulated insurance services . All sections applicable toinsurance firms are also applicable totakaful andretakaful firms .Module PB (Principles of Business) Principles that are applicable to all insurance licensees regulated in Bahrain; these apply in full totakaful andretakaful firms .Module HC (High-Level Controls) Directives in respect of governance, systems and controls of licensees. All sections apply in full to takaful andretakaful firms . In addition, there are special requirements with respect toTakaful and Retakaful firms .Module AA (Auditors and Actuaries) Directives on the appointment and functions of external auditors andactuaries ofinsurance licensees . These apply in full totakaful andretakaful firms .Module GR (General Requirements) Regulations and Directives dealing with requirements covering other areas not included in other Modules. These include: books and records, corporate and trade names, dividends, business transfers, controllers ,close links , statutory deposits, cessation of business andappointed representatives . These Regulations and Directives apply in full totakaful andretakaful firms .
BUSINESS STANDARDS
Module CA (Capital Adequacy) Directives governing minimum capital and solvency requirements and the valuation of assets and liabilities. Some of these Directives apply to all insurance firms ; some are specific totakaful firms , dealing with solvency requirements for takaful firms and the potential for Qard Hassan from the takaful operator (shareholder fund) should the takaful fund fail to meet the liquidity requirements.Module BC (Business Conduct) The Code of Business Conduct governs the sale of insurance and applies to all insurance licensees . In addition, there are several requirements specifically applicable to takaful dealing with restrictions on the use of the term 'takaful/retakaful' marketing and promotion of takaful products and disclosure of wakala and mudaraba fees to participants.Module RM (Risk Management) Risk management standards applicable to licensees. These requirements apply in full to takaful andretakaful firms .Module FC (Financial Crime) Directives governing the monitoring and reporting of financial crime. This Module applies in full to takaful andretakaful firms .Module TC (Training & Competency) Directives to be developed will apply to both takaful insurance firms andconventional insurance firms .
REPORTING REQUIREMENTS
Module BR (CBB Reporting) Requirements for reporting to the CBB. Annual and quarterly reporting requirements, as well as group reporting, apply in full to takaful andretakaful firms .Module PD (Public Disclosure) The public disclosure requirements pertaining to Bahraini insurance firms andoverseas insurance firms apply in full totakaful andretakaful firms .
ENFORCEMENT AND REDRESS
Module EN (Enforcement) This Module outlines enforcement powers and processes that may be applied by the CBB and applies in full to all insurance licensees .Module DP (Dispute Resolution) Directives will be developed later. Module CP (Compensation) Directives will be developed later. Amended: April 2014
Amended: April 2011
Amended: January 2007
Amended: October 2007TA-2 TA-2 High Level Standards
TA-2.1 TA-2.1 Authorisation
TA-2.1.1
An entity in Bahrain must be authorised if it wishes to conduct
regulated insurance services , including effecting insurance contracts, the broking of insurance contracts, the offering of advice to third parties and the provision of insurance management services.Insurance firms must restrict their business to insurance under their memorandum and articles of association.Rulebook Reference AU-A.1.3 TA-2.1.2
An
insurance firm's license will state the classes of insurance that the firm is authorised to conduct. Aninsurance firm , except forcaptive insurers , cannot undertake bothgeneral insurance andlong-term insurance business .Insurance firms must operate on either conventional insurance principles or on takaful principles; they cannot combine the two.Rulebook Reference AU-A.1.1.14 Amended: January 2007
Amended: October 2007TA-2.1.3
All persons wishing to undertake a
controlled function in aninsurance licensee must be approved by the CBB prior to their appointment. Membership of aShari'a Supervisory Board is acontrolled function and requires CBB approval.Rulebook Reference AU-A.1.2 Amended: January 2007TA-2.1.4
A
captive insurer may also be licensed either as atakaful firm in which case it will appoint aShari'a Supervisory Board and will operate in accordance with the principles of the Shari'a.Amended: January 2007TA-2.2 TA-2.2 Principles of Business
TA-2.2.1
There are 10 Principles of Business that apply to all
insurance licensees includingtakaful andretakaful firms .Amended: January 2007TA-2.2.2
Non compliance with the Principles of Business can lead to enforcement action, which can include the calling into question of whether the firm or its management continue to meet the fitness and propriety criteria for approval.
Rulebook Reference PB-B.2.1 TA-2.2.3
The Principles of Business are:
1. Observing high standards of integrity and fair dealing.Insurance licensees andapproved persons should be honest and straightforward in their dealings withcustomers .2. Taking all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of acustomer , and disclose fully all relevant information tocustomers , as required by the CBB's Regulations and Directives.3. Acting with due skill, care and diligence.4. Observing in full any obligations of confidentiality, including with respect toclient information. This requirement does not over-ride lawful disclosures.5. Observing proper standards of market conduct, and avoiding action that would generally be viewed as improper.6. Taking reasonable care to safeguard the assets ofcustomers .7. Paying due regard to the legitimate interests ofcustomers and communicating with them in a fair and transparent manner and, when dealing withcustomers who are entitled to rely on advice or discretionary decisions, taking reasonable care to ensure the suitability of such advice or decisions.8. Maintaining an open and co-operative relationship with the CBB and other competent regulatory bodies and taking reasonable care to ensure that activities comply with all applicable laws and Regulations.9. Maintaining adequate resources, whether human, financial or otherwise, sufficient to run the business in an orderly manner.10. Taking reasonable care to ensure that affairs are managed effectively and responsibly, with appropriate management, and systems and controls in relation to the size and complexity of operations.Rulebook Reference PB-1 Amended: January 2007
Amended: October 2007TA-2.3 TA-2.3 High-Level Controls
TA-2.3.1
In accordance with Principle of Business 10,
insurance licensees must put in place effective management, systems and controls for their business. The High-Level Controls Module sets out the Directives that put this principle into practice and apply to all takaful and retakaful firms.Rulebook Reference PB-1.10 Amended: January 2007
Amended: October 2007TA-2.3.2
Some of these Rules govern the establishment, composition, functions and responsibilities of Boards of
Directors . All incorporatedinsurance licensees must have a Board, composed of a minimum of fiveDirectors , which is ultimately accountable and responsible for the management and performance of the firm.Rulebook Reference HC-1
HC-1.3.3Amended: April 2011
Amended: January 2007
Amended: October 2007TA-2.3.3
In addition to a Board of
Directors ,takaful andretakaful firms must also have in place aShari'a Supervisory Board .Rulebook Reference HC-9.2.1 Amended: April 2011
Amended: January 2007TA-2.3.4
The CBB expects, for
Bahraini insurance licensees , for Bahrain to be the principal place of business and for Bahrain to be the centre of its governance and management. This must include:(a) The majority of Board meetings taking place in Bahrain;(b) Appointing a locally-residentChief Executive orGeneral Manager ; and(c) Premises and records being located in the Kingdom of Bahrain.
Rulebook Reference AU-2.2.1 and
GR-1Amended: April 2011
Amended: January 2007TA-2.3.5
The CBB requires
Bahraini insurance licensees to establish an internal audit function to monitor the adequacy of their systems and controls.Rulebook Reference HC-6.5.1 Amended: April 2011
Amended: January 2007TA-2.3.6
All
insurance licensees must designate anemployee , of appropriate standing and resident in Bahrain, as Compliance Officer. The duties of the Compliance Officer include:(a) Having responsibility for oversight of the licensee's compliance with the requirements of the CBB; and(b) Reporting to the licensee's Board in respect of that responsibility.
Rulebook Reference AU-1.2.11A Amended: April 2011
Amended: January 2007
Amended: October 2007TA-2.3.7
The Board must establish a remuneration committee of at least three directors which must:
(a) Review theinsurance licensee's remuneration policies for theapproved persons , which must be approved by the shareholders;(b) Make recommendations regardingremuneration policies and amounts forapproved persons to the whole Board, taking account of totalremuneration including salaries, fees, expenses and employee benefits; and(c) Recommend Board member remuneration based on their attendance and performance.
Rulebook Reference HC-5 Amended: April 2011
Amended: January 2007
Amended: October 2007TA-2.3.8
An
insurance licensee's Board must establish and disseminate to allemployees andappointed representatives of the licensee a corporate code of conduct.Rulebook Reference HC-2.2.4 Amended: April 2011
Amended: October 2007TA-2.3.9
The Board must oversee the process of disclosure to all stakeholders. The Board must ensure that the licensee's communications are fair, transparent, comprehensive and timely.
Rulebook Reference HC-8.2.2 Amended: April 2011TA-2.3.10
The Board must assess, document and provide a written certification to the CBB each year detailing whether the internal corporate governance processes that it has implemented have successfully achieved their objectives, and consequently whether the Board has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.
Rulebook Reference HC-1.1.11 Amended: April 2011
Amended: January 2007TA-2.4 TA-2.4 Auditors and Actuaries
TA-2.4.1
All
insurance firms must have an annual external audit. Firms must obtain prior written approval from the CBB before appointing or re-appointing theirauditor .Rulebook Reference AA-1.1.1 Amended: January 2007
Amended: October 2007TA-2.4.2
There are specific Rules and Guidance governing the duties and restrictions of external
auditors .Rulebook Reference AA-1 Amended: January 2007
Amended: October 2007TA-2.4.3
All
insurance firms that conductlong-term insurance business (family takaful)must appoint anactuary that must provide an annual financial condition report (FCR).Rulebook Reference AA-4.1 Amended: April 2014
Amended: January 2007
Amended: October 2007TA-2.4.4
Insurance firms that undertake general takaful business must commission an actuarial opinion from anactuary , every two years.Rulebook Reference AA-4.1 Amended: April 2014
Amended: October 2007TA-2.4.4A
Insurance firms can appoint aRegistered Actuary orSigning Actuary to meet the CBB requirements.Rulebook Reference AA-4.2 Adopted: October 2007TA-2.4.5
The CBB maintains on its website a list of
Registered Actuaries that can practise in the Kingdom of Bahrain. ARegistered Actuary must be independent of the insurance firm for which he is providing an actuarial evaluation and report.Rulebook Reference AU-1.3 and
AA-4.2Amended: January 2007
Amended: October 2007TA-2.5 TA-2.5 General Requirements
TA-2.5.1
All
insurance licensees are expected to maintain books and records sufficient to produce financial statements and show a record of the business undertaken.Rulebook Reference GR-1.1 TA-2.5.2
All
insurance licensees must keepcustomer and transaction records in accordance with the requirement outlined in Section GR-1.2.Insurance licensees must also keep other records as required per Section GR-1.3.Rulebook Reference GR-1.2
GR-1.3Amended: January 2007
Amended: October 2007TA-2.5.3
Insurance licensees , other thancaptive insurers , must seek prior approval from the CBB for their corporate name and any trade names, and those of theirsubsidiaries located in Bahrain.Rulebook Reference GR-2.1 Amended: January 2007
Amended: October 2007TA-2.5.4
All
Bahraini insurance licensees require CBB pre-approval for the distribution of dividends toshareholders .Rulebook Reference GR-3.1 Amended: January 2007TA-2.5.5
An
insurance firm must seek prior written approval from the CBB before executing a business transfer.Rulebook Reference GR-4.1 Amended: January 2007
Amended: October 2007TA-2.5.6
Insurance licensees must obtain prior approval from the CBB for any of the following changes to itscontrollers (as defined in Section GR-5.2):(a) A newcontroller ;(b) An existingcontroller increasing its holding from below 20% to above 20%;(c) An existingcontroller increasing its holding from below 50% to above 50%; and(d) An existingcontroller reducing its holding from above 50% to below 50%.Rulebook Reference GR-5.1 Amended: January 2007TA-2.5.7
All requirements dealing with
close links apply in full to allinsurance firms .Rulebook Reference GR-6 TA-2.5.8
Insurance firms are required to maintain statutory deposits as per Article 181 of the CBB Law.Rulebook Reference GR-7.1 Amended: January 2007TA-2.5.9
In accordance with the Bahrain Commercial Companies Law,
insurance licensees are required to 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 50 per cent of the paid-up capital.Rulebook Reference GR-7.2 Amended: January 2007TA-2.5.10
An
insurance firm wishing to suspend its operations and liquidate its business must notify the CBB in writing, setting out whether it proposes to affect a transfer of its portfolio or go into run-off.Rulebook Reference GR-8 Amended: January 2007TA-3 TA-3 Business Standards
TA-3.1 TA-3.1 Capital Adequacy
TA-3.1.1
Principle 9 requires
insurance licensees to hold adequate financial resources for the needs of the business. Module CA (Capital Adequacy) sets out in detail the minimum financial resources requirements forinsurance licensees . In addition, it is the responsibility of Boards ofinsurance licensees to make their own assessment of the financial resources needed to meet their liabilities.Rulebook Reference PB-1.9 TA-3.1.2
The base requirement is for firms to maintain at all times capital available in excess of the higher of its
required solvency margin andminimum fund .Rulebook Reference CA-1.2.1 Amended: January 2007TA-3.1.3
The
takaful firm is subject to capital available and solvency requirements. Should theTakaful firm not meet the solvency requirements, it must inject capital.Rulebook Reference CA-8.4.1 and CA-1.2.3 Amended: April 2014TA-3.1.4
The
minimum fund that must be maintained by the each takaful fund at all times, is:Category 1 firm: — BD 300,000;Category 2 firm: — BD 500,000;Category 3 firm: — BD 400,000; andCategory 4 firm: — The relevantminimum fund for Category 1 or 2 (depending on the type of general business underwritten) PLUS the Category 3 minimum. These amounts are to be maintained separately by the insurer.These minimum requirements are equivalent to those amounts for
conventional insurance firms .Rulebook Reference CA-2.1.5
CA-8.4.2Amended: January 2007
Amended: October 2007TA-3.1.5
For each general participants' fund, the
required solvency margin is calculated on the basis of the premiums written and claims incurred by the fund. A risk factor is applied, to reflect the differing risk profiles of different classes of insurance. Refer to Chapter CA-2 for the detailed rules governing the calculation of therequired solvency margin .Rulebook Reference CA-2 Amended: April 2014
Amended: January 2007TA-3.1.6
For each family participants' fund, the
required solvency margin is calculated on the basis of the aggregate of themathematical reserves calculation and thecapital sum at risk calculation .Rulebook Reference CA-2 Amended: April 2014
Amended: January 2007TA-3.1.7
The Valuation and Admissibility of Asset Regulations are contained in Chapter CA-4. Assets of an
insurance firm may only be given value for regulatory purposes in accordance with the Valuation of Assets Regulations. Surplus (inadmissible) assets are valued at zero for the purposes of calculating the firm's capital available. Assets considered inadmissible include those that exceed permitted categories and counterparty limits and intangible assets (e.g. brand value).Rulebook Reference CA-4 Amended: January 2007TA-3.1.8
The Valuation of Liability Regulations are contained in Chapter CA-5. Liabilities must be valued in accordance with International Accounting Standards (to the extent available) or, until such standards come into effect, with Section CA-5.1.
Rulebook Reference CA-5.1 Amended: January 2007TA-3.1.9
There are also Rules concerning the matching of assets and liabilities, to minimise the risk of maturity and/or currency mismatch in the portfolio.
Rulebook Reference CA-6.1 Amended: October 2007TA-3.1.10
The CBB may require a takaful firm to provide:
(a) A statement of the consolidated financial position of any group of which theinsurance firm is either the holding company, asubsidiary or abranch of that group; and(b) A statement of the solvency margin that would be determined by this Module if the group identified in part (a) of this Rule were a Bahrain authorisedinsurance firm .Rulebook Reference CA-7.1 Amended: January 2007
Amended: October 2007TA-3.1.11
All
takaful firms licensed in Bahrain must organise and operate their business according to the al wakala model. Specifically, in exchange for the provision of management services to takaful fund(s), theshareholders of thetakaful firm will receive a specific consideration (wakala fee). For the insurance assets invested on behalf of takaful funds, the takaful operator will use the al mudaraba model, and will receive a set percentage of the profits generated from the investment portfolio.Rulebook Reference CA-8.2.1 Amended: January 2007TA-3.1.12
The wakala fee charged in respect of a takaful contract must be directly proportional to the costs associated with establishing and maintaining that contract.
Rulebook Reference CA-8.2.2 TA-3.1.13
Takaful firms must maintain separate books of account in respect of each kind of business and for each fund.Rulebook Reference CA-8.3 Amended: January 2007TA-3.1.13A
Where a participants' fund(s) has a cash deficit which results in its inability to meet its day to day expenses and obligations, a Qard Hassan must be extended immediately to the shareholder fund.
Rulebook Reference CA-8.4A Added: April 2014TA-3.1.14
Takaful firms by definition are co-operative in nature and as such participants (policyholders ) are entitled to a return of any surplus of the takaful funds operated by a takaful insurer.Takaful firms must establish a policy for the distribution of surplus but may only distribute a surplus if the firm meets its required solvency margin requirements both prior to and after the distribution.Rulebook Reference CA-8.5 Amended: January 2007TA-3.2 TA-3.2 Business Conduct
TA-3.2.1
The Business Conduct Module comprises general rules (BC-1) and a Code of Practice (BC-2). These rules apply in full to all
insurance licensees with special provisions applicable totakaful firms .Rulebook Reference BC-A.1 Amended: January 2007TA-3.2.2
The use of the terms 'takaful', 'retakaful', 'general takaful' and 'family takaful' may only be used to describe the products of
insurance firms that are Islamic financial institutions within the meaning of the CBB Rulebook.Rulebook Reference BC-3.2 Amended: January 2007TA-3.2.3
An
insurance firm may only offer takaful products if it is licensed to do so. Aninsurance intermediary may offer both conventional insurance and takaful products but must provide clear information to enable consumers to make informed choices.Rulebook Reference BC-3.3 TA-3.2.4
Takaful firms must provide participants andshareholders with clear information about the performance of their business. This information must, as a minimum, comply with relevant AAOIFI standards, in particular Standard 13 (Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies) and Standard 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies).Rulebook Reference BC-3.4 Amended: January 2007TA-3.3 TA-3.3 Risk Management
TA-3.3.1
Principle 10 (TA-2.2.3) requires firms to have systems and controls that are appropriate for their business. Consequently, the Risk Management Module of the CBB Rulebook contains Rules and Guidance on how, specifically, firms should monitor and manage risk. This Module applies to all licensees, and it is for firms to consider the scale and complexity of the procedures that are required, given the nature of their operations. All those sections dealing with
Bahraini insurance firms andoverseas insurance firms are applicable totakaful firms .Rulebook Reference PB-1.10 Amended: January 2007
Amended: October 2007TA-3.4 TA-3.4 Financial Crime
TA-3.4.1
The general law of Bahrain imposes obligations on individuals and firms in relation to the prevention and prohibition of the laundering of money. Module FC applies to all
insurance licensees .Rulebook Reference Decree Law No. 4 TA-3.4.2
In addition, Module FC contains specific Rules and Guidance for
insurance licensees that require them to have effective money laundering controls and to report suspicious transactions to therelevant authorities .Rulebook Reference Module FC
FC-8 (details of penalties)Amended: October 2007TA-3.4.3
Chapter FC-1 outlines the requirements for
customer due diligence.Rulebook Reference FC-1 Amended: January 2007TA-3.4.4
The reporting of suspicious transactions is the responsibility of the firm's Money Laundering Reporting Officer ('MLRO'). All
takaful firms must appoint an MLRO.Rulebook Reference FC-3.1.1 Amended: January 2007TA-3.4.5
The MLRO will prepare an annual report on compliance with the anti-money laundering and combating terrorism financing controls and procedures. The Boards of
takaful firms will need to include the consideration of this report as a standing item for Board meetings each year.Rulebook Reference FC-3.3 Amended: January 2007TA-3.4.6
Appendix FC-(iv), contained in Part B of the CBB Rulebook provides guidance material and examples of transactions that would be considered suspicious for the purposes of this Directive.
Rulebook Reference Appendix FC-(iv) Amended: January 2007TA-4 TA-4 Reporting Requirements
TA-4.1 TA-4.1 CBB Reporting
TA-4.1.1
Takaful firms are required to file annual, quarterly and group insurance returns to the CBB providing details of the financial condition of the firm and the business undertaken.Rulebook Reference BR-1.1
BR-1.3
BR-1.4Amended: January 2007TA-4.1.2
Details of the content of the Insurance Firm Return can be found in Section BR-1.1. The content of the Insurance Firm Return is identical to that required for
conventional insurance firms , except for the calculation of the solvency margin as outlined in Chapter CA-8. The Return must be:(a) Deposited with the CBB within 3 months of the year end;(b) Reviewed by the externalauditor based on agreed-upon procedures;(c) Be accompanied by aDirectors' Certificate; and(d) Where applicable, include an actuarial certificate and report.Rulebook Reference BR-1.1 Amended: January 2007
Amended: October 2007TA-4.1.3
Takaful firms must disclose to the CBB material information about changes in their situation including (but not limited to):(a) Significant breaches in Rules and other requirements;(b) Civil, criminal, and disciplinary procedures, fraud, errors and other irregularities;(c) Financial difficulties, breach of minimum solvency requirements, insolvency, bankruptcy, winding-up;(d) Changes inauditors andactuaries :(e) Changes in address, legal status etc.; and(f) Changes incontrollers andclose links .Rulebook Reference BR-2.2.4
BR-2.2.6 to BR-2.2.8
BR-2.2.11
BR-2.3.29
BR-2.3.3 and BR-2.3.4
BR-2.3.7Amended: January 2007
Amended: October 2007TA-4.1.4
An
insurance licensee must permit representatives of the CBB, or persons appointed for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the CBB's functions under the relevant law.Rulebook Reference BR-3.1 Amended: January 2007TA-4.2 TA-4.2 Public Disclosure
TA-4.2.1
Takaful and Retakaful firms are subject to the same Public Disclosure requirements imposed in Module PD to
insurance firms andoverseas insurance firms .Rulebook Reference Module PD Amended: January 2007TA-4.2.2
Takaful and Retakaful firms must disclose to participants the calculation and amount of wakala fee and mudaraba share of profits paid by the takaful fund to the takaful operator.
Rulebook Reference BC-3.4.2 Amended: January 2007TA-5 TA-5 Enforcement and Redress
TA-5.1 TA-5.1 Enforcement
TA-5.1.1
The Enforcement Module of the CBB Rulebook applies in full to all
insurance licensees .Rulebook Reference Module EN Amended: January 2007