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  • HC-1.1 HC-1.1 Functions and Responsibilities[versions up to January 2011]

    • General Requirement[versions up to January 2011]

      • HC-1.1.1 [versions up to January 2011]

        With the exception of unincorporated entities and single person companies, all Bahraini insurance licensees must have a Board of Directors ('the Board'). The Board is ultimately accountable and responsible for the management and performance of the licensee.

      • HC-1.1.2 [versions up to January 2011]

        To discharge its responsibility effectively, a Board typically delegates various functions and tasks, for instance to Board sub-committees, management and other employees. When it delegates, the Board nonetheless retains ultimate responsibility for the performance of those functions and tasks.

      • HC-1.1.3 [versions up to January 2011]

        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 (refer to ES-2.2.1). Under Volume 3, insurance brokers and insurance consultants may be licensed as a single person company or (in the latter case only) a sole proprietorship: see Section AU-2.1.

        Amended: January 2007

    • Specific Requirements[versions up to January 2011]

      • HC-1.1.4 [versions up to January 2011]

        The Board must establish and maintain a statement of its responsibilities, defining its functions and tasks and those delegated to Board sub-committees and senior management. This statement must be clearly communicated to Board members and senior management.

      • HC-1.1.5 [versions up to January 2011]

        The Board must approve and review at least annually the licensee's:

        (a) Strategic plans;
        (b) Management structure and responsibilities; and
        (c) Systems and controls framework (including its policies and procedures).
        Amended: January 2007

      • HC-1.1.6 [versions up to January 2011]

        The Board must also regularly review:

        (a) The licensee's implementation of its strategy and operational performance;
        (b) The performance of its executive management; and
        (c) The level of risk.
        Amended: January 2007

      • HC-1.1.7 [versions up to January 2011]

        The Board must set out clearly and review on a regular basis who has authority to enter the licensee into contractual obligations. 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 obligations may have in relation to its capital.

      • HC-1.1.8 [versions up to January 2011]

        The Board must have effective policies and processes in place to address its members' potential conflicts of interest, including matters such as:

        (a) Related party transactions;
        (b) The misuse of assets belonging to the licensee; and
        (c) The use of privileged information for personal advantage ('insider trading').
        Amended: January 2007

      • HC-1.1.9 [versions up to January 2011]

        Board members must declare in writing all of their interests in other enterprises or activities (whether as a shareholder, manager, or other form of participation) to the Board (or the Nominations or Audit Committee) on an annual basis. Any Board member should also 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.

      • HC-1.1.10 [versions up to January 2011]

        The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licensee, its shareholders and policyholders.

      • HC-1.1.11 [versions up to January 2011]

        In assessing compliance with Paragraph HC-1.1.10, 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 other stakeholders. The interest of shareholders 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 of policyholders includes ensuring that the licensee fulfils its obligations under its policies and treats all policyholders fairly and pays equal regard to the interests of all policyholders and groups of policyholders.

        Amended: January 2007
        Amended: October 2007

    • Additional Guidance[versions up to January 2011]

      • HC-1.1.12 [versions up to January 2011]

        In assessing the licensee's strategic plans (Paragraph HC-1.1.5), 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).

        Amended: January 2007

      • HC-1.1.13 [versions up to January 2011]

        In assessing the management framework (Paragraph HC-1.1.5), 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) Appointing senior 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 key senior 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.
        Amended: January 2007

      • HC-1.1.14 [versions up to January 2011]

        In assessing the systems and controls framework (Paragraph HC-1.1.5), 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 external auditors. The internal audit function should be independent of the senior management, reporting to the Audit committee. 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.
        Amended: January 2007