HC-2 HC-2 Committees[versions up to January 2011]
HC-2.1 HC-2.1 Board Committees[versions up to January 2011]
HC-2.1.1 [versions up to January 2011]
Bahraini insurance licensees must establish Board Committees appropriate to the scale and complexity of their operations.HC-2.1.2 [versions up to January 2011]
Board Committees can enhance the effectiveness of Boards, both in their management of a licensee's risks, and in addressing potential conflicts of interest. In particular, three key areas where there is a need for checks and balances within the Board include: (a) the nomination of
Directors ; (b) the remuneration ofDirectors ; and (c) the audit of the licensee's financial performance. These areas are typically addressed by, respectively, the Nominations Committee, the Remuneration Committee and the Audit Committee. Where a licensee's Board does not consider it necessary to create Board Committees, it must be prepared to give reasons for its decision to the CBB.Amended: January 2007HC-2.1.3 [versions up to January 2011]
The CBB expects licensees, as a minimum, to establish an Audit Committee. The CBB would expect larger licensees to establish other committees as well. Where a licensee's Board does not consider it necessary to create Board committees, it must be prepared to give reasons for its decision to the CBB.
Amended: January 2007HC-2.1.4 [versions up to January 2011]
The CBB would expect to see committees dealing with the issues listed in (a) to (c) in Paragraph HC-2.1.2 to be chaired by an
independent non-executive Director and for the majority of its members to beindependent non-executive Directors .Amended: January 2007HC-2.1.5 [versions up to January 2011]
Where an
insurance licensee has been granted an exemption under Paragraph HC-1.2.8, upon application, an exemption may also be granted from Paragraph HC-2.1.1.Amended: January 2007HC-2.1.6 [versions up to January 2011]
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.Amended: January 2007HC-2.2 HC-2.2 Executive Management Committee[versions up to January 2011]
HC-2.2.1 [versions up to January 2011]
Bahraini insurance firms (other thancaptive insurance firms ) must consider the need to establish an Executive Management Committee to support theChief Executive Officer /General Manager .Amended: January 2007HC-2.2.2 [versions up to January 2011]
Insurance intermediaries andinsurance managers , unlike otherinsurance licensees , are not required to consider the need to operate an Executive Management Committee.HC-2.2.3 [versions up to January 2011]
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.Amended: January 2007HC-2.2.4 [versions up to January 2011]
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.Amended: January 2007HC-2.2.5 [versions up to January 2011]
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).
HC-2.2.6 [versions up to January 2011]
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.Amended: January 2007HC-2.3 HC-2.3 Shari'a Supervisory Board[versions up to January 2011]
HC-2.3.1 [versions up to January 2011]
An
insurance firm licensed to conduct insurance business according to takaful principles must establish aShari'a Supervisory Board . The firm must also comply with AAOIFI Governance Standard for Islamic Financial Institutions No. 1 ('Shari'a Supervisory Board: Appointment, Composition and Report').Amended: January 2007HC-2.3.2 [versions up to January 2011]
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.Amended: January 2007HC-2.3.3 [versions up to January 2011]
In the case of
overseas insurance firms operating according to takaful principles, the requirement to appoint a Shari'a Supervisory Board in Paragraph HC-2.3.1 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.Amended: January 2007HC-2.3.4 [versions up to January 2011]
An
insurance firm licensed to conduct insurance business according to takaful principles must comply with all other AAOIFI governance standards for Islamic Financial Institutions.HC-2.3.5 [versions up to January 2011]
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.Amended: January 2007HC-2.3.6 [versions up to January 2011]
The office of Shari'a Board Member is a
controlled function : see Module AU (Authorisation).Amended: January 2007
Amended: October 2007HC-2.3.7 [versions up to January 2011]
The Shari'a Board requirements contained in Section HC-2.3 are additional to the other high-level control requirements contained in this Module.