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  • AA-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 undertake long-term insurance business must, no later than the date on which they start to carry out such business, appoint a Registered Actuary or Signing Actuary, subject to CBB approval.

          Amended: January 2007
          Amended: October 2007

        • AA-4.1.2

          For insurance firms whose long-term insurance business is restricted to group life policies, having a term of less than or equal to 1 year, and where this long-term insurance business represents less than 5% of the insurance firm's total gross premiums written, this business will be treated as general insurance business and is subject to actuarial requirements as outlined in Paragraph AA-4.1.4.

          Amended: January 2007
          Amended: October 2007

        • AA-4.1.3

          To secure CBB approval, the actuary must satisfy the CBB's criteria for Registered Actuary or Signing Actuary, contained in Paragraphs AA-4.2.1 to AA-4.2.12. The actuary of an insurance firm undertaking long-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 2007

      • Obligation to Appoint an Actuary for General Insurance Business

        • AA-4.1.4

          An insurance firm that carries on general insurance business must commission an actuarial opinion, once every two years, from a Registered Actuary or Signing Actuary. The actuary must satisfy the criteria in Paragraphs AA-4.2.1 to AA-4.2.12.

          Amended: April 2014
          Amended: October 2007

        • AA-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 2007

        • AA-4.1.6

          [This Paragraph was deleted in April 2014.]

          Deleted: April 2014
          Amended: October 2007
          Amended: January 2007

        • AA-4.1.7

          [This Paragraph was deleted in April 2014.]

          Deleted: April 2014
          Adopted: January 2007

    • AA-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 are Directors or employees of the insurance firm for which an actuarial report is prepared.
        Added: October 2007

      • AA-4.2.2

        The CBB’s authorisation requirements for Registered Actuaries are contained in Module AU (Authorisation).

        Added: October 2007

      • AA-4.2.3

        A Signing Actuary is a controlled function and is subject to the CBB’s approval, as per Section AU-1.2, as an approved person.

        Added: October 2007

      • AA-4.2.4

        All actuaries authorised or approved by the CBB must hold appropriate professional qualifications from a relevant, recognised professional body.

        Added: October 2007

      • AA-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 2007

      • CBB Approval Criteria for Registered Actuaries

        • AA-4.2.6

          The Registered Actuary must not be a Director or employee of the insurance 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 an actuary within the Kingdom of Bahrain.

          Amended: April 2014
          Amended: October 2007
          Amended: January 2007

        • AA-4.2.2

          The CBB's authorisation requirements for Reporting Actuaries are contained in Module AU (Authorisation).

          Amended: January 2007

        • AA-4.2.7

          The Registered Actuary must be independent of the insurance firm.

          Amended: October 2007

        • AA-4.2.8

          For a Registered Actuary to be considered independent, he, his spouse and dependant children must not be a related party to the insurance firm.

          Amended: January 2007
          Amended: October 2007

        • AA-4.2.9

          For the purpose of this Section, a related party of an insurance firm includes:

          (a) A controller of the insurance firm as defined in Section GR-5.2;
          (b) A close link of the insurance firm as defined in Section GR-6.2;
          (c) An associate of a controller as defined in Paragraph GR-5.2.2;
          (d) The extended family of a controller 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 a Director or would be considered a controller were the definition of controller set out in Paragraph GR-5.2.1 applied to that corporate entity; and
          (f) An employee of an insurance firm that is related to the insurance firm submitting the FCR required under this Chapter.
          Amended: April 2014
          Added: October 2007

        • CBB Approval Criteria for Signing Actuary

          • AA-4.2.10

            The Signing Actuary may be a Director or employee of the licensee concerned.

            Added: October 2007

          • AA-4.2.11

            Where the Signing Actuary is a Director or employee of the licensee concerned, he occupies a controlled function, and is subject to CBB approval as per Section AU-1.2.

            Added: October 2007

          • AA-4.2.12

            The Signing Actuary must act independently of the insurance firm in providing the FCR.

            Amended: April 2014
            Added: October 2007

      • Removal or Resignation of a Reporting Actuary

        • AA-4.2.5

          Insurance firms must notify the CBB as soon as it intends to remove its Reporting Actuary, together with an explanation of its decision, or as soon as its Reporting Actuary resigns.

          Amended: January 2007

        • AA-4.2.6

          Insurance firms must ensure that a replacement Reporting 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 2007

        • AA-4.2.7

          If an insurance firm fails to make a fresh appointment of a Reporting Actuary in accordance with the provisions of Paragraph AA-4.2.6, the insurance firm must not — until such an appointment is made — effect any new contract which constitutes long-term business without the written permission of the CBB.

          Amended: January 2007

        • AA-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 2007

    • AA-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 the insurance 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 the insurance 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 for Takaful 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 the insurance firm's investment strategy;
        (f) An assessment of current and future capital adequacy and a discussion of the insurance 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 the insurance firm, the report must include recommendations on how to address any shortcomings and eliminate any negative trends; and
        (j) For overseas 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 2007

      • AA-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 2014

      • AA-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 2007

      • AA-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 2014

      • AA-4.3.3

        In accordance with Article 73 of the CBB Law, the evaluation should include:

        (a) A valuation of the liabilities of the insurance firm attributable to its long-term insurance business;
        (b)The establishment of the surplus, if any, on any long-term insurance funds that it is proposed be transferred to shareholders' funds and available for distribution; and
        (c) The establishment of the deficit, if any, on any long-term insurance funds established by the insurance firm.
        Amended: January 2007
        Amended: October 2007

      • AA-4.3.4

        Where the Registered Actuary's or Signing Actuary's investigation establishes a deficit on any fund or part of any fund, the insurance firm concerned must immediately notify the CBB and ensure that remedial action is taken to make good the deficit.

        Amended: January 2007
        Amended: October 2007

      • AA-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 2007

      • AA-4.3.6

        [This Paragraph was deleted in April 2014.]

        Deleted: April 2014
        Amended: October 2007
        Amended: January 2007

      • AA-4.3.7

        [This Paragraph was deleted in April 2014.]

        Deleted: April 2014
        Amended: October 2007
        Amended: January 2007

      • Signing Actuary Criteria

        • AA-4.3.1

          The Signing Actuary may be a Director or employee of the licensee concerned, an independent party, or an employee of a firm providing actuarial consulting services.

          Amended: January 2007

        • AA-4.3.2

          Where the Signing Actuary is a Director or employee 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 the Signing 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 an actuary in the Kingdom of Bahrain, in accordance with the requirements of Article 74 of the CBB Law.

          Amended: January 2007

        • AA-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 2007

      • Qualified 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 2007

        • AA-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 2007

        • AA-4.3.6

          The Directors of the insurance firm must provide the Signing Actuary with the data and information required for the preparation of the actuarial evaluation and report. The insurance firm must advise the Signing 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 the insurance firm must provide the Registered Actuary or Signing Actuary with the data and information required for the preparation of the FCR. The insurance firm must advise the Registered Actuary or Signing 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 2007

        • AA-4.3.12

          For general insurance business, claims development data provided to the Registered Actuary or Signing Actuary must be reconciled to the accounting information forming the basis of the statutory accounts.

          Added: October 2007

    • AA-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 General Takaful 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 2014

      • Certification 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 2014

        • AA-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 2014

      • Participants' 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 the Takaful firm to address any deficit in the participants' fund(s).

          Added: April 2014

      • Distribution 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 2014

      • Earmarked 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 a Takaful firm. A separate amount of earmarked 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 2014

        • AA-4.3A.7

          The computed figure of the earmarked assets for each participants' fund are allocated to the insurance 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, the insurance business amount is used in the calculation of the participants' fund available capital to meet the solvency requirements.

          Added: April 2014

        • AA-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 2014

        • AA-4.3A.9

          In light of the critical role of earmarked assets in assessing solvency and addressing any liquidity shortfall in a Takaful 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 2014

        • AA-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 of earmarked assets to meet any solvency or liquidity requirements.

          Added: April 2014

        • AA-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 the Takaful firm any increase needed to the earmarked assets to comply with these requirements. The actuary's recommendation must also be approved by the Takaful firm's board of directors.

          Added: April 2014

    • AA-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 its actuary, together with an explanation of its decision, or as soon as its actuary resigns.

        Added: October 2007

      • AA-4.4.2

        Insurance firms must ensure that a replacement 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.

        Added: October 2007

      • AA-4.4.3

        If an insurance firm fails to make a fresh appointment of an actuary in accordance with the provisions of Paragraph AA-4.4.2, the insurance firm must not – until such an appointment is made – effect any new contract which constitutes long-term insurance business without the written permission of the CBB.

        Added: October 2007

      • AA-4.4.4

        An actuary who resigns or is otherwise removed from the office of actuary must, within 30 days of his resignation or removal, write to the CBB setting out the reasons for his resignation or removal.

        Added: October 2007