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) requires insurance licensees to maintain adequate financial resources, in excess of the minimum requirements specified in Module CA (Capital Adequacy).

CA-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 that insurance 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.

CA-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.

Legal Basis

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.

CA-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.

CA-A.2.3

A list of recent changes made to this Module is detailed in the table below:

CA-A.2.4

Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).

CA-B.1.1

This Module applies to both Bahraini insurance licensees and overseas insurance licensees.

CA-B.1.2

While the solvency requirements for Bahraini insurance firms and for overseas insurance firms are identical (as per Chapter CA-2), the calculation of the capital available varies based on the legal structure of the licensee, i.e. whether it is a locally incorporated company or a branch operation.

CA-B.1.3

Bahraini insurance firms must calculate their capital available based on the shareholder's equity of the licensee (and other allowable elements of regulatory capital, as specified in Chapter CA-1). Overseas insurance firms must calculate their capital available based on their audited net assets, determined in accordance with accounting standards that would be applicable if they were a joint stock company incorporated in Bahrain.

Single Insurance Entity (Unconsolidated)

Consolidated Insurance Entity

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 its capital available will be restored and the timeframe for that restoration to occur.

CA-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.

CA-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).

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 for Bahraini insurance firms is BD 5 million, except for those firms whose business is limited to reinsurance. Bahraini insurance firms whose business is limited to reinsurance must have minimum Tier 1 capital of BD 10 million. Overseas insurance firms and captive insurers are not subject to a minimum Tier 1 capital but must comply with the Required Solvency Margin and minimum fund, as defined in Chapter CA-2. In addition, all insurance firms must at all times maintain a capital available in excess of the greater of the Required Solvency Margin and the minimum fund, as defined in Chapter CA-2.

CA-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 a capital available in excess of the greater of the Required Solvency Margin and minimum fund must be met by insurance 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).

CA-1.2.3

An insurance firm must ensure that at all times its capital available does not fall below the minimum fund. In the event that an insurance firm's capital available does fall below the minimum fund, the insurance firm must inject capital and must notify the CBB immediately. Further, the insurance firm must cease to effect any new contracts of insurance, including renewals of existing contracts unless explicitly permitted to do so by the CBB.

Limitation on Valuation of Capital Instruments

Capital Available: Tier 1 and Tier 2

Tier 1 Capital

Tier 2 Capital

Tier 2: Hybrid Capital Instruments

Determination of Capital Available

CA-1.3.1

Bahrain insurance brokers must maintain at all times the greater of:

CA-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.

CA-1.3.1B

Notwithstanding the requirements in Paragraph CA-1.3.1, Insurance aggregators are required to maintain at all times a minimum net 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.

CA-1.3.2

There are no minimum capital and net asset requirements for overseas insurance brokers. However, for overseas 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.

CA-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 brokerage subsidiaries and/or branches operating in other jurisdictions.

CA-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).

CA-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.

CA-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-1.4.1

Insurance consultants and insurance managers must possess financial resources commensurate with the scale and nature of their insurance consultancy or management activities.

CA-1.4.2

In determining the adequacy of the financial resources of insurance consultants and insurance managers, the CBB will consider, amongst other things:

CA-1.4.3

There are no minimum capital and net assets requirements applicable to insurance consultants and insurance 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-2.1.1

Every Bahraini insurance firm must calculate a required solvency margin in accordance with the requirements in this Chapter. The solvency margin must include the operations of all branches of the insurance firm, whether these undertake operations within Bahrain or in another jurisdiction.

CA-2.1.2

Every overseas insurance firm, other than a pure reinsurer, must calculate a 'Bahrain Required Solvency Margin' in accordance with the requirements in this Chapter.

CA-2.1.3

All overseas insurance firms, including pure 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 where pure reinsurers are not subject to supervisory requirements in another jurisdiction, they must calculate a Required Solvency Margin in accordance with this Chapter for the company as a whole.

CA-2.1.4

For insurance firms licensed prior to 1 April 2005 and allowed to carry on both long-term insurance business and general insurance business (refer to Paragraph AU-1.1.15), the insurance firm must calculate a separate Required Solvency Margin or a Bahrain Required Solvency Margin in respect of the two different types of insurance business and maintain separate solvency margins.

Minimum Fund

Calculation of Solvency Margin

Long-term Insurance Business

General Insurance Business

CA-3.1.1

Where an insurance firm carries on long-term insurance business, including traditional long-term insurance business or linked long-term insurance business or both:

CA-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.

CA-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.

CA-3.1.2

An insurance firm which carries on long-term insurance business or linked long-term insurance business must maintain such accounting and other records as are necessary for identifying:

CA-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 its long-term insurance business and must not be made available for any other purpose of the insurance 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 the long-term insurance business.

CA-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 the long-term insurance business, the restriction does not apply to those assets that represent the excess.

CA-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 the insurance firm.

CA-3.1.6

A long-term insurance firm must not enter into a financial transaction, and must take reasonable steps to ensure that any subsidiary company or associate company does not enter into such a transaction, with any related 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's long-term insurance funds.

CA-3.1.7

An insurance firm which carries on long-term insurance business in Bahrain must have adequate arrangements for securing that transactions affecting assets of the insurance firm (other than transactions outside of its control) do not operate unfairly between the long-term insurance fund or funds and the other assets of the insurance firm or, in a case where the insurance firm has more than one 'identified fund', between those funds.

CA-3.1.8

An identified fund means assets representing the insurance firm's receipts from a particular part of its long-term insurance business that can be identified as such by virtue of accounting or other records maintained by the insurance firm.

CA-3.1.9

Where the CBB imposes a financial penalty on an insurance firm or requires an insurance firm to compensate policyholders for any wrongful act of the insurance firm (including any wrongful act committed by an appointed representative of the insurance firm) it must not pay that compensation or financial penalty from any long-term insurance fund. Such penalties can only be paid out of the shareholder (or company) fund.

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.

CA-4.1.2

Assets not covered in this Chapter are deemed to be inadmissible assets for purposes of calculating the capital available required under Paragraph CA-1.2.21 and their admissible value is deemed to be nil.

CA-4.1.3

Where an insurance firm has entered into any insurance contracts that are classified as a linked 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).

CA-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).

CA-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.

CA-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.

CA-4.1.7

An insurance firm must ensure that its liabilities under a contract 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 the insurance firm.

CA-4.1.8

Without prejudice to Paragraph CA-4.1.7, an insurance firm must ensure that:

Asset Limits per Category of Assets

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.

CA-4.3.2

Assets used to match linked long-term insurance liabilities must fall in one of the following categories:

CA-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.

CA-4.3.4

The fair market value of real estate assets held as linked long-term insurance assets must be the market value as assessed by an independent qualified valuer at a date no earlier than 12 months from the end of the most recent financial year.

CA-5.1.1

The Valuation of Liabilities Rules apply with respect to the determination of the amount of liabilities of an insurance firm.

CA-5.1.2

Subject to the specific provisions of this Chapter, the amount of liabilities of an insurance firm in respect its long-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 for insurance firms.

CA-5.1.2A

Where an insurance licensee writes long term insurance with guaranteed level premiums, the reserving and solvency requirements must follow the requirements for long 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.

General Insurance Business

Long-term Insurance Business

CA-6.1.1

The provisions of this Chapter do not apply to:

CA-6.1.2

Where an insurance firm's 'liabilities' in any particular currency exceed 10% of its total 'liabilities', the insurance 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.

CA-6.1.4

Where an insurance firm carries on both long term insurance business and general insurance business, the requirements of Paragraph CA-6.1.1 apply to the 'assets' and ' liabilities' of each kind of business separately.

CA-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:

CA-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:

CA-6.1.8

'Assets' held pursuant to Paragraph CA-6.1.2 above must be held:

CA-7.1.1

In addition to the capital adequacy and solvency requirements imposed on Bahraini insurance firms and overseas insurance firms, the CBB may require whole firm and/or group solvency information. The requirement under this Chapter apply to the following categories:

CA-7.1.2

Captive insurers are exempted from the requirements to report on their group solvency position.

CA-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:

CA-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.

CA-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.

CA-7.1.7

In addition to consolidated information on the group, for Bahraini insurance firms, aggregate information detailing the solvency requirements of the major insurance subsidiaries in the group must also be submitted to the CBB as part of the Group Insurance Firm Return.

CA-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.

CA-8.1.1

This Chapter of CA applies only to those firms licensed to conduct the regulated activity of Takaful and Retakaful.

CA-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.

CA-8.1.3

The CBB acknowledges that Takaful/Retakaful insurance is different in some respects from conventional insurance. The specific Rules and Guidance set out in this Chapter aim to allow Takaful 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.

CA-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'.

CA-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), the shareholders of the Takaful 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 the Takaful firm; the only fees that can be paid are the Wakala fees and the set percentage of the profits generated from the investment portfolio.

CA-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).

Wakala Fee

Mudaraba Fee

Managing Operating Costs

CA-8.3.1

Where an insurer carries out Takaful business:

CA-8.3.2

A Takaful firm must maintain such accounting and other records as are necessary for:

CA-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 the Takaful firm. This does not however prevent the reimbursement of expenditures borne by the shareholders (in the same or the preceding financial year) in discharging liabilities wholly or partly attributable to a fund or funds.

CA-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 the Shari'a Supervisory Board has approved those fees.

CA-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 the shareholder.

CA-8.3.6

A Takaful firm which carries on insurance business in Bahrain must have adequate arrangements for securing that transactions involving assets of the Takaful firm (other than transactions outside its control) do not operate unfairly between any of the participants' fund(s) and the shareholder assets of the Takaful firm or, in a case where the Takaful firm has more than one 'identified fund', between those funds.

CA-8.3.7

Where the CBB imposes a financial penalty on a Takaful firm or requires a Takaful 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.

CA-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.

CA-8.4.1

All Takaful firms are subject to capital available and solvency requirements.

Determination of Available Capital

CA-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.

Solvency Requirements

Other Requirements

CA-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:

whichever of (a) or (b) occurs first.

CA-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.

CA-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.

Qard Hassan Transition Rules

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.

CA-8.4A.2

Where a Qard Hassan has been extended for liquidity purposes, the calculation of the earmarked assets allocated to the insurance business amount for the participants' fund(s) as outlined under Paragraph CA-8.4.4, must consider the impact of the reduction in earmarked assets.

CA-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 the earmarked assets are to be reassessed as a result, the Takaful firm must notify the CBB immediately.

CA-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 the Takaful firm include a specific note in the financial statements of the Takaful firm explaining the circumstances of the arrangement (Qard Hassan) and the implications for shareholders and participants.

CA-8.4A.5

Where a Qard Hassan has been extended, it must be repaid from future surpluses from the participants' fund(s).

CA-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.

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 the shareholders, 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 the Takaful firm.

CA-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.

CA-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 the actuary (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 the Takaful firm.

CA-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.

CA-8.5.4A

Distribution of surpluses from the Participants' fund(s) is subject to the CBB's prior written approval.

CA-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 the capital 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.