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  • 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 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.

        Amended: January 2007
        Amended: October 2007

      • 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.

        Amended: October 2007

      • 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.

        Amended: January 2007
        Amended: October 2007

      • 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.

        Amended: January 2007
        Amended: October 2007

      • Minimum 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 the insurance firm;.
          (e) Category C1 Insurer: BD 75,000; and
          (f) Category C2 Insurer: BD 300,000.
          Amended: January 2007

        • CA-2.1.6

          For purposes of Paragraph CA-2.1.5, the following definitions apply:

          (a) Category 1 insurer: an insurance 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: an insurance 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: an insurance 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: an insurance 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 than liability risk) of its shareholder(s) or those of subsidiary or associated companies of its shareholder(s); and
          (f) Category C2 insurer: an insurance firm whose business is restricted to insuring only the risks of its shareholder(s) or of subsidiary or associated companies of its shareholder(s) and whose business may include liability risks, subject to the CBB being satisfied that the activity, capital structure and management provide sufficient protection to potential third party claimants.
          Amended: January 2007

      • Calculation of Solvency Margin

        • CA-2.1.7

          The Required Solvency Margin to be calculated by an insurance firm subject to any of the requirements in Paragraphs CA-2.1.1 to CA-2.1.4 must be determined:

          (a) As regards long-term insurance business, in accordance with Paragraph CA-2.1.9, and
          (b) As regards general insurance business, in accordance with Paragraph CA-2.1.12.
          Amended: January 2007

        • CA-2.1.8

          The Bahrain Required Solvency Margin for overseas insurance firms must be calculated by applying Paragraph CA-2.1.7, but only to business booked in the Bahrain overseas insurance firm.

          Amended: January 2007

        • CA-2.1.8A

          The Required Solvency Margin for companies whose business is limited to reinsurance, except for reinsurance of linked business, is to be calculated in accordance with Paragraph CA-2.1.12.

          Adopted: January 2007

      • Long-term Insurance Business

        • CA-2.1.9

          For long-term insurance business the solvency margin must be determined by taking the aggregate of the results arrived at by applying the calculations described in Paragraph CA-2.1.10 ('the mathematical reserves basis calculation') and Paragraph CA-2.1.11 ('the capital sum at risk basis calculation'). Where the aggregate falls below the minimum fund, it must be substituted by the amount of the minimum fund.

          Amended: January 2007

        • CA-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 with long-term insurance business. The mathematical reserves basis calculation for:

          (a) Traditional long-term insurance business must be either 2% of mathematical reserves before deduction for reinsurance cessions or 4% of mathematical reserves after deduction for reinsurance cessions whichever produces the higher result;
          (b) The mathematical reserves basis calculation for linked long-term insurance business where the company bears an investment risk must be as in Subparagraph CA-2.1.10 (a); and
          (c) The mathematical reserves basis calculation for linked long-term insurance business where the company bears no investment risk must be either 0.5% of mathematical reserves before deduction for reinsurance cessions or 1% of mathematical 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 2007

        • CA-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 the mathematical reserves in respect of the relevant contract. The capital sum at risk calculation is the greater of:

          (a) 0.15% of the capital sum at risk before deduction for reinsurance cessions; or
          (b) 0.30% of the capital 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 2007

      • General Insurance Business

        • CA-2.1.12

          For general insurance business, the solvency 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 ('the premium basis calculation') and Paragraph CA-2.1.14 ('the claim basis calculation'). Where the higher of the two results falls below the minimum fund, it must be substituted by the amount of the minimum fund.

          Amended: January 2007

        • CA-2.1.13

          The premium basis calculation for general 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 2007

        • CA-2.1.14

          The claim basis calculation for general 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 the reference 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 the reference 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 2007

        • CA-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 the insurance firm has been in business for less than three years, the claims basis calculation shall be equal to 0.