TA-3.1.1

Principle 9 requires insurance licensees to hold adequate financial resources for the needs of the business. Module CA (Capital Adequacy) sets out in detail the minimum financial resources requirements for insurance licensees. In addition, it is the responsibility of Boards of insurance licensees to make their own assessment of the financial resources needed to meet their liabilities.

TA-3.1.2

The base requirement is for firms to maintain at all times capital available in excess of the higher of its required solvency margin and minimum fund.

TA-3.1.3

The takaful firm is subject to capital available and solvency requirements. Should the Takaful firm not meet the solvency requirements, it must inject capital.

TA-3.1.4

The minimum fund that must be maintained by the each takaful fund at all times, is:

These minimum requirements are equivalent to those amounts for conventional insurance firms.

TA-3.1.5

For each general participants' fund, the required solvency margin is calculated on the basis of the premiums written and claims incurred by the fund. A risk factor is applied, to reflect the differing risk profiles of different classes of insurance. Refer to Chapter CA-2 for the detailed rules governing the calculation of the required solvency margin.

TA-3.1.6

For each family participants' fund, the required solvency margin is calculated on the basis of the aggregate of the mathematical reserves calculation and the capital sum at risk calculation.

TA-3.1.7

The Valuation and Admissibility of Asset Regulations are contained in Chapter CA-4. Assets of an insurance firm may only be given value for regulatory purposes in accordance with the Valuation of Assets Regulations. Surplus (inadmissible) assets are valued at zero for the purposes of calculating the firm's capital available. Assets considered inadmissible include those that exceed permitted categories and counterparty limits and intangible assets (e.g. brand value).

TA-3.1.8

The Valuation of Liability Regulations are contained in Chapter CA-5. Liabilities must be valued in accordance with International Accounting Standards (to the extent available) or, until such standards come into effect, with Section CA-5.1.

TA-3.1.9

There are also Rules concerning the matching of assets and liabilities, to minimise the risk of maturity and/or currency mismatch in the portfolio.

TA-3.1.10

The CBB may require a takaful firm to provide:

TA-3.1.11

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 takaful fund(s), the shareholders of the takaful firm will receive a specific consideration (wakala fee). For the insurance assets invested on behalf of takaful funds, the takaful operator will use the al mudaraba model, and will receive a set percentage of the profits generated from the investment portfolio.

TA-3.1.12

The wakala fee charged in respect of a takaful contract must be directly proportional to the costs associated with establishing and maintaining that contract.

TA-3.1.13

Takaful firms must maintain separate books of account in respect of each kind of business and for each fund.

TA-3.1.13A

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 to the shareholder fund.

TA-3.1.14

Takaful firms by definition are co-operative in nature and as such participants (policyholders) are entitled to a return of any surplus of the takaful funds operated by a takaful insurer. Takaful firms must establish a policy for the distribution of surplus but may only distribute a surplus if the firm meets its required solvency margin requirements both prior to and after the distribution.

TA-3.2.1

The Business Conduct Module comprises general rules (BC-1) and a Code of Practice (BC-2). These rules apply in full to all insurance licensees with special provisions applicable to takaful firms.

TA-3.2.2

The use of the terms 'takaful', 'retakaful', 'general takaful' and 'family takaful' may only be used to describe the products of insurance firms that are Islamic financial institutions within the meaning of the CBB Rulebook.

TA-3.2.3

An insurance firm may only offer takaful products if it is licensed to do so. An insurance intermediary may offer both conventional insurance and takaful products but must provide clear information to enable consumers to make informed choices.

TA-3.2.4

Takaful firms must provide participants and shareholders with clear information about the performance of their business. This information must, as a minimum, comply with relevant AAOIFI standards, in particular Standard 13 (Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies) and Standard 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies).

TA-3.3.1

Principle 10 (TA-2.2.3) requires firms to have systems and controls that are appropriate for their business. Consequently, the Risk Management Module of the CBB Rulebook contains Rules and Guidance on how, specifically, firms should monitor and manage risk. This Module applies to all licensees, and it is for firms to consider the scale and complexity of the procedures that are required, given the nature of their operations. All those sections dealing with Bahraini insurance firms and overseas insurance firms are applicable to takaful firms.

TA-3.3.2

The Module contains both:

TA-3.4.1

The general law of Bahrain imposes obligations on individuals and firms in relation to the prevention and prohibition of the laundering of money. Module FC applies to all insurance licensees.

TA-3.4.2

In addition, Module FC contains specific Rules and Guidance for insurance licensees that require them to have effective money laundering controls and to report suspicious transactions to the relevant authorities.

TA-3.4.3

Chapter FC-1 outlines the requirements for customer due diligence.

TA-3.4.4

The reporting of suspicious transactions is the responsibility of the firm's Money Laundering Reporting Officer ('MLRO'). All takaful firms must appoint an MLRO.

TA-3.4.5

The MLRO will prepare an annual report on compliance with the anti-money laundering and combating terrorism financing controls and procedures. The Boards of takaful firms will need to include the consideration of this report as a standing item for Board meetings each year.

TA-3.4.6

Appendix FC-(iv), contained in Part B of the CBB Rulebook provides guidance material and examples of transactions that would be considered suspicious for the purposes of this Directive.