CBB Volume 3: Contents

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Location: Central Bank of Bahrain Volume 3—Insurance
  • Central Bank of Bahrain Volume 3—Insurance

    • Part A


      Table of Contents
        Module Title Module
      Code
      Date last
      changed
       
      Introduction Users Guide UG Oct 16 PDF Version
      Executive Summary ES Apr 14 PDF Version
      High Level Standards Authorisation AU April 18 PDF Version
      Principles of Business PB Jan 11 PDF Version
      High Level Controls HC Jul 16 PDF Version
      Auditors and Actuaries AA Apr 14 PDF Version
      General Requirements GR Apr 19 PDF Version
      Business Standards Capital Adequacy CA Apr 14 PDF Version
      Business Conduct BC Apr 16 PDF Version
      Client Money CL Jul 15 PDF Version
      Risk Management RM Oct 17 PDF Version
      Financial Crime FC Jan 19 PDF Version
      Training and Competency TC Oct 07 PDF Version
      Reporting Requirements CBB Reporting BR Apr 17 PDF Version
      Public Disclosure PD Apr 14 PDF Version
      Enforcement & Redress Enforcement EN Apr 19 PDF Version
      Compensation CP Oct 07 PDF Version
      Sector Guides Captive Insurance CI Apr 11 PDF Version
      Insurance Intermediaries and Managers IM Apr 12 PDF Version
      Takaful / Retakaful TA Apr 14 PDF Version

      • Introduction

        • UG Users Guide

          • UG-A Introduction

            • UG-A.1 Purpose

              • UG-A.1.1

                The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook’s substantive content was previously issued by the Bahrain Monetary Agency (‘the BMA’), and was carried forward when the CBB replaced the BMA in September 2006.

                Amended: January 2007

              • UG-A.1.2

                The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional and Islamic bank licensees respectively, were issued in July 2004 and January 2005. This Volume (Volume 3), was issued in April 2005. Volume 4, covering investment business, was issued in April 2006. Volumes 5 (covering specialised licensees), and Volume 6 (capital markets) are being issued gradually. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

                Amended: October 2012
                Amended: October 2007
                Amended: January 2007

              • UG-A.1.3

                This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 3 (Insurance); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

                Amended: January 2007

              • UG-A.1.4

                Volume 3 (Insurance) covers insurance licenseesG , i.e. those CBB licensees that solely undertake regulated insurance servicesG . It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on providing insurance services and the treatment of policyholdersG ). Collectively, these requirements are aimed at ensuring the safety and soundness of the CBB, and providing an appropriate level of protection for policyholdersG .

                Added: January 2007
                Amended: October 2007

              • Legal Basis

                • UG-A.1.5

                  This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 3 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the of the Central Bank of Bahrain and Financial Institutions Law 2006 ("CBB Law"). The Directive in this Module is applicable to all insurance licenseesG (including their approved personsG ), and to registered actuariesG and loss adjustersG .

                  Amended: January 2011
                  Added: January 2007

                • UG-A.1.6

                  For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

                  Added: January 2007

            • UG-A.2 Module History

              • UG-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 that have subsequently been made to this Module are annotated with the calendar date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                Amended: January 2007

              • UG-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 the actual requirements.

                Added: January 2007

              • UG-A.2.3

                A list of recent changes made to this Module is provided below:

                Module Ref. Change Date Description of Changes
                UG-A.1 01/2007 Updated to reflect new CBB Law, various references changed and new Rule UG-A.1.6 introduced categorising this Module as a Directive.
                UG-1.2 01/2007 New Rules UG-1.2.6 and UG-1.2.7 to reflect the CBB Law, other material reorderd as a consequence.
                UG-3.2.1 10/2007 Updated CBB policy re distribution of hard copies of Volumes of Rulebook.
                Order Form 10/2007 Amended Order Form to reflect new policy re hard copy availability.
                UG-A.1.5 01/2011 Clarified legal basis
                UG-2.1.2 01/2011 Updated to reflect structure of Volume 5.
                UG-A.1.2, UG-1.2.1, UG-1.2.2, UG-1.2.7, UG-2.1.1, UG-2.1.2, UG-2.1.3, and UG-2.2.2 10/2012 Various minor amendments to reflect the structure of the Rulebook, including the issuance of Volume 7.
                UG-3.2 and Annex 01/2013 Amended as CBB Rulebook only now available on CBB Website.
                UG-1.3.4 10/2016 Added Section to clarify reference to 'he' 'his' 'she' 'her'.

              • UG-A.2.4

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

              • Superseded Requirements

                Deleted: January 2007

                • UG-A.2.3

                  Deleted: January 2007

          • UG-1 Rulebook Status and Application

            • UG-1.1 Legal Basis

              • UG-1.1.1

                Volume 3 (Insurance) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Artilces 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

                Amended: January 2007

              • UG-1.1.2

                The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

                Amended: January 2007

              • UG-1.1.3

                The requirements for representative officesG will be covered as part of Volume 5 (Specialised activities) of the Rulebook and will be issued at a later date.

                Amended: January 2007
                Amended: October 2007

              • CBB's Rulemaking Instruments

                • UG-1.1.4

                  Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).

                  Added: January 2007

                • UG-1.1.5

                  Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.

                  Added: January 2007

                • UG-1.1.6

                  Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific licenseesG (or categories of licenseesG ), approved personsG or registered personsG . Directives are binding to whom they are addressed.

                  Added: January 2007

                • UG-1.1.7

                  Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.

                  Added: January 2007

                • UG-1.1.8

                  All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. When this is the case, then the Rulebook crossrefers to the Regulation in question and specifies the requirements concerned.

                  Adopted: July 2007

                • UG-1.1.9

                  In keeping with the nature of these regulatory requirements, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licensees, approved personsG , or registered persons.

                  Adopted: July 2007
                  Amended: October 2007

            • UG-1.2 Status of Provisions

              • UG-1.2.1

                The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. If a licensee breaches a Rule to which it is subject, it is liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.

                Amended: October 2012
                Amended: January 2007

              • UG-1.2.2

                Guidance is not binding; rather, it is material that helps inform a particular Rule or sets of Rules, or provides other general information. Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.

                Amended: October 2012
                Amended: January 2007

              • UG-1.2.3

                The status of each Paragraph within the Rulebook is identified by its text format, as follows:

                •  Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.
                •  Guidance is in normal type, font size 11.


                Amended: January 2007

              • UG-1.2.4

                Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.

                Amended: January 2007

              • UG-1.2.5 [Deleted]

                Deleted: January 2007

              • UG-1.2.6 [Deleted]

                Deleted: January 2007

              • UG-1.2.7 [Deleted]

                Deleted: January 2007

              • UG-1.2.5

                Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.

                Amended: January 2007

              • UG-1.2.6

                All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.

                Added: January 2007

              • UG-1.2.7

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Added: January 2007

              • UG-1.2.8

                The CBB’s enforcement processes are set out in Module EN.

                Added: January 2007

            • UG-1.3 Application

              • UG-1.3.1

                Volume 3 of the CBB Rulebook for the most part applies to all insurance licenseesG ; to individuals undertaking key functions in those licensees (so-called “approved persons”); and to certain support services (actuariesG and loss adjustersG ). (Representative officesG are subject to the relevant requirements in Volume 5 of the CBB Rulebook). Further information and relevant definitions are provided in Module AU (Authorisation). Most of the content of Volume 3 only has the formal status of a Directive.

                Amended: January 2007
                Amended: October 2007

              • UG-1.3.2 [Deleted]

                Deleted: January 2007

              • UG-1.3.2

                A few Rules and Guidance have general applicability (and thus also have the formal status of a Regulation); for instance, no one may carry on an insurance business within or from Bahrain without the appropriate license, and controllersG of insurance licenseesG are also subject to various requirements.

                Amended: January 2007
                Amended: October 2007

              • UG-1.3.3

                Each Module in Volume 3 (except those listed under the 'Introduction' and 'Sector Guides' headings) contains a Scope of Application Chapter, setting out which Rules and Guidance apply to which particular type of insurance licenseeG or person, for the Module concerned. In addition, each Rule, (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

                Amended: January 2007

              • UG-1.3.4

                All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

                Added: October 2016

            • UG-1.4 Effective Date

              • UG-1.4.1

                Volume 3 (Insurance) of the CBB Rulebook was first issued in April 2005. Its contents have immediate effect, subject to transition arrangements that may be specified.

                Amended: January 2007

              • UG-1.4.2

                Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 3 (Insurance).

          • UG-2 Rulebook Structure and Format

            • UG-2.1 Rulebook Structure

              • Rulebook Volumes

                • UG-2.1.1

                  The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:

                  Volume 1 Conventional Banks
                  Volume 2 Islamic Banks
                  Volume 3 Insurance
                  Volume 4 Investment Business
                  Volume 5 Specialised Activities
                  Volume 6 Capital Markets
                  Volume 7 Collective Investment Undertakings
                  Amended: October 2012
                  Amended: January 2007

                • UG-2.1.2

                  Volume 5 (Specialised Activities), covers money changers; financing companies; representative officesG ; administrators; trust service providers, micro-finance institutions and ancillary services providers.

                  Amended: October 2012
                  Amended: January 2011
                  Amended: October 2007
                  Amended: January 2007

              • Rulebook Contents (Overview)

                • UG-2.1.3

                  Except for Volumes 5, 6 and 7, the basic structure of each Rulebook is the same. Each Volume starts with a contents page and an introduction containing a User's Guide and Executive Summary. Subsequent material is organised underneath the following headings:

                  (a) High Level Standards;
                  (b) Business Standards;
                  (c) Reporting Requirements;
                  (d) Enforcement and Redress; and, where appropriate,
                  (e) Sector Guides.
                  Amended: October 2012
                  Amended: January 2007
                  Amended: October 2007

                • UG-2.1.4

                  Volume 5 is organised by the category of specialised firm concerned, whilst Volume 6 by subject area (authorised exchanges; issuers of securities, etc).

                  Amended: January 2007

                • UG-2.1.5

                  The material in Volumes 1–4 is contained in Modules, each covering a specific area of requirements (e.g. capital). In turn, each Module is divided into Chapters, Sections and Paragraphs, as detailed below.

                • UG-2.1.6

                  Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called "Part A" and the appendix Volume is called "Part B".

            • UG-2.2 Volume Structure

              • Modules

                • UG-2.2.1

                  Rulebook Volumes are subdivided into Modules, arranged in groups according to their subject matter, underneath the headings listed in Paragraph UG-2.1.3 above.

                • UG-2.2.2

                  Each Module in a Volume is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. These codes are used for cross-referencing within the text.

                  Amended: October 2012

              • Chapters

                • UG-2.2.3

                  Each Module consists of Chapters, categorised into two types:

                  •  A standard introductory Chapter (referenced with a letter: e.g. UG-A); and
                  •  Chapters containing the substantive content of the Module (referenced with a number: e.g. CA-1, ML-2, etc.)

                • UG-2.2.4

                  The introductory Chapters summarise the purpose of the Module and its history (in terms of changes made to its contents). A separate introductory Chapter also prescribes the scope of application of the Module’s requirements.

                  Amended: January 2007

              • Sections and Paragraphs

                • UG-2.2.5

                  Chapters are further sub-divided into Sections; these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-section headings may be used, to guide the reader through a Section; sub-section headings are italicised and unnumbered, and act purely as an indicator (without limitation), as to the status of the Paragraphs that follow.

                  Amended: January 2007

              • Table of Contents

                • UG-2.2.6

                  Each Volume's contents page lists all the Modules contained within it (Part A), and the information contained in the relevant appendix Volume (Part B).

                • UG-2.2.7

                  The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.

                  Amended: January 2007

            • UG-2.3 Format and Page Layout

              • Headers

                • UG-2.3.1

                  The top of each page in the Rulebook identifies the Volume, Module and Chapter in question.

              • Footers

                • UG-2.3.2

                  The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.

                  Amended: January 2007

              • Defined Terms

                • UG-2.3.3

                  Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

                  Amended: January 2007

              • Cross-references

                • UG-2.3.4

                  Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the First Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.

                  Amended: July 2007

              • Text format

                • UG-2.3.5

                  Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.

                  Amended: July 2007

                • UG-2.3.6

                  When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, the words ‘Rule’ or ‘Guidance’ may be used instead of ‘Paragraph’, followed by the reference number (e.g. “As required by Rule FC-1.1.1, licensees must …”).

                  Amended: January 2007

          • UG-3 Rulebook Maintenance and Access

            • UG-3.1 Rulebook Maintenance

              • Quarterly Updates

                • UG-3.1.1

                  Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required) in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.

                  Amended: January 2007

                • UG-3.1.2

                  The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the “date Last Changed” column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.

                  Amended: January 2007

                • UG-3.1.3

                  A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change and, the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.

                  Amended: July 2007

                • UG-3.1.4

                  Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module’s contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module’s contents page.

                  Amended: January 2007

                • UG-3.1.5

                  The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter , to notify them of changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.

                  Amended: January 2007

              • Changes to Numbering

                • UG-3.1.6

                  In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:

                  (a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an "A"; a second inserted Paragraph that follows immediately afterwards would be numbered with a "B", and so on.

                  For example, if a new Paragraph needs to inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter).
                  (b) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: "(This Paragraph was deleted in April 2006.)" ( The date given being the actual end-calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.
                  Amended: January 2007

                • UG-3.1.7

                  Where many such changes have built up over time, then the CBB may reissue the whole section, Paragraph, Chapter or even Module concerned, consolidating all these changes into a renumbered version.

                  Amended: January 2007

            • UG-3.2 Rulebook Access

              • Availability

                • UG-3.2.1

                  The Rulebook is available on the CBB website.

                  Amended: January 2013
                  Amended: January 2007
                  Amended: October 2007

              • Queries

                • UG-3.2.2

                  Questions regarding the administration of the Rulebook (e.g. ordering additional copies, website availability, the updating of material etc) should be addressed to the Rulebook Section of the Licensing & Policy Directorate
                  Rulebook Section
                  Licensing & Policy Directorate
                  Central Bank of Bahrain
                  PO Box 27
                  Manama
                  Kingdom of Bahrain

                  Tel: +973 - 17 54 7413
                  Fax: +973 - 17 53 0228
                  E-mail: rulebook@cbb.gov.bh
                  Web: www.cbb.gov.bh

                  Questions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.
                  Amended: January 2013
                  Amended: January 2007

              • CBB Rulebook Order Form [This form was deleted in January 2013]

                Deleted: January 2013

        • ES Executive Summary

          • ES-A Introduction

            • ES-A.1 Purpose

              • Executive Summary

                • ES-A.1.1

                  The purpose of this Module is to:

                  (a) Provide an overview of the structure of Volume 3 (Insurance);
                  (b) Provide a summary of each Module; and
                  (c) Outline the transition rules for the implementation of the Volume 3.
                  Amended: January 2007

                • ES-A.1.2

                  The Central Bank of Bahrain ('CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, has as its mission:

                  (a) To ensure monetary and financial stability in the Kingdom of Bahrain; and
                  (b) To regulate, develop and maintain confidence in the financial sector.
                  Amended: January 2007

                • ES-A.1.3

                  As the single regulator, the CBB ensures the consistent application of regulatory standards in banking, insurance and capital markets, as well as encourages an open and cooperative approach in dealing with financial institutions.

                  Amended: January 2007

                • ES-A.1.4

                  The supervision of the insurance sector in the Kingdom pays particular regard to the standards set by the International Association of Insurance Supervisors (IAIS). The CBB plays an important role in meeting stakeholders' expectations — the principal stakeholders of the CBB are the Government of the Kingdom of Bahrain, the regulated financial institutions, the consumers, the IAIS and several other international organizations.

                  Amended: January 2007

                • ES-A.1.5

                  To carry out its responsibilities in relation to the insurance sector, the CBB has four supervisory objectives, namely to:

                  (a) Promote the stability and soundness in the insurance system;
                  (b) Provide an appropriate degree of protection to insurance company policyholdersG ;
                  (c) Promote transparency and market discipline; and
                  (d) Reduce the likelihood of insurance licenseesG being used for financial crime (including money laundering activities).
                  Amended: January 2007

              • Legal Basis

                • ES-A.1.6

                  This Module contains the CBB's (as amended from time to time) Directive relating to transition rules and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all insurance licenseesG (including their approved personsG ).

                  Amended: January 2011
                  Amended: January 2007

                • ES-A.1.7

                  For an explanation of the CBB's rule-making power and different regulatory instruments, see Section UG-1.1.

                  Amended: January 2007

            • ES-A.2 Module History

              • ES-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 that have subsequently been made 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.

                Amended: January 2007

              • ES-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.

                Adopted: January 2007

              • ES-A.2.3

                A list of recent changes made to this Module is provided below:

                Module Ref. Change Date Description of Changes
                ES-1.1 01/07/05 Module BR: Corrected first quarterly return due for the period ending 31 March 2006.
                ES-1.1 01/10/05 Clarified application of Module FC to insurance managers.
                ES-1.10 01/10/05 Corrected cross-reference referring to examples of suspicious transactions.
                ES-2.4 01/10/05 Added transition period for actuarial requirements for insurance firms whose long term insurance business is restricted to group life policies having a maturity of less than or equal to 1 year.
                ES-2.5 01/10/05 Corrected cross-reference.
                ES-2.6 01/10/05 Updated transition rules for minimum Tier 1 capital.
                ES-1.1 01/01/06 Transition rules for reporting by insurance firms updated.
                ES-2.7 01/01/06 A Section on transition rules for reporting by insurance firms was added.
                ES-1.1.5 01/07/06 Transition rule for Modules RM and PD has been added.
                ES-2.6A 01/07/06 Added transition rules for physical security measures and third party insurance.
                ES-2.8 01/07/06 Transition rules in respect of semi-annual disclosure requirements have been added.
                ES-A.1.6 01/2007 New Rule introduced, categorising this Module as a Directive.
                ES-1.1.9 and ES-2.4.2 01/2007 Clarified the first period for which a report from the Signing ActuaryG is required.
                ES-1.1.9 and ES-2.6B.1 01/2007 Allowed for a transition period for the external auditor's report required under Subparagraph FC-3.3.1(d).
                ES-1.1.9 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firmsG .
                ES-1.2.2 10/2007 Pure reinsurers can undertake both general insurance businessG and long-term insurance businessG within the same entity.
                ES-2.4.3 10/2007 Clarified the transition period for the rotation of audit partner.
                ES-2.6.2 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firmsG .
                ES-1.1, ES-1.2, ES-1.11, ES-1.14 10/2009 Reference added to appointed representatives as per Resolution (11) of 2009.
                ES-1.2.3 10/2009 Amended list of controlled functions to be consistent with Module AU.
                ES-1.5.4 10/2009 Amended to be consistent with Section AA-4.2.
                ES-2.5.4 10/2009 Introduced transition rule for new requirements for appointed representatives as per Resolution (11) of 2009.
                ES-A.1.6 01/2011 Clarified legal basis
                ES1.1.9, ES-1.4, ES-1.17.3 and ES-2.3 04/2011 Amended to reflect changes to Module HC.
                ES-1.1.9, ES-1.8A and ES-2.6AA2 04/2012 Amendments made to reflect the issuance of Module CL (Client Money).
                ES-2.6AA1 04/2012 Added transition period to have in place customer complaints procedures as outlined in Chapter BC-4.
                ES-2.7.4 and ES-2.7.5 04/2012 Added transition period for filing of IBR and IBRS.
                ES-1.1.9
                ES-1.15
                10/2012 The reference to Module DP was deleted as customer complaints procedures are included in Chapter BC-4.
                ES-1.1.9 04/2014 Updated transition period to repay/write of Qard Hassan granted for solvency purposes.
                ES-1.2.3 04/2014 Updated list of approved persons to be in line with AU-1.2.2.
                ES-1.7.5, ES-1.19.3, ES-2.4 and ES-2.6 04/2014 Updated to reflect the consultation on the enhanced operational and solvency framework for Takaful firms.

          • ES-1 Structure and Summary of Insurance Modules

            • ES-1.1 Structure of Volume 3 (Insurance)

              • ES-1.1.1

                Volume 3 (Insurance) of the Rulebook covers insurance activities, i.e. the provision of regulated insurance servicesG by insurance licenseesG . It also includes requirements regarding approved personsG ; and the registration requirements for actuariesG , loss adjustersG and appointed representativesG .

                Amended: October 2009
                Amended: January 2007

              • ES-1.1.2

                Volume 3 excludes representative officesG of insurance firmsG , and ancillary services providersG . These Regulations will later be incorporated into Volume 5 (Specialised Activities) of the CBB Rulebook, to be released at a later date.

                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.3

                Volume 3 (Insurance) is made up of two volumes: Part A is the main Volume containing detailed Modules containing the Rules and Guidance and Part B is an appendix Volume containing a glossary of defined terms, CBB authorisation forms, CBB reporting forms and any supplementary information.

                Amended: January 2007

              • ES-1.1.4

                Part A of Volume 3 (Insurance) is organized under the following headings:

                •  Introduction;
                •  High Level Standards;
                •  Business Standards;
                •  Reporting Requirements;
                •  Enforcement and Redress; and
                •  Sector Guides.
                Amended: January 2007
                Amended: October 2007

              • ES-1.1.5

                Including this Executive Summary Module, there are 20 Modules that make up Part A of Volume 3 (Insurance). The requirements for the various insurance license categories are embedded throughout Part A. In addition, for some specialised licenses (captive insurersG , insurance intermediariesG and takafulG /retakafulG ) there are sector guides summarizing the key requirements, specifically applicable to these categories.

                Amended: January 2007

              • ES-1.1.6

                Part B of Volume 3 is organized under the following headings:

                •   Glossary;
                •   Reporting Forms; and
                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.7

                Defined terms used in the Rulebook are underlined; their definition can be found in the Glossary. Each volume has its own Glossary, as definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different volume with a different meaning.

                Adopted: January 2007

              • ES-1.1.8

                There are four authorisation forms, comprising (i) Form 1 (application for a license); (ii) Form 2 (application for the authorisation of a controllerG ); (iii) Form 3 (application for approved personG status); and (iv) Form 4 (application for registration).

                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.9

                A summary of the Modules, their application and implementation is given in the table below:

                Module Application Transition Rules
                Module AU All new applicants for licenses, approved personsG and registration of actuariesG , loss adjustersG and appointed representativesG . Effective 1 June 2005. AU-1.1.11 where an insurance licensee carries on a prohibited commercial business, the licensee must notify the CBB and establish the transitional rules.
                Module PB All insurance licenseesG and approved personsG . None.
                Effective 1 June 2005.
                Module HC
                1. Applies to all Bahraini insurance licenseesG except for Bahraini single person companies.
                2. Insurance consultants, insurance managers and captive insurers are subject to Guidance under HC-10.
                3. Exemption possible from the requirement to have 2 independent non-executive DirectorsG for Bahraini insurance licenseesG that are part of an overseas group and exemption to have Board Committees (HC-1.5.2).
                4. Where an insurance broker's Board does not consider it necessary to create an audit committee, it must be prepared to give reasons for its decision to the CBB (HC-B.1.2).
                The updated Module is effective on 1st January 2011. All insurance licenseesG to which Module HC applies must be in full compliance by the financial year end 2011.
                Module AA All insurance licenseesGauditorsG
                All insurance firmsGactuariesG
                For insurance firmsG whose business is restricted to group life policies, having a maturity of less than or equal to 1 year, actuarial requirements must be met by December 31, 2007.
                The first period for which a report is required by a Signing ActuaryG is for the period ending December 31, 2008.
                All other requirements are effective 1 July 2005.
                Module GR Refer to chart in GR-B.1.1 for application All insurance licenseesG must comply with the requirements for books and records within Bahrain, effective 1 July 2005.
                Professional indemnity coverage must be met by all insurance brokersG and insurance consultantsG by 31 Dec. 2005.
                For unincorporated brokers licensed prior to 1 June 2005, professional indemnity coverage must be met by 31 Dec 2006.
                All other provisions of Module GR are to be applied effective 1 June 2005.
                Compliance with Resolution (11) of 2009 dealing with appointed representativesG is effective 1st January 2010.
                Module CA All insurance licenseesG , with specific requirements applicable to different types of licensees.
                Also special rules in place for takaful firmsG .
                Minimum Tier 1 capital for Bahraini insurance firmsG to be met by December 31, 2007.
                For insurance brokersG licensed prior to 1 June 2005, implementation effective 31 Dec. 2006.
                For Qard Hassan granted for solvency purposes, repayment or write off over a period of 5 years from April 2014.
                For other insurance licenseesG licensed prior to 1 June 2005, implementation effective 31 Dec. 2005.
                Module BC Applicable to direct domestic businessG . Reinsurance business is exempted. Also special rules in place for takaful firmsG . None.
                Effective 1 July 2005.
                Module CL Applies to all insurance brokers and appointed representatives licensed by the CBB that undertake the broking of insurance contracts (see Rule AU-1.4.10) and hold client money. Effective 1 July 2012.
                Module RM Only applies to insurance firmsG and insurance brokersG . Physical Security Measures and Third Party Insurance are effective December 31, 2006.
                Module FC Measures for the prevention of money laundering and terrorism financing apply to insurance firmsG and insurance brokersG , with some exemptions for captive insurersG managed by an insurance managerG . Where captive insurersG are managed by an insurance managerG , this Module also applies to the insurance managerG .
                Some exemption possible for reinsurers (FC-B.1.2).
                Measures dealing with fraud (FC-8) apply to all insurance licenseesG .
                Effective 1 July 2005. For long-term insurance contracts, the CBB expects the Module to be applied to current clients gradually on a case by case basis.
                Module TC To be developed in the future.  
                Module BR All insurance licenseesG , with specific requirements applicable to different types of licensees. For insurance firmsG , first annual and group reporting due for the period ending 31 December 2006 and first quarterly report due for the quarter ending 31 March 2007. Notification and approval requirements effective 1 June 2005.
                Module PD Only applies to insurance firmsG . First disclosure requirements required for the period ending 31 December 2005.
                First semi-annual disclosure requirements required for the period ending 30 June 2008.
                Module EN All insurance licenseesG , approved personsG and registered persons. None.
                Effective 1 June 2005.
                Module DP [Deleted as included in Chapter BC-4]  
                Module CP To be developed in the future.  
                Module CI Captive insurersG Transition rules as per those stated in main Modules.
                Module IM Insurance intermediariesG Transition rules as per those stated in main Modules.
                Module TA TakafulG /retakafulG Transition rules as per those stated in main Modules.
                Amended: April 2014
                Amended: October 2012
                Amended: April 2012
                Amended: April 2011
                Amended: October 2009
                Amended: October 2007
                Amended: January 2007

            • ES-1.2 Module AU — Authorisation

              • ES-1.2.1

                Module AU covers the licensing requirements for insurance licenseesG ; registration requirements for actuariesG , loss adjustersG and appointed representativesG ; and authorisation requirements for approved personsG . The Module defines what is included as part of regulated servicesG , specifically providing definitions for:

                (a) Carrying on of insurance business (insurance firmsG );
                (b) The broking of insurance contracts (insurance brokersG );
                (c) The offering of insurance advice (insurance consultantsG );
                (d) The provision of insurance management services (insurance managersG ); and
                (e) Operators of an insurance exchange (insurance exchange operatorsG ).
                Amended: October 2009
                Amended: October 2007
                Amended: January 2007

              • ES-1.2.2

                With the exception of captive insurersG and pure reinsurersG , an insurance firmG cannot undertake both long-term insurance businessG and general insurance businessG . Insurance firmsG (including captive insurersG ), must operate on either conventional insurance principles or on takafulG principles: they cannot combine the two. Grandfathering provisions apply for those companies whose past license granted them the right to undertake both long-term insurance businessG and general business.

                Amended: January 2007
                Amended: October 2007

              • ES-1.2.3

                Module AU deals with the requirements and conditions for approved personsG , i.e. those wishing to undertake a controlled functionG in an insurance licenseeG . Controlled functionsG are those of:

                (a) DirectorG ;
                (b) Chief executiveG or general managerG ;
                (c) Head of functionG ;
                (d) Head of risk management;
                (e) Compliance officer;
                (f) Money Laundering Reporting Officer;
                (g) Member of Shari'a Supervisory BoardG ;
                (h) Internal Shari'a reviewer;
                (i) Unit-linked investment adviserG ; and
                (j) Signing ActuaryG (where the function is undertaken by a DirectorG or an employeeG of the insurance firmG ).
                Amended: April 2014
                Amended: October 2009
                Amended: January 2007

              • ES-1.2.4

                The licensing conditions that must be abided by all insurance licenseesG are outlined as part of Chapter AU-2 of the Module.

                Amended: January 2007

              • ES-1.2.5

                The Module outlines the information requirements and procedures that must be followed as part of the process for:

                (a) Licensing;
                (b) Approved personsG ; and
                (c) Registration of actuariesG , loss adjustersG and appointed representativesG .
                Amended: October 2009
                Amended: January 2007

            • ES-1.3 Module PB — Principles of Business

              • ES-1.3.1

                The 10 Principles of Business covered in Module PB are a general statement of the fundamental obligations of all CBB insurance licenseesG and approved personsG . They have the status of Rules and provide a basis for other more detailed Rules elsewhere in Volume 3.

                Amended: January 2007

              • ES-1.3.2

                All Principles of Business apply to activities carried out by the licensees, including activities carried out through overseas branches. Principles 1 to 8 also apply to approved personsG , in respect of controlled functionsG for which they have been approved. Principles 9 (Adequate Resources) and Principles 10 (Management, Systems and Controls) also take into account any activities of other members of the group of which the licensee is a member.

                Amended: January 2007

              • ES-1.3.3

                The Principles of Business are:

                Principle 1 — Integrity

                Principle 2 — Conflicts of Interest

                Principle 3 — Due Skill, Care and Diligence

                Principle 4 — Confidentiality

                Principle 5 — Market Conduct

                Principle 6 — Customer Assets

                Principle 7 — Customer Interests

                Principle 8 — Relations with Regulators/Supervisors

                Principle 9 — Adequate Resources

                Principle 10 — Management, Systems and Controls

            • ES-1.4 Module HC — High-Level Controls

              • ES-1.4.1

                Module HC outlines the requirements that must be met by insurance licenseesG with respect to:

                (a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code; and
                (b) Related high-level controls and policies.
                Amended: April 2011
                Amended: January 2007

              • ES-1.4.1A

                The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.

                Added: April 2011

              • ES-1.4.1B

                The requirements distinguish between different types of insurance licenseesG . For insurance brokersG , Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply for insurance brokersG . Because of their limited business activities, and consequent lesser risk to customers, insurance consultantsG , insurance managersG and captive insurance firmsG are subject to applicable Guidance Paragraphs included in Chapter HC-10.

                Added: April 2011

              • ES-1.4.2

                The high-level controls covered by this Module deal with:

                (a) The function of chief executive officerG and general managerG ;
                (b) The mapping of risks and responsibilities;
                (c) Internal audit;
                (d) Compliance;
                (e) Remuneration policies for approved personsG ;
                (f) Corporate ethics; and
                (g) Transparency and disclosure.
                (h) Committees of the Board;
                (i) Financial statements certification;
                (j) Appointment, training and evaluation of the Board;
                (k) Management structure;
                (l) Communication between the Board and shareholders; and
                (m) Governance and disclosure per Shari'a principles.
                Amended: April 2011
                Amended: January 2007

              • ES-1.4.3

                Module HC also includes requirements for an annual Board review and certification, on the implementation of internal governance processes and their effectiveness in achieving the Board's objectives, and whether the Board can attest that it has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.

            • ES-1.5 Module AA — Auditors and Actuaries

              • ES-1.5.1

                Module AA deals with requirements on the appointment and functions of auditorsG and actuariesG of insurance licenseesG . Requirements dealing with actuariesG only apply to insurance firmsG and are not applicable to insurance intermediariesG and insurance managersG .

                Amended: January 2007

              • ES-1.5.2

                The auditor requirements deal with:

                (a) The appointment of auditorsG ;
                (b) The removal and resignation of auditorsG ;
                (c) Audit partner rotation;
                (d) AuditorG independence; and
                (e) Restrictions on the relationship between the insurance licenseeG and the auditorG .
                Amended: January 2007

              • ES-1.5.3

                The Module covers the CBB's requirements regarding access to auditorsG and actuariesG as well as the auditors'G access to outsourcing providersG . In addition, the Module outlines the requirement for insurance licenseesG to arrange for their auditorsG to review the licensee's annual return submitted to the CBB.

                Amended: January 2007

              • ES-1.5.4

                Module AA provides requirements for both Registered ActuariesG and Signing ActuariesG .

                Amended: October 2009
                Amended: January 2007

            • ES-1.6 Module GR — General Requirements

              • ES-1.6.1

                Module GR covers requirements dealing with areas not covered in other Modules. The areas covered are:

                (a) Books and records;
                (b) Corporate and trade names;
                (c) Dividends;
                (d) Business transfers;
                (e) ControllersG ;
                (f) Close links;
                (g) Statutory deposits and compulsory reserve;
                (h) Cessation of business;
                (i) Appointed representativesG ; and
                (j) Professional indemnity coverage.
                Amended: January 2007
                Amended: October 2007

              • ES-1.6.2

                Item (i) applies only to insurance firmsG ; item (g) applies to insurance firmsG and insurance brokersG , whereas item (j) only applies to insurance brokersG and insurance consultantsG .

                Amended: January 2007
                Amended: October 2007

            • ES-1.7 Module CA — Capital Adequacy

              • ES-1.7.1

                Module CA covers requirements governing the minimum capital and solvency requirements as well as the valuation of assets and liabilities.

                Amended: January 2007

              • ES-1.7.2

                Considering the nature of their business, the requirements regarding capital and solvency for insurance firmsG are far more detailed than for insurance intermediariesG and insurance managersG .

                Amended: January 2007

              • ES-1.7.3

                Similarly the rules dealing with the valuation of assets and valuation of liabilities are only applicable to insurance firmsG .

                Amended: January 2007

              • ES-1.7.4

                For insurance firmsG , Module CA outlines various currency matching and localisation requirements as well as whole firm and group solvency requirements.

                Amended: January 2007

              • ES-1.7.5

                The Module provides detailed rules for requirements dealing with takafulG and retakafulG specifically addressing:

                (a) General capital requirements;
                (b) The basis of operating a takafulG business;
                (c) The segregation of funds;
                (d) The capital adequacy and solvency requirements for both the Takaful firmG ; and
                (e) The distribution of surplus.
                Amended: April 2014
                Amended: January 2007

            • ES-1.8 Module BC — Business Conduct

              • ES-1.8.1

                This Module presents under the form of an Insurance Code of Practice the minimum standards of good practice for market conduct in relation to direct insurance activities. This Module applies to domestic businessG . ReinsuranceG business is exempted from the requirements of this Module.

                Amended: January 2007

              • ES-1.8.2

                The Insurance Code of Practice is made up of overarching principles applied throughout the customer relationship. These principles cover:

                (a) Marketing and promotion;
                (b) Initial customer information service;
                (c) Identification of customer requirements;
                (d) Advice and recommendation;
                (e) Customer identification before commitment to contract;
                (f) Confirmation of cover and policy documentation;
                (g) Service after the point of sale;
                (h) Claims;
                (i) Renewal, expiry and cancellation;
                (j) Complaints;
                (k) Information conditions applying to all customer information;
                (l) Fair treatment; and
                (m) Confidentiality and security of customer assets.
                Amended: January 2007

              • ES-1.8.3

                Module BC has additional requirements dealing specifically with requirements unique to takafulG and retakafulG , including the requirement to clearly disclose to participants the calculation of wakala and mudaraba fees paid by the takafulG fund(s) to the takafulG operator.

                Amended: January 2007

            • ES-1.8A Module CL – Client Money

              • ES-1.8A.1

                This Module provides detailed Rules and Guidance with respect to the holding of client moneyG by insurance brokersG and appointed representativesG . They are aimed at ensuring proper protection of client moneyG to minimise the risk of client moneyG being used by insurance brokersG and appointed representativesG and to prevent the commingling of client moneyG with the insurance brokers'G and appointed representatives'G assets.

                Added: April 2012

              • ES-1.8A.2

                As a general rule, client moniesG are required to be segregated from a firm's own assets, and client moneyG must be held in a client money accountG . Various other restrictions and protections apply to client moneyG , whilst the rules also apply certain reconciliation and reporting requirements.

                Added: April 2012

              • ES-1.8A.3

                Rules applying to appointed representativesG are applicable based on the type of appointed representativesG . The Module deals with:

                (a) Individual appointed representativesG ;
                (b) Corporate appointed representativesG that are financial institutions; and
                (c) Corporate appointed representativesG , other than financial institutions.
                Added: April 2012

            • ES-1.9 Module RM — Risk Management

              • ES-1.9.1

                This Module provides detailed Rules and Guidance on risk management systems and controls required for insurance firmsG and insurance brokersG . The Module imposes on these licensees the obligation to identify the range of risks that they face and to effectively manage these through the implementation of risk management systems that monitor and control all material risks.

                Amended: January 2007

              • ES-1.9.2

                Module RM specifically addresses certain risk categories. However, insurance firmsG and insurance brokersG must determine any additional risk categories relevant to their business and how these are addressed.

                Amended: January 2007

              • ES-1.9.3

                The risk management standards addressed in Module RM are:

                (a) Credit riskG ;
                (b) Liquidity riskG ;
                (c) Market riskG ;
                (d) Insurance technical riskG ;
                (e) Operational riskG ;
                (f) Outsourcing riskG ; and
                (g) Group risk.
                Amended: January 2007
                Amended: October 2007

            • ES-1.10 Module FC — Financial Crime

              • ES-1.10.1

                Module FC implements the Financial Action Task Force (FATF) recommendations on money laundering and special recommendations on terrorism financing that are relevant to the insurance sector in Bahrain.

              • ES-1.10.2

                The Module covers the detailed procedures required for:

                (a) Customer identification;
                (b) Reporting;
                (c) Staff awareness and training;
                (d) The appointment of a money laundering reporting officer;
                (e) Compliance monitoring;
                (f) Record keeping arrangements;
                (g) Segregation of duties;
                (h) Special measures for non-cooperative countries; and
                (i) Contact with relevant authorities.
                Amended: January 2007

              • ES-1.10.3

                Item FC (iv) in Part B of Volume 3 (Insurance) provides further examples of transactions that may be suspicious or unusual.

              • ES-1.10.4

                In addition, Module FC has a chapter dealing with the area of insurance fraud and steps that must be taken by insurance licenseesG to address this area.

                Amended: January 2007

            • ES-1.11 Module TC — Training and Competency

              • ES-1.11.1

                This Module is to be issued at a later date.

                Amended: January 2007
                Amended: October 2007

              • ES-1.11.2

                When finalised, the Module will provide detailed Rules and Guidance on training and competency requirements for employees of insurance licenseesG as well as for actuariesG , loss adjustersG and appointed representativesG .

                Amended: October 2009
                Amended: January 2007

            • ES-1.12 Module BR — BMA Reporting

              • ES-1.12.1

                Module BR outlines the CBB's reporting requirements. The reporting requirements are broken down into three main categories:

                (a) Financial reporting;
                (b) Notifications; and
                (c) Approvals.
                Amended: January 2007

              • ES-1.12.2

                Annual financial reporting is required for all insurance licenseesG . Group and quarterly reporting are required only for insurance firmsG . The financial reporting Chapter contains various Rules, Directives and Guidance which underpin the reporting forms included in Part B of Volume 3 (Insurance).

                Amended: January 2007
                Amended: October 2007

              • ES-1.12.3

                The Module outlines instances and procedures to be followed where insurance licenseesG must submit written notifications to the CBB. These include matters having a serious supervisory impact, breaches of Regulations and Directives and other requirements and the removal or resignation of auditorsG or Reporting ActuariesG .

                Amended: January 2007

              • ES-1.12.4

                The Module also outlines where insurance licenseesG must seek the CBB's prior approval for changes in their operations, such as change in legal status, mergers, acquisitions, disposals and establishment of new subsidiaries. The CBB's prior approval is also required for insurance licenseesG undertaking business transfers and for related party transactionsG above a specified threshold.

                Amended: January 2007
                Amended: October 2007

              • ES-1.12.5

                Finally, the Module outlines the various ways in which the CBB gathers its information from insurance licenseesG including onsite visits by the CBB, and where deemed necessary the use of Appointed ExpertsG .

                Amended: January 2007

            • ES-1.13 Module PD — Public Disclosure

              • ES-1.13.1

                Module PD governs the minimum requirements to be followed by insurance firmsG with respect to corporate and financial transparency through meaningful public disclosures. Public disclosures help protect customersG of insurance firmsG and facilitate market discipline.

                Amended: October 2007

              • ES-1.13.2

                The disclosure requirements for insurance firmsG cover both annual and semi-annual disclosure requirements.

              • ES-1.13.3

                Module PD outlines what information and by what means this information must be disclosed, distinguishing the type of information to be disclosed by the insurance firmG subject to these requirements.

              • ES-1.13.4

                To assist those insurance firmsG subject to this Module wishing to go further than the CBB's minimum requirements, further guidance and best practice are set out in Chapter PD-3.

                Amended: January 2007

            • ES-1.14 Module EN — Enforcement

              • ES-1.14.1

                This Module outlines enforcement powers and processes that may be applied by the CBB to address failures by insurance licenseesG , approved personsG or registered persons. The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk to policyholdersG and the financial system.

                Amended: January 2007

              • ES-1.14.2

                The enforcement measures contained in the Module are of varying severity and will be used in keeping with the CBB's assessment of the contravention, reserving the most serious enforcement measures for the most serious of contraventions.

                Amended: January 2007

              • ES-1.14.3

                The CBB follows a proportionality principle in its enforcement measures, and will usually opt for the least severe of appropriate enforcement measures, consistent with the desired outcome. The CBB's enforcement approach includes:

                (a) Formal requests for information;
                (b) Investigations;
                (c) Formal warnings;
                (d) Directions;
                (e) Financial penalties;
                (f) Administration;
                (g) Cancellation of license;
                (h) Cancellation of "fit and proper" approval; and
                (i) Cancellation of registration (for actuariesG , loss adjustersG and appointed representativesG only).
                Amended: October 2009
                Amended: January 2007

              • ES-1.14.4

                A reminder of criminal sanctions in the CBB Law and other legislation is set out in Chapter EN-10.

                Amended: January 2007

            • ES-1.15 [This Section was deleted in October 2012 as it is included in Chapter BC-4]

              • ES-1.15.1

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Amended: January 2007
                Amended: October 2007

              • ES-1.15.2

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Adopted: January 2007

            • ES-1.16 Module CP — Compensation

              • ES-1.16.1

                This Module provides space, for possible inclusion at a later date, for a description of a policyholderG protection scheme, should such a scheme be developed in cooperation with the industry.

                Amended: January 2007

            • ES-1.17 Module CI — Captive Insurers

              • ES-1.17.1

                This Module provides a summary of Rules and Guidance applicable to captive insurance firmsG , that are contained in the main subject Modules of Volume 3 (Insurance). Module CI (Captive Insurers) only contains Guidance material.

                Amended: January 2007

              • ES-1.17.2

                While Module CI is primarily focused for captive insurersG , it contains the requirements that would need to be fulfilled by captive management firms (insurance managersG ), in meeting the regulatory obligations of captive insurersG .

                Amended: January 2007

              • ES-1.17.3

                The Module extracts several of the rules applicable to captive insurersG , and tailored to meet the unique nature of captive insurersG , including:

                (a) The option to be licensed as a special purpose vehicle (SPV), specifically established to carry out the activities of a captive insurerG (Module AU);
                (b) Lighter requirements with respect to high-level controls (Module HC);
                (c) Exemptions to rules in respect of due diligence requirement for client records, approval for corporate and trade names and pre-approval for distribution of dividends to shareholdersG (Module GR);
                (d) Capital requirements based on the type (Category C1G  or Category C2G firm) of captive insurersG (Module CA);
                (e) Exemptions from quarterly and group financial reporting (Module BR); and
                (f) The non-application of public disclosure requirements for captive insurersG (Module PD).
                Amended: April 2011
                Amended: January 2007
                Amended: October 2007

            • ES-1.18 Module IM — Insurance Intermediaries and Managers

              • ES-1.18.1

                This Module provides a summary of Rules and Guidance applicable to insurance intermediariesG (insurance brokersG and insurance consultantsG ) and insurance managersG , that are contained in the main subject Modules of Volume 3 (Insurance). Module IM (Insurance Intermediaries and Managers) only contains Guidance material.

                Amended: January 2007

              • ES-1.18.2

                The regulated insurance servicesG of insurance consultantsG and insurance managersG are defined in Section AU-1.4, detailing the type of services that can be offered by these intermediaries.

                Amended: January 2007

              • ES-1.18.3

                The category of insurance managerG is being introduced in the Rulebook, as the CBB has also introduced a regulatory framework to cater to the unique nature of captive insurersG . The CBB recognises that, in most cases, the operations of captive insurersG are sub-contracted to insurance managersG . To simplify the approval of the management subcontracted by a captive insurerG , the licensing of insurance managersG will have been considered by the CBB in detail as part of its licensing process.

                Amended: January 2007

              • ES-1.18.4

                The Module extracts the rules applicable to insurance intermediariesG and insurance managersG , including:

                (a) The requirements to have in place professional indemnity coverage for insurance brokersG and insurance consultantsG . (Module GR);
                (b) The capital requirements for insurance intermediariesG and insurance managersG (Module CA); and
                (c) Exemptions from quarterly and group financial reporting (Module BR).
                Amended: January 2007
                Amended: October 2007

            • ES-1.19 Module TA — Takaful/retakaful

              • ES-1.19.1

                This Module provides a summary of Rules and Guidance applicable to takafulG and retakafulG business that are contained in the main subject Modules of Volume 3 (Insurance). Module TA (Takaful/retakaful) only contains Guidance material.

                Amended: January 2007

              • ES-1.19.2

                Module TA recognises the unique nature of the takafulG /retakafulG business and has carved out Rules in instances where conventional Rules could not be applied to a takafulG entity.

                Amended: January 2007

              • ES-1.19.3

                Included in the Rules tailored to meet the requirements of the takafulG industry are:

                (a) The requirement for takafulG firms to have a Shari'a Supervisory BoardG in addition to a Board of Directors (Module HC); and
                (b) Capital and solvency Rules taking into account the participants' funds and the possibility of Qard Hassan from the shareholder fund in instances where the takafulG fund does not fully meet the liquidity requirements (Module CA).
                Amended: April 2014
                Amended: January 2007

          • ES-2 Transition Rules

            • ES-2.1 General Requirements

              • ES-2.1.1

                Insurance licenseesG who were licensed prior to the publication of Volume 3 (Insurance), do not need to resubmit an application for a license.

              • ES-2.1.2

                Insurance licenseesG licensed prior to 1 June 2005 will have their license category, and the scope of their authorisation, confirmed in an exchange of letters.

                Amended: January 2007

              • ES-2.1.3

                Insurance licenseesG licensed prior to 1 June 2005, must comply with all other requirements of the Rulebook, when these take effect on 1 June 2005, unless different transition arrangements have been agreed in writing with the CBB beforehand or in accordance with the transition rules incorporated throughout in this Module.

                Amended: January 2007

            • ES-2.2 Module AU — Authorisation

              • ES-2.2.1

                In instances where an insurance licenseeG carries on a commercial business, at the time where the Insurance Rulebook becomes effective, the insurance licenseeG must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to AU-1.1.11).

                Amended: January 2007

            • ES-2.3 Module HC — High-Level Controls

              • ES-2.3.1

                Insurance brokersG who were licensed prior to the introduction of Volume 3 (Insurance), and who were unincorporated entities or natural persons at that time, may continue as such until 31 December 2006.

              • ES-2.3.2

                [This Paragraph was deleted in April 2011].

                Deleted: April 2011
                Amended: January 2007

              • ES-2.3.3

                The updated Module is effective on 1st January 2011. All insurance licenseesG to which Module HC applies must be in full compliance by the financial year end 2011.

                Added: April 2011

            • ES-2.4 Module AA — Auditors and Actuaries

              • ES-2.4.1

                [This Paragraph was deleted in April 2014.]

                Deleted: April 2014
                Amended: July 2007

              • ES-2.4.2

                [This Paragraph was deleted in April 2014.]

                Deleted: April 2014
                Amended: April 2008
                Adopted: January 2007

              • ES-2.4.3

                The first five year-period where the requirement for the rotation of audit partner referred to in Paragraph AA-1.3.1 takes effect, ends 31 December 2010. Therefore, unless there has been a change in the partner appointed since the Rulebook was issued in May 2005, or if a company has been licensed since the Rulebook has been issued, insurance licensees will need to have a new partner responsible for the audit engagement for the year 2011.

                Adopted: October 2007

            • ES-2.5 Module GR — General Requirements

              • Books and Records (GR-1)

                • ES-2.5.1

                  All insurance licenseesG must comply with the requirements for books and records outlined in Chapter GR-1, effective 1 July 2005.

              • Professional Indemnity Coverage (GR-10)

                • ES-2.5.2

                  Except as provided for by Paragraph ES-2.5.3, professional indemnity coverage requirements must be met by insurance brokersG and insurance consultantsG by 31 December 2005.

                • ES-2.5.3

                  Unincorporated Bahraini insurance brokersG licensed prior to 1 June 2005 must meet the professional indemnity coverage requirements by 31 December 2006.

              • Appointed Representatives (GR-9)

                • ES-2.5.4

                  Requirements for the registration of appointed representatives and minimum qualifications as outlined in Chapter GR-9 are effective 1st January 2010.

                  Adopted: October 2009

            • ES-2.6 Module CA — Capital Adequacy

              • ES-2.6.1

                Except as otherwise noted below, the requirements of Module CA are to be implemented, effective 31 December 2005.

              • Insurance Firm

                • ES-2.6.2

                  Bahraini insurance firmsG 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 firmsG by 31 December 2005. Insurance firmsG 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.

                  Amended: January 2007
                  Amended: October 2007

              • Insurance Broker

                • ES-2.6.3

                  In respect of licensees who were carrying out activities that fall within the definition of the regulated activity of insurance brokerG prior to 1 April 2005, the requirements of Paragraph CA-1.3.1 (capital requirements) will apply from 1 January 2007.

                  Amended: January 2007

              • Takaful Firms

                • ES-2.6.4

                  Where a takaful firmG was licensed prior to the Rulebook coming into force, Section ES-2.6.5 applies.

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

                • ES-2.6.5

                  A takaful firmG operating on a basis other than that prescribed by Paragraph CA-8.2.1 at the date the Rulebook comes into force, must in respect of all takafulG contracts written after this date, manage those contracts in accordance with Paragraph CA-8.2.1. TakafulG contracts written before this date hereafter referred to as pre-existing contracts, must continue to be managed in accordance with the takafulG model or models operated by the takaful firmG prior to Paragraph CA-8.2.1 coming into force, until such time as all obligations of the takafulG fund or funds under those pre-existing contracts have been discharged in full.

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

                • ES-2.6.6

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: January 2007

                • ES-2.6.7

                  [This Paragraph was deleted in April 2014.]

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

                • ES-2.6.8

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: January 2007

            • ES-2.6AA1 Module BC – Business Conduct

              • ES-2.6AA1.1

                All insurance licenseesG must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31st March 2012.

                Added: April 2012

            • ES-2.6AA2 Module CL – Client Money

              • ES-2.6AA2.1

                All insurance brokersG and appointed representativesG and where applicable, insurance firmsG , must comply with the requirements of Module CL, effective 1st July 2012 (See Paragraph CL-A.1.5).

                Added: April 2012

            • ES-2.6A Module RM — Risk Management

              • ES-2.6A.1

                Insurance licenseesG are required to comply with physical security measures and third party insurance (Paragraphs RM-6.1.13 to RM-6.1.17), by 31 December 2006.

                Amended: January 2007

            • ES-2.6B Module FC — Financial Crime

              • ES-2.6B.1

                For the year ending 31 December 2006, insurance licenseesG must submit the report required as per Paragraph FC-3.3.1 (d), no later than 30 June 2007.

                Adopted: January 2007

            • ES-2.7 Module BR — CBB Reporting

              • ES-2.7.1

                The first Insurance Firm Return (IFR) for both conventional insuranceG firmsG and takaful firmsG , required under Section BR-1.1, must be submitted to the CBB for the financial year ending 31 December 2006.

                Amended: January 2007

              • ES-2.7.2

                The first Group Insurance Firm Return (GIFR) for insurance firmsG , required under Section BR-1.3, must be submitted to the CBB for the financial year ending 31 December 2006.

                Amended: January 2007

              • ES-2.7.3

                The first quarterly return (IFRQ) for insurance firms, required under Section BR-1.4, must be submitted to the CBB for the quarter ending 31 March 2007.

                Amended: January 2007

              • ES-2.7.4

                The first annual return (IBR) for insurance brokersG , required under Section BR-1.2A, must be submitted to the CBB for the semi-annual period ending 31 December 2012.

                Added: April 2012

              • ES-2.7.5

                The first semi-annual return (IBRS) for insurance brokersG , required under Section BR-1.4A, must be submitted to the CBB for the semi-annual period ending 30 June 2012.

                Added: April 2012

            • ES-2.8 Module PD — Public Disclosure

              • ES-2.8.1

                For purposes of Chapter PD-2, semi-annual disclosure requirements are effective for the period ending 30 June 2008.

                Amended: January 2007

      • High Level Standards

        • AU Authorisation

          • AU-A Introduction

            • AU-A.1 Purpose

              • Executive Summary

                • AU-A.1.1

                  The Authorisation Module sets out the Central Bank of Bahrain's (CBB) approach to licensing providers of regulated insurance servicesG in the Kingdom of Bahrain. It also sets out CBB requirements for approving persons undertaking key functions in those providers. Finally, it sets out requirements for registering certain support services (actuariesG , loss adjustersG and appointed representativesG ).

                  Amended: October 2011
                  Amended: October 2009
                  Amended: July 2007

                • AU-A.1.2 [Deleted]

                  Deleted July 2007

                • AU-A.1.2

                  Persons who provide any of the following regulated insurance servicesG within or from the Kingdom of Bahrain require a license:

                  (a) The carrying on of insurance business;
                  (b) The broking of insurance contracts;
                  (c) The offering of advice to third parties regarding individual insurance requirements and products;
                  (d) The provision of insurance management services (such as captive managers); and
                  (e) The operating of a recognised insurance exchange.
                  Amended: July 2007

                • AU-A.1.3

                  The categories of regulated insurance servicesG listed in AU-A.1.2 in turn determine the license category of the provider. The requirements in Volume 3 (Insurance) are tailored in certain respects, according to the license category concerned, in order to address the specific features and risks associated with each type of regulated insurance servicesG .

                  Amended: July 2007

                • AU-A.1.4

                  For the purposes of Volume 3 (Insurance), providers licensed to undertake activities falling under AU-A.1.2 (a) are categorised as 'insurance firmsG '; those under (b), as 'insurance brokersG '; those under (c), as 'insurance consultantsG '; those under (d), as 'insurance managersG '; and those under (e), as 'insurance exchange operatorsG '. A provider of regulated insurance servicesG can only hold one of the above license categories; different categories may not be combined.

                  Amended: July 2007

                • AU-A.1.5

                  Collectively, licensed providers of regulated insurance servicesG are called insurance licenseesG . Bahrain-incorporated insurance licenseesG are called Bahraini insurance licenseesG . Insurance licenseesG that are incorporated in an overseas jurisdiction and operate via a branch presence in the Kingdom of Bahrain are called overseas insurance licenseesG . The same naming convention applies to the various categories of license holders: for example, Bahraini insurance brokersG are incorporated in Bahrain and overseas insurance brokersG operate via a branch presence.

                  Amended: July 2007

              • Approved Persons

                • AU-A.1.6

                  Persons undertaking certain functions in relation to CBB insurance licenseesG require prior CBB approval. These functions (called 'controlled functionsG ') include DirectorsG and members of senior management. The controlled functionsG regime supplements the licensing regime by ensuring that key persons involved in the running of insurance licenseesG are fit and proper. Those authorised by the CBB to undertake controlled functionsG are called approved personsG .

                  Amended: July 2007

              • Registration

                • AU-A.1.7

                  Persons wishing to carry on the business of an actuaryG , loss adjusterG or licensed principalG wishing to appoint appointed representativeG within the Kingdom of Bahrain are required to register with the CBB. Registrants are subject to basic screening to verify their expertise and general suitability, at the point of application. Unlike insurance licenseesG , they are not subject to detailed Directives and Regulations and continuous, risk-based supervision.

                  Amended: October 2009
                  Amended: July 2007

              • Retaining Authorised Status

                • AU-A.1.8

                  The requirements set out in Chapters AU-2, AU-3 and AU-4 represent the minimum conditions that have to be met in each case, both at the point of authorisation and on an on-going basis thereafter, in order for authorised status to be retained.

                  Amended: July 2007

                   

              • Ancillary Services Providers

                • AU-A.1.9

                  Ancillary services providersG are not covered in Volume 3 (Insurance) of the Rulebook. Requirements covering these types of activities will instead be included in Volume 5.

                  Amended: October 2011
                  Amended: July 2007

                • AU-A.1.10

                  Until such time as Volume 5 (Specialised Activities) of the CBB Rulebook is issued, ancillary services providersG remain subject to the requirements contained in the CBB's 'Standard Conditions and Licensing Criteria', a copy of which is available from the CBB Licensing Directorate.

                  Amended: April 2018
                  Amended: October 2011
                  Amended: July 2007

                • AU-A.1.11

                  [This Paragraph was merged with Paragraph AU-A.1.9 above, in January 2007].

                  Amended: July 2007

                • AU-A.1.12

                  [This Paragraph was merged with Paragraph AU-A.1.10 above, in January 2007]

                  Amended: July 2007

              • Legal Basis

                • AU-A.1.13

                  This Module contains the CBB's Regulations, Resolutions and Directive (as amended from time to time) regarding authorisation requirements applicable to insurance licenseesG , approved personsG and registered bodies and is issued under the powers available to the CBB under Articles 37 to 42, 44 to 48 and 180 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding regulated insurance services as per Article 39 (see Chapter AU-1), licensing conditions and processes as per Articles 44 to 48 (see Chapters AU-2 and AU-5) and licensing and registrations fees as per Article 180 (see Chapter AU-6) are also included in Resolutions and included in this Module. Module AU includes the requirements contained in Resolution No (1) of 2007 with respect to determining fees categories due for licensees and services provided by the CBB. Module AU also contains the minimum qualifications and fit and proper requirements for appointed representativesG issued in 2009 under Resolution 11 in accordance with Article 74 of the CBB Law. The Module contains requirements governing the conditions of granting a license for the provision of regulated services as prescribed under Resolution No (43) of 2011 and issued under the powers available to the CBB under Article 44(c). Finally, the Module contains requirements under Resolution No.(16) for the year 2012 including the prohibition of marketing financial services pursuant to Article 42 of the CBB Law. This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                  Amended: July 2015
                  Amended: January 2013
                  Amended: October 2011
                  Amended: January 2011
                  Amended: October 2009
                  Added: July 2007

                • AU-A.1.14

                  For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

                  Added: July 2007

            • AU-A.2 Module History

              • AU-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 that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made. UG-3 provides further details on Rulebook maintenance and version control.

                Amended: July 2007

              • AU-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 these involved changes in the substance of Rules.

                Added: July 2007

              • AU-A.2.3

                A list of recent changes made to this Module is provided below:

                Module Ref. Change Date Description of Changes
                AU-1.1 01/07/05 Corrections made to cross references.
                AU-1.2 01/07/05 Correction to typo and clarification to AU-1.2.4.
                AU-1.4 01/07/05 Clarified possible exclusion to regulated insurance services.
                AU-5.1 01/07/05 Clarified AU-5.1.2 and amended AU-5.1.8(e) to reflect that the cash deposit to be held with a commercial bank also applies to insurance brokers.
                AU-5.2 01/07/05 Correction made to cross reference.
                AU-5.3 01/07/05 Corrected reference to Form 4 (Application for Registration).
                AU-1.1 01/10/05 Clarified application of grandfathering provisions for composite companies.
                AU-2.1 01/10/05 Clarified legal status for E.C. companies and added the option for insurance manager to operate as a branch resident in Bahrain of a company incorporated in another jurisdiction.
                AU-2.2 01/10/05 Clarified guidance on mind and management for insurance licensees originally licensed as exempt companies.
                AU-2.8 01/10/05 Clarified the application of IFRS and AAOIFI standards.
                AU-2.1 01/01/06 Clarified legal status for EC companies that are insurance brokers and insurance consultants.
                AU-2.1.6 01/04/06 Guidance Paragraph deleted in October 2005.
                AU-1.2.2 01/01/07 Added Signing Actuary (where the Signing Actuary is an employee of the insurance firm) to the list of controlled functions for which an application for approved person must be submitted.
                AU-A.1.13 01/2007 New Rule introduced, categorising this Module as a Directive.
                AU-1.1.24 01/2007 Added Rule pertaining to suitability of applicants for authorisation.
                AU-2.1.11 01/2007 Corrected legal status requirements for insurance consultants.
                AU-2.6.1A 01/2007 Added a Rule dealing with the segregation of staff responsibilities.
                AU-5.1. 01/2007 Section amended to reflect new procedures reflecting CBB Law.
                AU-5.4 01/2007 Amended to reflect new CBB Law procedures.
                AU-5.5 01/2007 Amended to reflect new CBB Law procedures.
                AU-6 01/2007 New Chapter on Licensing and Registration Fees added.
                AU-1.1.14 10/2007 Pure reinsurers can undertake both general insurance businessG and long-term insurance businessG within the same entity.
                AU-1.2.3 and 1.2.4 10/2007 Clarified the controlled functions for which CBB prior approval is required.
                AU-2.5.4 10/2007 Clarified that insurance brokersG must also maintain a cash deposit as per Section GR-7.1.
                AU-5.1.5 and 5.1.5A 01/2008 Clarified CBB's requirements for letters of comfort and/or letters of guarantee.
                AU-5.1.13 01/2008 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued.
                AU-5.2.2 04/2008 Clarified to whom Form 3 should be sent to if dealing with a request for an appointment of MLRO from an existing investment firm licensee.
                AU-5.5.6 04/2008 Outlined CBB's requirements in instances where a controlled function becomes vacant.
                AU-6.3 04/2008 Clarified the payment of annual fees for new insurance licensees and registered persons.
                AU-5.2.5 07/2008 Clarified that the refusal decision by the CBB to grant a person 'approved person' status is issued to the insurance licensee.
                AU-5.2.6 07/2008 Added cross reference.
                AU-6.3 10/2008 Introduced a minimum licensing fee for new applicants whose annual licensing fees may be prorated.
                AU-2.1.8 04/2009 Amended the legal status of insurance broker to no longer allow the establishment of new licensees as single person company.
                AU-6.3.12 and 6.3.12A 04/2009 Clarified the rules regarding annual license fees to be paid by new licensees in relation to the first year in which the license has been granted.
                AU-6.3.16 04/2009 Deleted Paragraph waiving annual fees for insurance licensees in run-off and whose license has been restricted to servicing existing business.
                AU-A.1, AU-B.2, AU-1.3A, AU-4, AU-5.3, AU-5.5 and AU-6.3 10/2009 Added registration requirements for appointed representatives.
                AU-A.1.13 10/2009 Reference to Regulations added to Paragraph under Legal Basis.
                AU-2.1.8 and AU-2.1.11 10/2009 The legal status option for insurance brokers and insurance consultants to be established as a branch resident in Bahrain of a company incorporated in another jurisdiction has been deleted.
                AU-1.4.16A 04/2010 Guidance provided on the definition of regulated services for insurance consultants.
                AU-2.1.8 04/2010 Clarified the legal status for insurance brokers.
                AU-4.1.2A 04/2010 Added guidance on relevant loss adjusters associations used in evaluating expertise condition.
                AU-5.2.1 04/2010 Added requirement for licensees to verify accuracy of information contained in form 3 (Approved persons).
                AU-5.2.2A and B 04/2010 Clarified requirements when submitting Form 3.
                AU-5.2.7 and 5.2.8 04/2010 Clarified notification requirements when applying for Approved person status.
                AU-A.1.13 01/2011 Clarified legal basis.
                AU-5.1.5A 01/2011 Removed the reference to a letter of comfort that may be provided with an application for license.
                AU-1.2.9A 04/2011 Clarified the position of Chairman and that of managing director. This Rule was moved from the former version of Module HC.
                AU-1.2.11A 04/2011 Added a definition Paragraph for the compliance officer.
                AU-A.1.10 10/2011 Guidance Paragraph amended as Volume 5_Representative Offices was issued in December 2010.
                AU-A.1.13 10/2011 Legal basis updated to reflect all Articles of the CBB Law covered by this Module as well as applicable Resolutions.
                AU-5.1.13 10/2011 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued to be in line with other Volumes of the Rulebook.
                AU-5.5 10/2011 Clarified language on cancellation of a license to be in line with other Volumes of the CBB Rulebook.
                AU-1.4.10 04/2012 Reference added to appointed representatives.
                AU-2.1.8 and AU-2.1.9 10/2012 Clarified legal status for single person company and natural person.
                AU-5.5.4A 10/2012 Corrected cross reference.
                AU-A.1.13 01/2013 Updated legal basis.
                AU-B.1.1 01/2013 Updated prohibition as per issuance of Resolution No.(16) for the year 2012.
                AU-1.1 01/2013 References added to requirements under Resolution No.(16) for the year 2012.
                AU-6.3 07/2013 Amended due date and collection process for annual license and registration fees.
                AU-1.2 04/2014 Approved persons requirement updated to reflect consultation undertaken on the enhanced operational and solvency framework.
                AU-1.4.13 10/2014 Amended the definition of exempt introducer.
                AU-2.1.11 10/2014 Aligned with Commercial Companies Law.
                AU-A.1.13 07/2015 Legal basis updated to reflect Resolution No (23) of 2015.
                AU-5.2 07/2015 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                AU-1.2 01/2016 Clarified general requirements for approved persons.
                AU-3 01/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                AU-4.2.2 01/2016 Corrected cross reference.
                AU-5.1.4 01/2016 Paragraph deleted as no longer applicable.
                AU-5.2 01/2016 Minor amendments to be aligned with other Volumes of the Rulebook.
                AU-5.6 07/2017 Added new Section on Publication of the Decision to Grant, Cancel or Amend a License.
                AU-A.1.10 04/2018 Amended Paragraph.
                AU-5.1.1 04/2018 Amended Paragraph.
                AU-5.1.12E 04/2018 Amended sub-paragraph.
                AU-5.2.2 04/2018 Amended Paragraph.
                AU-5.3.1 04/2018 Amended Paragraph.

              • AU-A.2.4

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

                Amended: July 2007

          • AU-B Scope of Application

            • AU-B.1 The Public

              • AU-B.1.1

                The Authorisation requirements in Chapter AU-1 are generally applicable to the public, in that they prevent a person (whether legal or natural) from undertaking certain specified activities if they do not hold the appropriate authorisation from the CBB or marketing any financial servicesG unless specifically allowed to do so by the CBB (see Rule AU-1.1.1). In addition, those applying for authorisation are also required to comply with the relevant requirements and procedures contained in this Module.

                Amended: January 2013
                Amended: July 2007

              • AU-B.1.2

                Three types of authorisation are prescribed:

                (i) Any person who provides a regulated insurance serviceG within or from the Kingdom of Bahrain requires a license (see AU-1.1);
                (ii) Natural persons wishing to perform a controlled functionG in an insurance licenseeG require prior CBB approval, as an approved personG (see AU-1.2); and
                (iii) Any person wishing to provide actuarial or loss adjuster services within the Kingdom of Bahrain is required to register with the CBB (see AU-1.3).
                Amended: July 2007

              • AU-B.1.3

                Because of the general applicability of many of the requirements contained in this Module, they are supported by way of a Regulation (see Section UG-1.1 for an explanation of the CBB’s rule-making powers and different regulatory instruments).

                Added: July 2007

            • AU-B.2 Authorised Persons

              • AU-B.2.1

                Various requirements in Chapters AU-2 to AU-5 inclusive also apply to persons once they have been authorised by the CBB (whether as licensees, approved personsG or registered actuariesG , loss adjustersG and appointed representativesG ).

                Amended: October 2009
                Amended: July 2007

              • AU-B.2.2

                Chapter AU-2 applies to insurance licenseesG (not just applicants), since licensing conditions have to be met on a continuous basis by licensees. Similarly, Chapter AU-3 applies to approved personsG on a continuous basis; it also applies to insurance licenseesG seeking an approved personG authorisation. Chapter AU-4 applies to actuariesG , loss adjustersG and appointed representativesG that are either registered by the CBB or are seeking to be registered by the CBB. Chapter AU-5 contains requirements applicable to licensees, with respect to the starting up of their operations, as well as to licensees, approved personsG and registered actuariesG , loss adjustersG and appointed representativesG with respect to the amendment or cancellation of their authorised status. Finally, Section AU-6.2 imposes annual fees on licensees and registered actuariesG , loss adjustersG and licensed principalsG for their registered appointed representativesG .

                Amended: October 2009
                Amended: July 2007

          • AU-1 Authorisation Requirements

            • AU-1.1 Insurance Licensees

              • General Prohibition

                • AU-1.1.1

                  No person may:

                  (a) Undertake (or hold themselves out to undertake) regulated insurance servicesG , by way of business, within or from the Kingdom of Bahrain unless duly licensed by the CBB;
                  (b) Hold themselves out to be licensed by the CBB unless they have as a matter of fact been so licensed; or
                  (c) Market any financial servicesG in the Kingdom of Bahrain unless:
                  (i) Allowed to do by the terms of a license issued by the CBB;
                  (ii) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
                  (iii) Has obtained the express written permission of the CBB to offer financial servicesG .
                  Amended: January 2013
                  Amended: July 2007

                • AU-1.1.1A

                  For the purposes of Rule AU-1.1.1(a), please refer to Section AU-1.4 for the definition of ‘regulated insurance servicesG ’ and ‘by way of business’. Such activities will be deemed to be undertaken within or from the Kingdom of Bahrain if, for example, the person concerned:

                  (a) Is incorporated in the Kingdom of Bahrain;
                  (b) Uses an address situated in the Kingdom of Bahrain for its correspondence; or
                  (c) Directly solicits clients, who are resident within the Kingdom of Bahrain.
                  Added: July 2007

                • AU-1.1.2

                  For the purposes of AU-1.1.1(b), and in accordance with Article 41(b) of the CBB Law persons would be considered in breach of this requirement if they were to trade as, or incorporate a company in Bahrain with a name containing the words '(re)insurance', '(re)assurance' or '(re)takaful', or the words 'broker', 'consultant', or 'manager' in combination with '(re)insurance', '(re)assurance' or '(re)takaful' (or the equivalents in any language), without holding the appropriate CBB license or the prior approval of the CBB.

                  Amended: July 2007

                • AU-1.1.2A

                  In accordance with Resolution No.(16) for the year 2012 and for the purpose of Subparagraph AU-1.1.1(c), the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial servicesG in return for monetary payment or some other form of valuable consideration.

                  Added: January 2013

                • AU-1.1.2B

                  Persons in breach of Subparagraph AU-1.1.1(c) are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law (see also Section EN-10.3A).

                  Added: January 2013

              • Authorisation

                • AU-1.1.3

                  Depending on the type of regulated insurance serviceG that a person wishes to undertake, applicants must seek to be licensed either as an insurance firmG , an insurance brokerG , an insurance consultantG , an insurance managerG or an insurance exchange operatorG . These license categories cannot be combined.

                  Amended: July 2007

                • AU-1.1.4

                  Within the Kingdom of Bahrain and in respect of Bahrain residents, licensed insurance firmsG and insurance brokersG may only effect contracts of insurance through intermediaries when these intermediaries are:

                  (a) Licensed by the CBB (e.g., as an insurance brokerG );
                  (b) Exempt introducersG (as defined in Paragraph AU-1.4.13); or
                  (c) Appointed representativesG .
                  Amended: July 2007

                • AU-1.1.5

                  Persons wishing to be licensed to undertake regulated insurance servicesG within or from the Kingdom of Bahrain must apply in writing to the CBB.

                  Amended: July 2007

                • AU-1.1.6

                  An application for a license must be in the form prescribed by the CBB and must contain, inter alia:

                  (a) A business plan specifying the type of business to be conducted;
                  (b) Application forms for all controllersG ;
                  (c) Application forms for all controlled functionsG ; and
                  (d) For insurance brokersG and insurance consultantsG , details of proposed professional indemnity coverage.
                  Amended: July 2007

                • AU-1.1.7

                  The CBB will review the application and duly advise the applicant in writing when it has:

                  (a) Granted the application without conditions;
                  (b) Granted the application subject to conditions specified by the CBB; or
                  (c) Refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.
                  Amended: July 2007

                • AU-1.1.8

                  Detailed Rules and Guidance regarding information requirements and processes for licenses can be found in Section AU-5.1. As specified in Paragraph AU-5.1.12 and in accordance with Article 44(e) of the CBB Law, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

                  Amended: July 2007

                • AU-1.1.8A

                  In granting new licenses, the CBB will specify the type of regulated insurance servicesG for which a license has been granted, and include further conditions in relation to the license such as the class of business authorised, whether the insurance firmG is operating on a conventional or takaful basis, limited to reinsuranceG or licensed as a captive insurerG .

                  Added: July 2007

                • AU-1.1.9

                  All applicants seeking an insurance licenseG must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed, insurance licenseesG must maintain these criteria on an ongoing basis.

                  Amended: July 2007

                • AU-1.1.10

                  An insurance licenseeG must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than insurance business and activities directly arising from or incidental to that business.

                • AU-1.1.11

                  In instances where an insurance licenseeG carries on a commercial business, at the time where the Insurance Rulebook becomes effective, the insurance licenseeG must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to Paragraph ES-2.2.1).

                  Amended: July 2007

                • AU-1.1.12

                  Activities 'directly arising from or incidental' to an insurance firm'sG business, for instance, will depend on the type of insurance provided by an insurer. By way of example, an insurance firm providing health insurance may show a connection with owning and managing hospitals, an insurer providing insurance that covers damage to motor vehicles may reasonably be able to own accident repairers or garages. Insurers should consult the CBB in relation to their own circumstances in determining if an activity directly arises from or is incidental to their insurance business.

                  Amended: July 2007

              • Insurance Firms

                • AU-1.1.13

                  For the purposes of Volume 3 (Insurance), insurance firmsG are defined as insurance licenseesG who undertake the regulated insurance serviceG of carrying on insurance business, as defined in Paragraphs AU-1.4.7 to AU-1.4.9.

                  Amended: July 2007

                   

                   

                • AU-1.1.14

                  An insurance firmG must satisfy the CBB as to its suitability for each type and class of insurance business for which it is seeking authorisation. With the exception of captive insurersG and pure reinsurersG , an insurance firmG cannot undertake both general and long-term insuranceG business. Insurance firmsG (including captive insurersG ), must operate on either conventional insurance principles or on takaful principles: they cannot combine the two.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.1.15

                  In granting new licenses, the CBB will specify the classes of insurance for which authorisation has been granted, and on what basis (i.e. conventional insurance principles or takaful principles). For reinsurance companies, the license will restrict the insurance firmG to undertaking reinsurance business only. For captive insurersG , the license will also restrict the insurance firmG to effecting insurance contracts with its own group members only. Grandfathering provisions apply for those insurance firmsG whose past license granted them the right to undertake both general and long-term insuranceG business (composite companies). In addition, composite companies are subject to the requirements of Paragraph GR-1.1.3 with respect to separate books and records for each kind of business. The grandfathering exemption will only apply to the licensee's classes of insurance business as at 1st April 2005, i.e. when Volume 3 (Insurance) was first issued. Should the insurance licenseeG wish to add additional classes of business, it will be required to separate its general and long-term business into separate licenses.

                  Amended: July 2007

              • Insurance Brokers

                • AU-1.1.16

                  For the purposes of Volume 3 (Insurance), insurance brokersG are defined as insurance licenseesG who undertake the regulated insurance serviceG of broking of insurance contracts, as defined in Paragraphs AU-1.4.10 to AU-1.4.15.

                  Amended: July 2007

                • AU-1.1.17

                  [This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]

                  Amended: July 2007

                • AU-1.1.18

                  An insurance brokerG may be licensed for one or more of the following types of business:

                  (a) General insurance (as defined in Paragraph AU-1.4.9);
                  (b) Unit-linked long-term insurance;
                  (c) Long-term insuranceG (as defined in Paragraph AU-1.4.8) other than unit-linked business;
                  (d) ReinsuranceG ; and
                  (e) TakafulG products.
                  Amended: July 2007
                  Amended: October 2007

              • Insurance Consultants

                • AU-1.1.19

                  For the purposes of Volume 3 (Insurance), insurance consultantsG are defined as insurance licenseesG who undertake the regulated insurance serviceG of offering insurance advice, as defined in Paragraphs AU-1.4.16 to AU-1.4.18.

                  Amended: July 2007

                • AU-1.1.20

                  [This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]

                  Amended: July 2007

                • AU-1.1.21

                  An insurance consultantG may be licensed for one or more of the following types of business:

                  (a) General insurance (as defined in Paragraph AU-1.4.9);
                  (b) Unit-linked long-term insurance;
                  (c) Long-term insuranceG (as defined in Paragraph AU-1.4.8) other than unit-linked business;
                  (d) ReinsuranceG ; and
                  (e) TakafulG products.
                  Amended: July 2007

              • Insurance Managers

                • AU-1.1.22

                  For the purpose of Volume 3 (Insurance), insurance managersG are defined as insurance licenseesG who undertake the regulated insurance serviceG of providing insurance management services, as defined in Paragraphs AU-1.4.20 to AU-1.4.23.

                  Amended: July 2007

              • Insurance Exchange Operators

                • AU-1.1.23

                  For the purpose of Volume 3 (Insurance), insurance exchange operatorsG are defined as insurance licenseesG who undertake the regulated insurance serviceG of operating an insurance exchange, as defined in Paragraphs AU-1.4.24 and AU-1.4.25.

                  Amended: July 2007

              • Suitability

                • AU-1.1.24

                  Those seeking authorisation must satisfy the CBB as to their suitability to carry out the regulated investment servicesG for which they are seeking authorisation.

                  Added: July 2007

                • AU-1.1.25

                  In assessing applications for a license, the CBB will assess whether an applicant satisfies the licensing conditions (as specified in Chapter AU-2) with respect to all the regulated investment servicesG that the applicant proposes undertaking.

                  Added: July 2007

            • AU-1.2 Approved Persons

              • General Requirement

                • AU-1.2.1

                  Insurance licenseesG must obtain the CBB's prior written approval for any person wishing to undertake a controlled functionG in an insurance licenseeG . The approval from the CBB must be obtained prior to their appointment, subject to the variations contained in Paragraph AU-1.2.3.

                  Amended: January 2016
                  Amended: July 2007

                • AU-1.2.2

                  Controlled functionsG are those functions occupied by board members and persons in executive positions and include:

                  (a) DirectorG (for Bahraini insurance licensee only);
                  (b) Chief ExecutiveG or General ManagerG ;
                  (c) Head of functionG ;
                  (d) Head of risk management;
                  (e) Compliance officer;
                  (f) Money Laundering Reporting Officer;
                  (g) Member of Shari'a Supervisory BoardG (where applicable);
                  (h) Internal Shari'a reviewer (where applicable);
                  (i) Unit-linked investment adviserG (where applicable); and
                  (j) Signing ActuaryG (where the function is undertaken by a DirectorG or an employeeG of the insurance firmG ).
                  Amended: January 2016
                  Amended: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.3

                  Controlled functionsG may be combined with any other functions, subject to the CBB's prior written approval and such combination must not result in any possible conflict of interest.

                  Amended: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.4

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.5

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014

              • Basis for Approval

                • AU-1.2.6

                  Approval under Paragraph AU-1.2.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections AU-3.1 and AU-3.2 respectively.

                  Amended: July 2007

              • Definitions

                • AU-1.2.7

                  DirectorG is any person who occupies the position of a DirectorG , as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).

                  Amended: July 2007

                • AU-1.2.8

                  The fact that a person may have 'DirectorG ' in their job title does not of itself make them a DirectorG within the meaning of the definition noted in Paragraph AU-1.2.7. For example, a 'Director of Marketing', is not necessarily a member of the Board of DirectorsG and therefore may not fall under the definition of Paragraph AU-1.2.7.

                  Amended: July 2007

                • AU-1.2.9

                  The Chief ExecutiveG or General ManagerG means a person who is responsible for the conduct of the licensee (regardless of actual title). The Chief ExecutiveG or General ManagerG must be resident in Bahrain. This person is responsible, alone or jointly, for the conduct of the whole of the firm, or, in the case of an overseas insurance licenseeG , for all of the activities of the branch.

                • AU-1.2.9A

                  The Chairman of the Board may not act as the Chief ExecutiveG or General ManagerG . However, in the case of appointing a DirectorG on the Board as the Managing DirectorG of the insurance licenseeG , such person:

                  (a) Should be fully responsible for the executive management and performance of the insurance licenseeG , within the framework of delegated authorities set by the Board;
                  (b) Must devote full-time working hours to the insurance licenseeG ; and
                  (c) Must not be employed at any other firm.
                  Added: April 2011

                • AU-1.2.10

                  Head of functionG means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.

                • AU-1.2.10A

                  The head of risk management is responsible for the management of all risk exposures arising from the activities of the insurance firmG .

                  Added: April 2014

                • AU-1.2.11

                  Whether a person is a head of functionG will depend on the facts in each case and is not determined by the presence or absence of the word in their job title. Examples of head of functionG might include, depending on the scale, nature and complexity of the business, a deputy Chief Executive; heads of departments such as Underwriting, Claims, Risk Management, Compliance or Internal Audit; the Chief Financial Officer; or a Signing ActuaryG (where that person is a DirectorG or employeeG of the insurance firm concerned).

                  Amended: July 2007

                • AU-1.2.11A

                  All insurance licenseesG must designate an employeeG , of appropriate standing and resident in Bahrain, as Compliance Officer. The duties of the Compliance Officer include:

                  (a) Having responsibility for oversight of the licensee's compliance with the requirements of the CBB; and
                  (b) Reporting to the licensee's Board in respect of that responsibility.
                  Added: April 2011

                • AU-1.2.11B

                  The internal Shari'a reviewer in a Takaful firmG is responsible for the examination and evaluation of the adequacy and effectiveness of the Takaful firmG 's system of internal Shari'a control. The internal Shari'a review function must comply with AAOIFI Governance standard for Islamic Financial Institutions No. 3.

                  Added: April 2014

                • AU-1.2.12

                  Where a firm is in doubt as to whether a function should be considered a controlled functionG it must discuss the case with the CBB.

                  Amended: July 2007

                • AU-1.2.13

                  A unit-linked investment adviserG refers to the function of advising clientsG on contracts that are, by their nature, investment products, including, but not limited to pension and retirement products. The unit-linked investment adviserG function is a controlled functionG .

                  Amended: July 2007

            • AU-1.3 Registered Actuaries and Loss Adjusters

              • AU-1.3.1

                In accordance with Article 74 of the CBB Law, a person may not carry on the business of an actuaryG or a loss adjusterG , without being registered as such with the CBB.

                Amended: July 2007

              • AU-1.3.2

                For the purposes of Paragraph AU-1.3.1 and in accordance with Article 1 of the CBB Law, actuariesG are defined as persons who hold themselves out as able to give a professional opinion on the level of reserves that should be held in order to meet potential insurance liabilities and are accredited by an international recognised organisation.

                Amended: July 2007

              • AU-1.3.3

                For the purposes of Paragraph AU-1.3.1, loss adjustersG are defined as persons who hold themselves out as being able to determine the extent of a firm's liability for loss when a claim is submitted. In doing so, loss adjustersG may investigate and settle losses for an insurance firmG by surveying or assessing the extent of damages being claimed for under an insurance contract, investigate the causes of such damage, and the extent to which those damages are covered by the contract of insurance.

                Amended: July 2007

            • AU-1.3A Registered Appointed Representatives

              • AU-1.3A.1

                In accordance with Resolution 11 issued under Article 74 of the CBB Law, a person may not be appointed by a licensed principalG as an appointed representativeG , without being registered as such with the CBB.

                Adopted: October 2009

              • AU-1.3A.2

                For the purposes of Paragraph AU-1.3A.1, an appointed representativeG is defined as an agent, who is not licensed by the CBB as insurance firmG , insurance brokerG or insurance consultantG , appointed by an insurance firmG (licensed principalG ) as its representative according to the rules in Chapter GR-9.

                Adopted: October 2009

            • AU-1.4 Definition of Regulated Insurance Services

              • AU-1.4.1

                For the purposes of Volume 3 (Insurance) and in accordance with Article 39 of the CBB Law, regulated insurance servicesG are any of the activities specified in Section AU-1.4, carried on by way of business. However, upon application, the CBB may exclude one or more specific transactions from the definition of regulated insurance servicesG .

                Amended: July 2007

              • AU-1.4.2

                The CBB will normally only consider granting such an exemption when a Bahrain resident is unable to obtain a specific product in Bahrain and it would be unreasonable to require the overseas provider of that product to be licensed for that particular transaction.

                Amended: July 2007

              • AU-1.4.3

                For the purposes of Volume 3 (Insurance), carrying on a regulated insurance serviceG by way of business means:

                (a) Undertaking one or more of the activities specified in Section AU-1.4 for commercial gain;
                (b) Holding oneself out as willing and able to engage in that activity; or
                (c) Regularly soliciting other persons to engage in transactions constituting that activity.
                Amended: July 2007

              • General Exclusions

                • AU-1.4.4

                  With the exception of insurance firmsG licensed to carry on insurance business as a captive insurerG , a personG does not carry on an activity constituting a regulated insurance serviceG if the personG is a body corporate and carries on that activity solely with or for other bodies corporate, and they are all members of the same group.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.5

                  A personG does not carry on an activity constituting a regulated insurance serviceG if the activity:

                  (a) Is carried on in the course of a business which does not ordinarily constitute of the carrying on of financial services;
                  (b) May reasonably be regarded as a necessary part of any other services provided in the course of that business; and
                  (c) Is not remunerated separately from the other services.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.6

                  A personG does not carry on an activity constituting a regulated insurance serviceG if he carries on an activity with or for another personG , and they are both members of the same familyG .

                  Amended: October 2007

              • Carrying on of Insurance Business (Insurance Firms)

                • AU-1.4.7

                  The carrying on of insurance business includes the carrying out and effecting of insurance contracts as principal, including with limitation contracts of long-term insuranceG or contracts of general insuranceG . Effecting contracts of insurance means assuming (as principal) insurance risk, by entering into a contract of insurance or contract of reinsurance. Carrying out contracts of insurance means performing (as principal) obligations under a contract of insurance or reinsurance.

                • AU-1.4.8

                  A contract of long-term insuranceG includes any insurance contract dealing with life insurance, personal accident with a term over 1 year and savings and fund accumulation insurance.

                • AU-1.4.9

                  A contract of general insuranceG includes any insurance contract dealing within one or more of the following categories:

                  (a) Fire and other property damage;
                  (b) Marine, aviation and transport;
                  (c) Accident and liability insurance;
                  (d) Motor insurance; or
                  (e) Such other activities as the CBB may specify from time to time.
                  Amended: July 2007

              • The Broking of Insurance Contracts (Insurance Brokers/Appointed Representatives)

                • AU-1.4.10

                  The broking of insurance contracts means:

                  (a) Acting as agent for another personG in relation to the buying of insurance for that other personG ;
                  (b) Making arrangements with a view to another personG , whether as principal or agent, buying insurance; or
                  (c) Advising on insurance.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.11

                  In Subparagraph AU-1.4.10 (c), 'advising' means giving advice to a personG in his capacity as a policyholderG or potential policyholderG (or in his capacity as agent for a policyholderG or potential policyholderG ), on the merits of entering into a contract of insurance whether as principal or agent.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.12

                  A person does not carry on the activities specified in Subparagraphs AU-1.4.10 (a) or (b) if he enters or is to enter into a transaction in respect of a contract of insurance as principal.

                  Amended: July 2007

                • AU-1.4.13

                  A personG does not carry on the broking of insurance contracts if he falls under the definition of exempt introducerG , defined as:

                  (a) A personG selling an extended warranty insurance product where the product is sold as part of an exclusive arrangement originated by the product manufacturer and in conjunction with the purchase by the insured of the product;
                  (b) A personG selling travel insurance as part of, or in conjunction with, a travel package, either directly or through a travel agent (where no advice is being provided other than that contained in the product literature);
                  (c) A personG , approved or licensed as an insurance intermediaryG in its country of incorporation or residence, providing marine, aviation or transit insurance, general reinsurance or long-term reinsurance to clientsG in Bahrain;
                  (d) [This Subparagraph was deleted in October 2014]; and
                  (e) An insurer or reinsurance broker located outside Bahrain ('A') placing business on behalf of a CBB licensed insurance brokerG ('B'), where B is carrying on business in Bahrain and on behalf of Bahrain residents and A is acting on behalf of B.
                  Amended: October 2014
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.14

                  A personG does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:

                  (a) That of giving advice of the kind mentioned in Paragraph AU-1.4.13; nor
                  (b) That of leading or enabling persons to buy insurance contracts.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.15

                  A personG does not arrange insurance contracts merely by providing the means by which one party to a transaction is able to communicate with other such parties.

                  Amended: October 2007

              • The Offering of Insurance Advice (Insurance Consultants)

                • AU-1.4.16

                  The offering of insurance advice means advising on insurance to third parties, without also acting as agent or making arrangements with a view to another personG buying insurance.

                  Amended: October 2007

                • AU-1.4.16A

                  For purposes of Paragraph AU-1.4.16, should the insurance consultantG receive a fee for his services as agent from the party that provides the insurance or reinsurance to the third party, such services will be considered as broking of insurance and will be covered under Paragraph AU-1.4.10.

                  Added: April 2010

                • AU-1.4.17

                  In Paragraph AU-1.4.16, 'advising on insurance' means giving advice to a personG in his capacity as a policyholderG or potential policyholderG (or in his capacity as agent for a policyholderG or potential policyholderG ), on the merits of entering into a contract of insurance whether as principal or agent.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.18

                  A personG does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:

                  (a) That of giving advice of the kind mentioned in Paragraph AU-1.4.16; nor
                  (b) That of leading or enabling persons to buy insurance.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.19

                  Advice given by professionals may not constitute the activity of advising on insurance, even if the matter relates to insurance, providing it satisfies the general exclusion specified in Paragraph AU-1.4.5. These may include circumstances such as lawyers providing legal advice on the interpretation of insurance contracts; business consultancy advice on the establishment of a new business, which may include, in general terms, discussion of the classes of insurance that the business may need; and the interpretation of insurance contracts by loss adjustersG .

                  Amended: July 2007

              • The Provision of Insurance Management Services (Insurance Managers)

                • AU-1.4.20

                  The provision of insurance management services means the provision of management services to, or the exercising of managerial functions on behalf of, an insurance firmG .

                • AU-1.4.21

                  Management services and managerial functions include the administration and underwriting of insurance contracts.

                • AU-1.4.22

                  A personG does not provide insurance management services to an insurance firmG , if he is an employee or a Board member of that licensee.

                  Amended: October 2007

                • AU-1.4.23

                  An insurance managerG may provide management services to undertakings other than insurance firmsG , providing that these activities do not compromise the manager's ability to provide a professional service to insurance firmsG and the manager can meet the licensing conditions specified in Chapter AU-2. It is possible for a group to include separate licensees, one an insurance brokerG and the other an insurance managerG .

              • The Operating of an Insurance Exchange

                • AU-1.4.24

                  The operating of an insurance exchange means the maintenance, administration and management of an insurance exchange located within the Kingdom of Bahrain by, inter alia, determining its membership, operating rules or arranging the provision of shared services to users of the exchange.

                • AU-1.4.25

                  For the purposes of Paragraph AU-1.4.24, an insurance exchange means a distinct market place comprising as members insurance firmsG or insurance brokersG , and undertaking insurance related activities. The fact that the exchange may undertake other non-insurance related activities does not preclude it from being an 'insurance exchange' within the meaning of Paragraph AU-1.4.24.

                  Amended: July 2007

          • AU-2 Licensing Conditions

            • AU-2.1 Condition 1: Legal Status

              • Insurance Firm

                • AU-2.1.1

                  Except for captive insurersG , the legal status of an insurance firmG must be:

                  (i) A Bahraini joint stock company (BSC);
                  (ii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance firm in that territory; or
                  (iii) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005.
                  Amended: July 2007

                • AU-2.1.2

                  For captive insurersG , the legal status of an insurance firmG must be:

                  (i) A Bahraini special purpose vehicle (SPV), specifically established to carry out the activities of a captive insurerG ; or
                  (ii) Any of the legal structures noted in Paragraph AU-2.1.1.
                  Amended: July 2007

                • AU-2.1.3

                  A Bahraini SPV is a category of a closed Bahraini joint stock company (BSC(c)). The minimum capital required by the Ministry of Commerce and Industry to incorporate such a company is much lower than for other types of companies, at BD 1,000. In addition, however, captive insurersG must satisfy the CBB's capital requirements for captives, as set out in Module CA (Capital Adequacy).

                  Amended: July 2007
                  Amended: January 2008

                • AU-2.1.4

                  Where the insurance licenseeG is a branch of an overseas insurance company, in deciding whether to grant a license, the CBB will pay close regard to its activities elsewhere and how these activities are regulated. If the insurance licenseeG is not regulated elsewhere (e.g. some countries do not regulate reinsurance firms) or in a jurisdiction not substantially compliant with IAIS Core Principles or FATF standards, then an application for licensing can only be considered after exhaustive enquiries into the firm's shareholdersG , management structure and financial position.

                  Amended: July 2007

                • AU-2.1.5

                  [Guidance Paragraph deleted in January 2007.]

                  Amended: July 2007

                • AU-2.1.6

                  [Guidance Paragraph deleted in October 2005.]

              • Insurance Broker

                • AU-2.1.7

                  Licensees who were carrying out activities that fall within the definition of the regulated activity of insurance brokerG prior to 1 April 2005 may be unincorporated entities or natural persons and were allowed to continue as such until 31 December 2006.

                  Amended: July 2007

                • AU-2.1.8

                  The legal status of an insurance brokerG after 1 April 2009 must be:

                  (i) A Bahraini joint stock company (BSC);
                  (ii) A Bahraini company with limited liability ('WLL');
                  (iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory, and licensed to conduct insurance business in Bahrain prior to 1st April 2009;
                  (iv) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005;
                  (v) A Bahraini single person company which was incorporated and licensed to conduct insurance business prior to 1st April 2009; or
                  (vi) A natural person that has been licensed by the CBB to conduct insurance business prior to April 2005.
                  Amended: October 2012
                  Amended: April 2010
                  Amended: October 2009
                  Amended: April 2009
                  Amended: July 2007

                • AU-2.1.9

                  Licensees referred to in Subparagraphs AU-2.1.8 (v) and (vi) will be granted a six-month period from the date of the death of the natural person to convert the license to comply with Subparagraph AU-2.1.8 (i) or (ii), subject to the CBB's prior written approval.

                  Amended: October 2012
                  Amended: July 2007

                • AU-2.1.10

                  An insurance broker'sG business activity must be restricted by its Memorandum and Articles of Association to insurance broking.

              • Insurance Consultant

                • AU-2.1.11

                  Persons carrying out the regulated activity of insurance consultantG , and who meet the licensing criteria of this Section, must be:

                  (i) [This Subparagraph was deleted in October 2014];
                  (ii) A Bahraini single person company;
                  (iii) A Bahraini joint stock company (BSC);
                  (iv) A Bahraini company with limited liability ('WLL'); or
                  (v) A Bahraini exempt company (E.C.) which was incorporated and licensed to conduct insurance business prior to 1st January 2005.
                  Amended: October 2014
                  Amended: October 2009
                  Amended: July 2007

              • Insurance Manager

                • AU-2.1.12

                  Persons carrying out the regulated activity of insurance managerG , and who meet the licensing criteria of this Section must be:

                  (i) A Bahraini joint stock company (BSC);
                  (ii) A Bahraini company with limited liability ('WLL'); or
                  (iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation and (where local regulation so requires) authorised as an insurance or reinsurance intermediary in that territory.
                  Amended: July 2007

                • AU-2.1.13

                  An insurance managerG is a professional provider of services to insurance firmsG , which may include company secretarial, bookkeeping, claims processing and underwriting and, where duly licensed, insurance consulting and actuarial services. The CBB would, in principle, regard it as acceptable for the insurance managerG to provide these services to other clients, whether or not insurance clients. It would not regard it as acceptable for the firm to combine these activities with that of insurance brokerG , although it is possible for a group to include both insurance brokerG and insurance managerG activities, for instance, by an insurance brokerG establishing a subsidiary to act as an insurance managerG (or vice versa).

                  Amended: July 2007

            • AU-2.2 Condition 2: Mind and Management

              • AU-2.2.1

                Insurance licenseesG with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom. Overseas insurance licenseesG must maintain a local management presence and premises in the Kingdom appropriate to the nature and scale of their activities.

              • AU-2.2.2

                In assessing the location of an insurance licensee'sG Head Office, the CBB will take into account the residency of its Directors and senior management. The CBB requires the majority of key decision makers in executive management — including the Chief Executive OfficerG — to be resident in Bahrain. In the case of overseas licensees, the CBB requires the branchG or subsidiaryG of a foreign owned company to have a substantive presence, demonstrated by a level of staff and other resources sufficient to ensure adequate local scrutiny and control over business booked in the Bahrain branchG or subsidiaryG .

                Amended: July 2007

              • AU-2.2.3

                In the case of insurance licenseesG originally licensed as exempt companies, the CBB will consider the granting of temporary individual waivers on a case-by-case basis from the requirements in Paragraph AU-2.2.1. In all cases, the CBB's objective is to require all such companies that wish to remain licensed by the CBB, to have a suitable office in the Kingdom of Bahrain. This requirement means that knowledgeable staff should be resident in Bahrain.

                Amended: July 2007

              • AU-2.2.4

                Subject to CBB approval, an insurance licenseeG that is a captive (re)insurance company may maintain its Head Office or place of business at the offices of an insurance managerG appointed to manage its affairs.

                Amended: July 2007

              • AU-2.2.5

                The CBB's overall approach to captive insurersG is summarized in Module CI. The day-to-day operations of captive insurersG are typically outsourced to specialist captive managers, and Paragraph AU-2.2.4 allows for this possibility. The CBB requires captive managers providing services to CBB-licensed captive insurersG to be also licensed by the CBB and thus also to have a substantive presence within the Kingdom.

                Amended: July 2007
                Amended: October 2007

            • AU-2.3 Condition 3: Controllers and Close Links

              • AU-2.3.1

                Insurance licenseesG must satisfy the CBB that their controllersG are suitable and pose no undue risks to the licensee. Insurance licenseesG must also satisfy the CBB that their close linksG do not prevent the effective supervision of the insurance licenseeG by the CBB and otherwise pose no undue risks to the licensee.

                Amended: July 2007

              • AU-2.3.2

                Chapters GR-5 and GR-6 contains the CBB's requirements and definitions regarding controllersG and close linksG .

                Amended: July 2007

              • AU-2.3.3

                In summary, controllersG are persons who directly or indirectly are significant shareholdersG in an insurance licenseeG , or who are otherwise able to exert significant influence on the insurance licenseeG . The CBB seeks to ensure that controllersG pose no significant risks to the licensee. In general terms, controllersG are assessed in terms of their financial standing, their judicial and regulatory record, and standards of business and (where relevant) personal probity.

                Amended: July 2007
                Amended: October 2007

              • AU-2.3.4

                In summary, an insurance licenseeG has close linksG with its subsidiariesG , with its parent undertakingsG , and with subsidiariesG of its parent undertakingsG . It also has close linksG with any entity in which the licensee, its subsidiariesG , its parent undertakingsG , and the subsidiariesG of its parent undertakingsG has an equity interest of more than 20% (either in terms of capital or voting rights). The CBB seeks to ensure that these closely linked entities do not pose any material financial, reputational or other risks to the licensee. The CBB also seeks to ensure that the structure and geographical spread of the groupG is such that it is subject to adequate scrutiny at groupG level.

                Amended: July 2007
                Amended: October 2007

              • AU-2.3.5

                In all cases, when judging applications from existing groupsG , the CBB will have regard to the reputation and financial standing of the groupG as a whole. Where relevant, the CBB will also take into account the extent and quality of supervision applied to overseas members of the groupG and take into account any information provided by other supervisors in relation to any member of the groupG .

                Amended: July 2007
                Amended: October 2007

            • AU-2.4 Condition 4: Board and Employees

              • AU-2.4.1

                In accordance with Article 65 of the CBB Law, those nominated to carry out controlled functionsG must satisfy the CBB's approved personsG requirements.

                Amended: July 2007

              • AU-2.4.2

                The definition of controlled functionsG is contained in Section AU-1.2, whilst Chapter AU-3 sets out the CBB's approved personsG requirements.

                Amended: July 2007

              • AU-2.4.3

                The insurance licensee'sG staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner. Insurance licenseesG must ensure their employeesG meet any training and competency requirements specified by the CBB.

                Amended: July 2007

            • AU-2.5 Condition 5: Financial Resources

              • AU-2.5.1

                Insurance licenseesG must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. The level of financial resources held must at all times meet the minimum requirements contained in Module CA (Capital Adequacy), as specified for the category of insurance license held.

                Amended: July 2007

              • AU-2.5.2

                A 3-year business plan, with financial projections, must be submitted with any application for a license, demonstrating the adequacy of financial resources over that period, together with details (where appropriate) as to the calculation of rates, technical reserves, use of reinsurance, investment and valuation policies.

              • AU-2.5.3

                Overseas insurance applicants are required to provide written confirmation from their head office that the head office will provide financial support to the branch sufficient to enable it to meet its obligations as and when they fall due. Overseas insurance applicants must also demonstrate that the company as a whole is adequately resourced for the amount of risks underwritten, and that it and its groupG meet solvency standards applied by its home supervisorG .

                Amended: October 2007

              • AU-2.5.4

                Insurance firmsG and insurance brokersG must maintain a cash deposit with a retail bank licensed to operate in the Kingdom of Bahrain, in keeping with the requirement specified in Section GR-7.1.

                Amended: July 2007
                Amended: October 2007

              • AU-2.5.5

                Insurance brokersG and insurance consultantsG must maintain professional indemnity coverage as specified in Chapter GR-10.

            • AU-2.6 Condition 6: Systems and Controls

              • AU-2.6.1

                Insurance licenseesG must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities. These systems and controls must meet the minimum requirements contained in Modules HC (High-level Controls) and RM (Risk Management), as specified for the category of insurance license held.

                Amended: July 2007

              • AU-2.6.1A

                Insurance licenseesG must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems and errors. Such segregation should ensure that no single individual has control over all stages of a transaction.

                Added: July 2007

              • AU-2.6.2

                Insurance licenseesG must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module FC, as specified for the category of insurance license held.

                Amended: July 2007

              • AU-2.6.3

                Applicants will be required to demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB, as part of the licensing approval process.

                Amended: July 2007

              • AU-2.6.4

                Insurance brokersG must, in connection with any premium monies received in the course of their business, establish and maintain separate client accounts separate to those for their own funds as required per Section GR-1.2.

            • AU-2.7 Condition 7: External Auditors and Reporting Actuaries

              • AU-2.7.1

                Article 61 of the CBB Law requires that insurance licenseesG appoint external auditorsG , subject to prior CBB approval. The minimum requirements regarding auditorsG contained in Module AA (Auditors and Actuaries) must be met.

                Amended: July 2007

              • AU-2.7.2

                Article 72 of the CBB Law requires that insurance firmsG authorised to undertake long-term businessG appoint an actuaryG , subject to prior CBB approval. The minimum requirements contained in Module AA (Auditors and Actuaries) regarding actuariesG must be met at all times.

                Amended: July 2007
                Amended: October 2007

              • AU-2.7.3

                Applicants must submit details of their proposed external auditorsG and, where relevant, actuaryG , to the CBB as part of their license application.

                Amended: July 2007
                Amended: October 2007

            • AU-2.8 Condition 8: Other Requirements

              • Books and Records

                • AU-2.8.1

                  Article 59 of the CBB Law requires that insurance licenseesG maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, or persons appointed by the CBB, at any time. Insurance licenseesG must comply with the minimum record-keeping requirements contained in Module GR. Books of accounts must comply with International Financial Reporting Standard (IFRS) (and for TakafulG and RetakafulG companies relevant AAOIFI standards), and recognised international actuarial standards.

                  Amended: July 2007
                  Amended: October 2008

              • Provision of Information

                • AU-2.8.2

                  Articles 58, 111 and 114 of the CBB Law require that insurance licenseesG act in an open and cooperative manner with the CBB. Insurance licenseesG must meet the regulatory reporting and public disclosure requirements contained in Modules BR and PD respectively.

                  Amended: July 2007

              • General Conduct

                • AU-2.8.3

                  Insurance licenseesG must conduct their activities in a professional and orderly manner, in keeping with good market practice standards. Insurance licenseesG must comply with the general standards of business conduct contained in Module PB, as well as the standards relating to treatment of customersG contained in Module BC.

                  Amended: July 2007

              • License and Registration Fees

                • AU-2.8.4

                  Insurance licenseesG and registered persons must comply with any license and registration fee requirements applied by the CBB, and outlined in Chapter AU-6.

                  Amended: July 2007

                • AU-2.8.5

                  Following the transfer of insurance supervision to the CBB, the Central Bank is applying license and registration fees on insurance licenseesG and registered persons, effective for the year 2007.

                  Amended: July 2007

              • Additional Conditions

                • AU-2.8.6

                  Insurance licenseesG must comply with any other specific requirements or restrictions imposed by the CBB on the scope of their license.

                  Amended: July 2007

                • AU-2.8.7

                  When granting a license, the CBB specifies the regulated insurance serviceG that the licensee may undertake and (where relevant) the type and classes of insurance business that the licensee may undertake. Pursuant to Article 45 of the CBB Law, the CBB has the right to impose such terms and conditions, as it deems necessary when issuing a license. Licensees must respect the scope of their license. Section AU-5.4 sets out the process for varying the scope of an authorisation, should a licensee wish to undertake new regulated insurance servicesG .

                  Amended: July 2007

                • AU-2.8.8

                  In addition, the CBB may impose additional restrictions or requirements, beyond those already specified in Volume 3, to address specific risks. For instance, authorisation may be granted subject to strict limitations on intra-group transactions.

                  Amended: July 2007

          • AU-3 Approved Persons Conditions

            • AU-3.1 Condition 1: 'Fit and Proper'

              • AU-3.1.1

                Licensees seeking an approved personG authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled functionG in question.

                Amended: July 2007

              • AU-3.1.2

                The authorisation requirement for persons nominated to carry out controlled functionsG is contained in Section AU-1.2. The authorisation process is described in Section AU-5.2.

              • AU-3.1.3

                Each applicant applying for approved personG status and those individuals occupying approved personG positions must comply with the following conditions:

                (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
                (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
                (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
                (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
                (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
                (f) Must have personal integrity, good conduct and reputation;
                (g) Has appropriate professional and other qualifications for the controlled functionG in question; and
                (h) Has sufficient experience to perform the duties of the controlled functionG .
                Amended: January 2016
                Amended: July 2007

              • AU-3.1.4

                In assessing the conditions prescribed in Paragraph AU-3.1.3, the CBB will take into account the criteria contained in Paragraph AU-3.1.5. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled functionG but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled functionG in one insurance licenseeG may not be considered to have sufficient expertise and experience to undertake nominally the same controlled functionG but in a much bigger licensee.

                Amended: January 2016
                Amended: July 2007

              • AU-3.1.5

                In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

                (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
                (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
                (e) The contravention of any financial services legislation;
                (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
                (g) Dismissal or a request to resign from any office or employment;
                (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
                (i) The extent to which the person has been truthful and open with supervisors; and
                (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.

              • AU-3.1.6

                With respect to Paragraph AU-3.1.5, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

              • AU-3.1.7

                Approved personsG undertaking a controlled functionG must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking a controlled functionG .

                Amended: January 2016
                Amended: July 2007

              • AU-3.1.8

                In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

                (a) A person has breached any fiduciary obligations to the company or terms of employment;
                (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensee; and
                (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licensee.
                Amended: January 2016
                Amended: July 2007

              • AU-3.1.9

                Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-8.

                Added: January 2016

            • AU-3.2 [This Section was deleted in January 2016]

              • AU-3.2.1

                [This Paragraph was deleted in January 2016.]

                Deleted: January 2016
                Amended: July 2007

              • AU-3.2.2

                [This Paragraph was deleted in January 2016.]

                Deleted: January 2016
                Amended: July 2007

              • AU-3.2.3

                [This Paragraph was moved to Paragraph AU-3.1.9 in January 2016.]

                Amended: January 2016
                Amended: July 2007

          • AU-4 Registration Conditions

            • AU-4.1 Condition 1: Relevant Expertise

              • AU-4.1.1

                ActuariesG , loss adjustersG and appointed representativesG seeking registration must satisfy the CBB that they have relevant expertise and qualifications. They must hold appropriate professional qualifications from a relevant, recognised professional body.

                Amended: October 2009
                Amended: July 2007

              • AU-4.1.2

                For actuariesG , all 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 AU-4.1.1.

                Amended: July 2007

              • AU-4.1.2A

                For loss adjustersG , all Fellows (or members of equivalent status) in good standing of the Chartered Institute of Loss Adjusters (CILA), the European Federation of Loss Adjusting Experts (FUEDI), the National Association of Independent Insurance Adjusters (NAIIA) or the Canadian Independent Adjusters' Association (CIAA) or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirements in Paragraph AU-4.1.1.

                Added: April 2010

              • AU-4.1.3

                In the case of corporate persons wishing to provide actuarial or loss adjusterG services, the CBB expects management and other staff collectively to have sufficient appropriate professional qualifications to ensure a professional level of service.

                Amended: July 2007

              • AU-4.1.4

                The above requirement does not oblige actuariesG or loss adjustersG to be residents of the Kingdom of Bahrain, in order to be registered by the CBB. Non-resident actuariesG and loss adjustersG wishing to practice in Bahrain may seek registration on the same basis as resident actuariesG and loss adjustersG .

                Amended: July 2007

              • AU-4.1.5

                For purposes of Paragraph AU-4.1.1 and as outlined in Chapter GR-9, the minimum qualifications of appointed representativesG recognised by the CBB are:

                (a) For general insurance, the Award in General Insurance from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF);and
                (b) For long-term insurance, the Award in Financial Planning from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF).
                Adopted: October 2009

              • AU-4.1.6

                For appointed representativesG , upon written application to the CBB, equivalent or higher qualification from an internationally recognised insurance institute may be acceptable, provided it substantially covers the core syllabuses of the minimum qualifications outlined in Paragraph GR-9.1.5B.

                Adopted: October 2009

              • AU-4.1.7

                In the case of corporate persons, the appointed representativeG must designate the individuals that will act on their behalf. Such individuals must meet the minimum qualifications outlined in Paragraph GR-9.1.5B.

                Adopted: October 2009

            • AU-4.2 Condition 2: General Suitability

              • AU-4.2.1

                ActuariesG , loss adjustersG and appointed representativesG seeking registration must satisfy the CBB that the proposed registrants are generally suitable to operate as such.

                Amended: October 2009
                Amended: July 2007

              • AU-4.2.2

                In the case of natural persons, the CBB will have regard to the fitness and propriety, of the proposed registrant using the Rules and Guidance contained in Section AU-3.1.

                Amended: January 2016
                Amended: October 2009
                Amended: October 2007
                Amended: July 2007

              • AU-4.2.3

                In the case of corporate persons, the CBB will have regard to the corporation's reputation, financial soundness, and business conduct. The CBB will also review closely linked entities against the same criteria, using the definition of close linksG contained in Module GR.

                Amended: July 2007

          • AU-5 Information Requirements and Processes

            • AU-5.1 Licensing

              • Application Form and Documents

                • AU-5.1.1

                  Applicants for a license must submit a duly completed Form 1 (Application for a License), under cover of a letter signed by an authorised signatory of the applicant marked for the attention of the Director, Licensing Directorate. The application must be accompanied by the documents listed in Paragraph AU-5.1.5, unless otherwise directed by the CBB.

                  Amended: April 2018
                  Amended: July 2007

                • AU-5.1.2

                  Articles 44 to 47 of the CBB Law govern the licensing process. This prescribes a single stage process, with the CBB required to take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and timelines.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.3

                  References to applicant mean the proposed licensee seeking authorisation. An applicant may appoint a representative — such as a law firm or professional consultancy – to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.4

                  This Paragraph was deleted in January 2016.]

                  Deleted: January 2016
                  Amended: July 2007

                • AU-5.1.5

                  Unless otherwise directed by the CBB, the following documents must be provided in support of a Form 1:

                  (a) A duly completed Form 2 (Application for Authorisation of Controller) for each controllerG of the proposed licensee;
                  (b) A duly completed Form 3 (Application for Approved Person status), for each individual applying to undertake controlled functionsG , (as defined under Paragraph AU-1.2.2) of the proposed licensee;
                  (c) A comprehensive business plan for the application, addressing the matters described in Paragraph AU-5.1.6;
                  (d) For overseas companies, a copy of the company's current commercial registration or equivalent documentation;
                  (e) Where the applicant is a Bahraini company, a copy of the applicant's commercial registration certificate;
                  (f) Where the applicant is a corporate body, a certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB insurance license;
                  (g) Details of the proposed licensee's close linksG , as specified under Chapter GR-6;
                  (h) In the case of applicants that are part of a regulated groupG , a letter of non-objection to the proposed license application from the applicant's home supervisorG , together with confirmation that the groupG is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;
                  (i) In the case of branch applicants, a letter of non-objection to the proposed license application from the applicant's home supervisorG , together with confirmation that the applicant is in good regulatory standing and the company concerned is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;
                  (j) In the case of branch applicants, copies of the audited financial statements of the applicant (head office) for the three years immediately prior to the date of application;
                  (k) In the case of applicants that are part of a groupG , copies of the audited financial statements of the applicant's groupG , for the three years immediately prior to the date of application.
                  (l) In the case of applicants not falling under either (j) or (k) above, copies of the audited financial statements of the applicant's major shareholderG , for the three years immediately prior to the date of application;
                  (m) In the case of applicants seeking to raise part of their capital through a private placement, a draft of the relevant private placement memorandum, together with a formal, independent legal opinion that the documents comply with all applicable capital markets laws and regulations;
                  (n) A draft copy of the applicant's memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;
                  (o) [Subparagraph deleted in January 2008];
                  (p) [Subparagraph deleted in January 2008];
                  (q) For insurance firmsG and insurance brokersG , confirmation of the cash deposit required to be held with a retail bank (licensee) in Bahrain under Article 181 of the CBB Law (see Section GR-7.1); and
                  (r) [Subparagraph deleted in January 2008].
                  Amended: January 2011
                  Amended: January 2008
                  Amended: October 2007
                  Amended: July 2007

                • AU-5.1.5A

                  The CBB may require that an acceptably worded a letter of guarantee be provided in support of the application for a license. Where the application for the license is for an incorporated entity, the CBB may seek a letter of guarantee from the major shareholder. Where the application is for an overseas insurance licenseeG , the CBB may seek a letter of guarantee from the parent company.

                  Amended: January 2011
                  Added: January 2008

                • AU-5.1.6

                  The business plan submitted in support of an application must explain:

                  (a) An outline of the history of the applicant and its shareholdersG ;
                  (b) The reasons for applying for a license, including the applicant's strategy and market objectives;
                  (c) The proposed type of activities to be carried on by the applicant in/from the Kingdom of Bahrain;
                  (d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;
                  (e) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions, including underwriting, claims and accounting; and
                  (f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital and solvency requirements.
                  Amended: July 2007

                • AU-5.1.7

                  In the case of applicants seeking to raise capital (refer to AU-5.1.5(m)), the CBB’s review is aimed at checking that the proposed private placement complies with applicable capital markets laws and regulations, and that the information contained in the private placement memorandum (‘PPM’) is consistent with the information provided in the license application. The CBB’s review does not in any way constitute an approval or endorsement as to any claims made in the PPM regarding the future value of the company concerned. Note also that the CBB will not license applicants without a core group of sponsoring shareholdersG (who can demonstrate a strong business track record with relevant expertise), and where failure of the private placement to raise its targeted amount would leave the institution unable to comply with the CBB’s minimum capital requirements. The CBB will normally expect core shareholdersG to account for at least 40% of the applicant’s proposed initial total capital.

                  Added: July 2007

                • AU-5.1.8

                  The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the licensed application, and must preclude the applicant from undertaking other regulated insurance servicesG , or commercial activities, unless these arise out of its insurance activities or are incidental to those.

                  Amended: July 2007

                • AU-5.1.8 [Deleted]

                  Deleted July 2007

                • AU-5.1.9

                  All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.

                  Amended: July 2007

                • AU-5.1.10

                  Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs prior to authorisation must be reported to the CBB.

                  Amended: July 2007

                • AU-5.1.11

                  Failure to inform the CBB of the changes specified in Paragraph AU-5.1.10 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition AU-2.8.2.

                  Amended: July 2007

              • Licensing Process and Timelines

                • AU-5.1.12

                  By law, the 60-day time limit referred to in Paragraph AU-5.1.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule AU-5.1.5 have to be provided, before the CBB may issue a license.

                  Amended: July 2007

                • AU-5.1.12A

                  The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer AU-5.1.5(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license. Likewise, a Bahrain company proposing to undertake financial services activities would not be able to obtain a commercial registration from the Ministry of Commerce and Industry without such assurances (refer AU-5.1.5(e) above).

                  Added: July 2007

                • AU-5.1.12B

                  Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule 5.1.5. This draft application should contain at least items AU-5.1.5(a); AU-5.1.5(b), with respect to proposed DirectorsG (but not necessarily senior management); AU-5.1.5(c); AU-5.1.5(d); and AU-5.1.5(g) to AU-5.1.5(m) inclusive.

                  Added: July 2007

                • AU-5.1.12C

                  On the basis of the information specified in Paragraph AU-5.1.12B, the CBB may provide an initial ‘in principle’ confirmation that the applicant appears likely to meet the CBB’s licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The ‘in principle’ confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                  Added: July 2007

                • AU-5.1.12D

                  An ‘in principle’ confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB’s ‘fit and proper’ requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule AU-5.1.5 and, once assessed as complete by the CBB, a signed and dated final version of Form 1.

                  Amended: July 2007
                  Amended: October 2007
                  Amended: April 2008

                • AU-5.1.12E

                  Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans, for guidance on the CBB's license categories and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final).

                  Amended: April 2018
                  Added: July 2007

                • AU-5.1.12F

                  Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The Central Bank can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.

                  Added: July 2007

                • AU-5.1.12G

                  At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule AU-5.1.12H below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).

                  Added: July 2007

              • Granting or Refusal of License

                • AU-5.1.12H

                  To be granted a license, an applicant must demonstrate compliance with the applicable requirements of the CBB Law and this Module. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.

                  Added: July 2007

                • AU-5.1.12I

                  The CBB may refuse to grant a license if in its opinion:

                  (a) The requirements of the CBB Law or this Module are not met;
                  (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
                  (c) The CBB believes it necessary in order to safeguard the interests of potential customersG .

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.12J

                  Where the CBB proposes to refuse an application for a license, it must give the applicant written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice; these procedures will comply with the provisions contained in Article 46 of the CBB Law.

                  Added: July 2007

              • Starting Operations

                • AU-5.1.13

                  Within 6 months of the license being issued, the new licensee must provide to the CBB (if not previously submitted):

                  (a) The registered office address and details of premises to be used to carry out the business of the proposed licensee;
                  (b) The address in the Kingdom of Bahrain where full business records will be kept;
                  (c) The licensee's contact details including telephone and fax number, e-mail address and website;
                  (d) A copy of its business continuity plan;
                  (e) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;
                  (f) A copy of the auditor'sG acceptance to act as auditorG for the applicant;
                  (g) A copy of an auditor'sG opinion certifying that the licensee's capital — as specified in the business plan submitted under Rule AU-5.1.5 — has been paid in;
                  (h) For insurance brokersG and insurance consultantsG , a copy of the licensee's professional indemnity insurance policy or confirmation that a deposit to an amount specified by the CBB has been placed in escrow in an account of a retail bank licensed in the Kingdom of Bahrain (see Chapter GR-10); and
                  (i) A copy of the applicant's notarised memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;
                  (j) A copy of the Ministry of Industry and Commerce commercial registration certificate;
                  (k) An updated organisation chart showing the reporting lines, committees (if any) and including the names of the persons undertaking the controlled functionsG ;
                  (l) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the insurance licenseeG is licensed by the CBB; and
                  (m) Any other information as may be specified by the CBB.
                  Amended: October 2011
                  Amended: July 2007
                  Amended: January 2008

                • AU-5.1.14

                  New licensees must start their operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.

                  Amended: July 2007

                • AU-5.1.15

                  The procedures for amending or cancelling licenses are contained in Sections AU-5.4 and AU-5.5 respectively.

                  Added: July 2007

                   

                   

            • AU-5.2 Approved Persons

              • Prior Approval Requirements and Process

                • AU-5.2.1

                  Insurance licenseesG must obtain CBB's prior written approval before a person is formally appointed to a controlled functionG . The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in Form 3, including previous experience, is accurate. Form 3 is available under Volume 3 Part B Authorisation Forms of the CBB Rulebook.

                  Amended: January 2016
                  Amended: July 2015
                  Amended: April 2010
                  Amended: July 2007

                • AU-5.2.2

                  When the request for approved personG status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled functionG is in relation to an existing insurance licenseeG , the Form 3, except if dealing with a MLRO, must be marked for the attention of the Director, Insurance Supervision Directorate. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

                  Amended: April 2018
                  Amended: July 2007
                  Amended: April 2008

                • AU-5.2.2A

                  When submitting the Forms 3, insurance licenseesG must ensure that the Form 3 is:

                  (a) Submitted to the CBB with a covering letter signed by an authorised representative of the insurance licenseeG , seeking approval for the proposed controlled functionG ;
                  (b) Submitted in original form;
                  (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
                  (d) Signed by an authorised representative of the licenseeG and all pages stamped with the licensee'sG seal.
                  Amended: July 2015
                  Added: April 2010

                • AU-5.2.2B

                  Insurance licenseesG seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

                  Added: July 2015

                • AU-5.2.2C

                  For existing licensees applying for the appointment of a DirectorG or the Chief ExecutiveG /General ManagerG , the authorised representative should be the Chairman of the Board or a DirectorG signing on behalf of the Board. For all other controlled functionsG , the authorised representative should be the Chief ExecutiveG /General ManagerG .

                  Amended: July 2015
                  Added: April 2010

              • Assessment of Application

                • AU-5.2.3

                  The CBB shall review and assess the application for approved personG status to ensure that it satisfies all the conditions required in Paragraph AU-3.1.3 and the criteria outlined in Paragraph AU-3.1.5.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.4

                  For purposes of Paragraph AU-5.2.3, insurance licenseesG should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all regulatory requirements, including but not limited to receiving the application complete with all the required information and documents, as well as verifying references.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.4A

                  The CBB reserves the right to refuse an application for approved personG status if it does not satisfy the conditions provided for in Paragraph AU-3.1.3 and does not satisfy the CBB criteria in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to the insurance licenseeG concerned, setting out the basis for the decision.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.5

                  [This Paragraph was deleted in January 2016.]

                  Deleted: January 2016
                  Amended: July 2015
                  Amended: July 2008
                  Amended: July 2007

              • Appeal Process

                • AU-5.2.5A

                  Insurance licenseesG or the nominated approved personsG may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved personG status. The CBB shall decide on the appeal and notify the insurance licenseeG of its decision within 30 calendar days from submitting the appeal.

                  Added: July 2015

                • AU-5.2.5B

                  Where notification of the CBB's decision to grant a person approved personG status is not issued within 15 business days from the date of meeting all regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, insurance licenseesG or the nominated approved personsG may appeal to the the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the insurance licenseeG of its decision within 30 calendar days from the date of submitting the appeal.

                  Amended: January 2016
                  Added: July 2015

              • Notification Requirements and Process

                • AU-5.2.6

                  Insurance licenseesG must immediately notify the CBB when an approved personG ceases to hold a controlled functionG together with an explanation as to the reasons why (see Paragraph AU-5.5.6). In such cases, their approved personG status is automatically withdrawn by the CBB.

                  Amended: July 2008
                  Amended: April 2008
                  Amended: July 2007

                • AU-5.2.7

                  Insurance licenseesG must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved personG .

                  Added: April 2010

                • AU-5.2.8

                  Insurance licenseesG must immediately notify the CBB when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of their approved personsG .

                  Added: April 2010

            • AU-5.3 Registration

              • AU-5.3.1

                Persons wishing to be registered as an actuaryG or loss adjusterG must submit a duly completed Form 4 (Application for Registration). Persons wishing to be registered as appointed representativeG must submit Form 5 (Application for Appointed Representative). The form must be marked for the attention of the Director, Licensing Directorate.

                Amended: April 2018
                Amended: October 2009

              • AU-5.3.2

                The CBB aims to respond to applications for registration within 2 weeks of receipt of a Form 4 or Form 5, although in some cases, where referral to an overseas supervisor is required, the response time is likely to be longer.

                Amended: October 2009
                Amended: July 2007

              • AU-5.3.3

                All refusals by the CBB to grant a person registered person status have to be reviewed and approved by an Executive Director of the CBB. A notice of intent is issued to the applicant concerned, setting out the basis for the decision. The applicant has 30 calendar days from the date of the notice in which to appeal the decision. The CBB then has 30 calendar days from the date of the representation in which to make a final determination. See also Chapter EN-9.

                Amended: October 2009
                Amended: July 2007

            • AU-5.4 Amendment of Authorisation

              • Licenses

                • AU-5.4.1

                  Insurance licenseesG wishing to vary the scope of their license must obtain the CBB’s written approval, before effecting any such change. Insurance licenseesG must seek prior CBB approval before undertaking new activities (such as carrying out or broking new classes of business). Approval must be sought whenever a licensee wishes to add or cease undertaking a regulated insurance serviceG , or to vary a condition imposed on their license.

                  Amended: July 2007

                • AU-5.4.2

                  Failure to secure the CBB approval prior to effecting such changes is likely to be viewed as a serious breach of a licensee's regulatory obligations and may constitute a breach of Article 40(a) of the CBB Law.

                  Amended: July 2007

                • AU-5.4.3

                  In addition to any other information requested by the CBB, and unless otherwise directed by the CBB, an insurance licenseeG requesting CBB approval to undertake new regulated insurance servicesG must provide the following documentation:

                  (a) A summary of the rationale for undertaking the proposed new service;
                  (b) A description of how the new service will be managed and controlled;
                  (c) An analysis of the financial impact of the new service; and
                  (d) A summary of the due diligence undertaken by the Board and management of the insurance licenseeG on the proposed new service.
                  Amended: July 2007

                • AU-5.4.4

                  The CBB will only agree to amend a license if doing so poses, in its judgement, no unacceptable risks to customersG . As provided for under Article 48 of the CBB Law, the CBB may itself move to amend a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires such a change. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances.

                  Amended: July 2007
                  Amended: October 2007

              • Approved Persons

                • AU-5.4.5

                  Insurance licenseesG must seek prior CBB approval before an approved personG may move from one controlled functionG to another within the same licensee.

                  Added: July 2007

                • AU-5.4.6

                  In such instances, a new Form 3 (Application for Approved Person status) should be completed and submitted to the CBB. Note that a person may be considered ‘fit and proper’ for one controlled functionG , but not for another, if for instance the new role requires a different set of skills and experience. Where an approved personG is moving to a controlled functionG in another licensee, the first licensee should notify the CBB of that person’s departure (see Rule AU-5.5.6), and the new licensee should submit a request for approval under Rule AU-1.2.1.

                  Added: July 2007

            • AU-5.5 Cancellation of Authorisation

              • Voluntary Surrender of a License or Closure of a Branch

              • Cancellation of a License by the CBB

                • AU-5.5.1

                  In accordance with Article 50 of the CBB Law, insurance licenseesG wishing to cancel their license or cease activities for a branch must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Insurance Supervision Directorate, setting out in full the reasons for the request and how the business is to be wound up.

                  Amended: October 2011
                  Amended: July 2007

                • AU-5.5.2

                  Insurance licenseesG must satisfy the CBB that their customers'G interests are to be safeguarded during and after the proposed cancellation. The requirements contained in Module GR regarding cessation of business must be satisfied.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.5.3

                  Failure to comply with Rule AU-5.5.1 may constitute a breach of Article 50(a) of the CBB Law. The CBB will only approve such requests where it has no outstanding regulatory concerns and any relevant customers'G interests would not be prejudiced. A voluntary surrender will not be accepted where it is aimed at pre-empting supervisory actions by the CBB. A voluntary surrender will only take effect once the licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities to customersG .

                  Amended: July 2007

                • AU-5.5.4

                  As provided for under Article 48(c) of the CBB Law, the CBB may itself move to cancel a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires a cancellation. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances and the licensee's right to appeal the formal notice of cancellation issued by the CBB.

                  Amended: October 2011
                  Added: July 2007

                • AU-5.5.4A

                  Cancellation of a license requires the CBB to issue a formal notice of cancellation to the licensee concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.

                  Amended: October 2012
                  Added: October 2011

                • AU-5.5.4B

                  Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to clientsG . Until such time, the CBB will retain all its regulatory powers towards the licensee and will direct the licensee so that no new regulated insurance servicesG may be undertaken whilst the licensee discharges its obligations to its clientsG .

                  Added: October 2011

                • AU-5.5.5

                  In the case of insurance brokersG and insurance consultantsG , the requirements relating to professional indemnity coverage must be observed (see Paragraph GR-10.1.8)

                  Amended: July 2007
                  Amended: October 2007

              • Approved Persons

                • AU-5.5.6

                  In accordance with Paragraph AU-5.2.6, insurance licenseesG must promptly notify the CBB in writing when a person undertaking a controlled functionG will no longer be carrying out that function. If a controlled functionG falls vacant, the insurance licenseeG must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the insurance licenseeG must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled functionG affected. These interim arrangements must be approved by the CBB.

                  Amended: July 2007
                  Amended: April 2008

                • AU-5.5.7

                  The explanation given for any such changes should simply identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.

                  Amended: July 2007

                • AU-5.5.8

                  The CBB may also move to declare someone as not ‘fit and proper’, in response to significant compliance failures or other improper behaviour by that person: see Chapter EN-8 regarding the cancellation of ‘fit and proper’ approval.

                  Added: July 2007

              • Registered Persons

                • AU-5.5.9

                  Registered actuariesG , loss adjustersG and appointed representativesG wishing to cancel their registration status with the CBB must obtain the CBB's written approval. All such requests must be made in writing to the Director, Insurance Supervision Directorate.

                  Amended: October 2009
                  Added: July 2007

                • AU-5.5.10

                  The CBB may itself cancel the registered status of an actuaryG , loss adjusterG or appointed representativeG should the registered person fail to comply with registration conditions outlined in Chapter AU-4: see Chapter EN-9 regarding the cancellation of registration.

                  Amended: October 2009
                  Added: July 2007

            • AU-5.6 Publication of the Decision to Grant, Cancel or Amend a License

              • AU-5.6.1

                In accordance with Articles 47 and 49 of the CBB Law, the CBB must publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.

                Added: July 2017

              • AU-5.6.2

                For the purposes of Paragraph AU-5.6.1, the cost of publication must be borne by the Licensee.

                Added: July 2017

              • AU-5.6.3

                The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

                Added: July 2017

          • AU-6 Licensing and Registration Fees

            • AU-6.1 Introduction

              • AU-6.1.1

                Insurance licenseesG and registered persons must comply with any fees levied by the CBB, pursuant to Article 180 of the CBB Law. The fees charged vary on the type of insurance license or registration granted by the CBB. Fees are levied at the time of application for licensing and on an annual basis for licensees and registered persons, thereafter.

                Added: July 2007

            • AU-6.2 License Application Fees

              • AU-6.2.1

                With immediate effect, applicants seeking an insurance license from the CBB must pay a non-refundable application fee of BD 100 at the time of submitting their application to the CBB.

                Added: July 2007

              • AU-6.2.2

                There are no application fees for those seeking approved person status.

                Added: July 2007

              • AU-6.2.3

                ActuariesG , loss adjustersG and appointed representativesG seeking registration status are exempt from application fees but are subject to annual fees as outlined in Section AU-6.3.

                Amended: October 2009
                Added: July 2007

            • AU-6.3 Annual Fees

              • AU-6.3.1

                Insurance licenseesG or registered persons must pay to the CBB an annual licensing or registration fee, on 1st December of the preceding year for which fees are due.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.2

                The relevant fees are specified in Rules AU-6.3.3 to AU-6.3.6A below: different fees are specified for insurance firmsG (other than captive insurance firmsG ), captive insurance firmsG , insurance brokersG , insurance consultantsG , insurance managersG , actuariesG , loss adjustersG and appointed representativesG . The fees due on 1st December are those due for the following calendar year. Where applicable, variable fees are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example) based on a percentage, is calculated using the audited financial statements for 2012, assuming a 31st December year end.

                Amended: July 2013
                Amended: October 2009
                Added: July 2007

              • AU-6.3.3

                For insurance firmsG , other than captive insurance firmsG , the annual licensing fee is a fixed amount of BD 6,000. For captive insurance firmsG , the annual licensing fee is a fixed amount of BD 1,000.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.4

                Insurance brokersG , other than Bahraini single person companies, all insurance consultantsG and all insurance managersG must pay a variable annual licensing fee, based on 0.25% of their relevant operating expensesG , subject to a minimum ('floor') of BD 500 and a maximum ('cap') of BD 3,000.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.5

                For insurance brokersG that are Bahraini single person companies, the annual licensing fee is a fixed amount of BD 175.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.6

                The annual registration fee for registered actuariesG is a fixed amount of BD 25. For registered loss adjustersG , unincorporated individuals must pay an annual registration fee of a fixed amount of BD 175 while incorporated loss adjustersG must pay an annual registration fee of a fixed amount of BD 1,200.

                Amended: July 2013
                Amended: October 2007
                Added: July 2007

              • AU-6.3.6A

                For appointed representativesG , the annual fee must be paid by the licensed principalG . The fee for registered appointed representativesG , that are unincorporated individuals is a fixed amount of BD 25. For incorporated appointed representativesG , the fixed annual fee is based on the number of designated individuals within the corporate entity that are the representatives of the insurance firm. For incorporated appointed representativesG that have:

                (a) 1 to 10 designated individuals, the fee is BD500;
                (b) 11 to 20 designated individuals, the fee is BD 1000; and
                (c) More than 20 designated individuals, the fee is BD1500.
                Amended: July 2013
                Adopted: October 2009

              • AU-6.3.6B

                For incorporated appointed representativesG , the fee amount is based on the number of designated individuals at the prior year end.

                Adopted: October 2009

              • AU-6.3.6C

                As an example, for purposes of Paragraph AU-6.3.6B, if at 31st December 2012 an incorporated appointed representativeG had 8 designated individuals, the fee payable on 1st December 2013 for the 2014 year would be BD 500. If during the course of the year 2013, the number of designated individuals increased to 15 by year end 2013, the fee payable for the year 2015 would be BD 1000.

                Amended: July 2013
                Adopted: October 2009

              • AU-6.3.7

                For purposes of Paragraph AU-6.3.4, relevant operating expensesG are defined as the total operating expenses of the licensee concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule AU-6.3.8.

                Added: July 2007

              • AU-6.3.8

                The adjustments to be made to relevant operating expensesG are the exclusion of the following items from total operating expenses:

                (a) Training costs;
                (b) Charitable donations;
                (c) CBB fees paid; and
                (d) Non-executive Directors'G remuneration.
                Added: July 2007

              • AU-6.3.9

                For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.

                Added: July 2007

              • AU-6.3.10

                The CBB would normally rely on the audited accounts of a licensee as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.

                Added: July 2007

              • AU-6.3.11

                Insurance licenseesG , subject to Paragraph AU-6.3.4 must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which fees are due.

                Amended: July 2013
                Amended: April 2009
                Added: July 2007

              • AU-6.3.11A

                Except for actuaries and loss adjustors, all annual license fees are collected by direct debit. For licensees subject to a variable fee, the fee levied will be based on form ALF that is provided in accordance with Paragraph AU-6.3.11.

                Added: July 2013

              • AU-6.3.11B

                All licensees subject to direct debit for the payment of the annual fee, must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September, available under Part B of Volume 3 (Insurance) CBB Rulebook on the CBB Website.

                Added: July 2013

              • AU-6.3.11C

                For actuaries and loss adjusters, the annual fixed fee must be remitted by direct deposit or wire transfer by 1st December of the previous year for which the fees are due. Payment instructions are outlined in Form ALF which must be completed when fees are remitted.

                Added: July 2013

              • AU-6.3.12

                For new insurance firm licenseesG , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license has been granted, shall be prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

                Added: July 2007
                Amended: October 2007
                Amended: April 2008
                Amended: April 2009

              • AU-6.3.12A

                For those new licensees subject to a fee based on their relevant operating expensesG (refer to Paragraph AU-6.3.4), the amount payable in relation to the first year in which the license has been granted is the floor amount of BD500.

                Added: April 2008
                Amended: October 2008
                Amended: April 2009

              • AU-6.3.13

                For newly registered actuariesG , individual loss adjustersG and appointed representativesG , the full annual amount of the annual registration fee referred to in Paragraph AU-6.3.6 and AU-6.3.6A, shall be the fee required to be paid to the CBB for the first year in which the registration status has been granted.

                Amended: October 2009
                Amended: April 2008
                Added: July 2007

              • AU-6.3.14

                For newly registered incorporated loss adjustersG , the annual registration fee referred to in Paragraph AU-6.3.6, shall be prorated for the year using the date of the official registration letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year, subject to a minimum fee of BD 250.

                Added: July 2007
                Amended: April 2008
                Amended: October 2008

              • AU-6.3.15

                [This Paragraph was deleted in July 2013]

                Deleted: July 2013
                Added: July 2007

              • AU-6.3.16

                [This Paragraph was deleted in April 2009]

                Deleted: April 2009

              • AU-6.3.17

                Where a license or registration is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

                Added: July 2007

              • AU-6.3.18

                Insurance licenseesG or registered persons failing to comply with this Section may be subject to financial penalties for date sensitive requirements as outlined in Section EN-5.3B or may have their license or registered status withdrawn by the CBB.

                Added: July 2013

        • PB Principles of Business

          • PB-A Introduction

            • PB-A.1 Purpose

              • Executive Summary

                • PB-A.1.1

                  The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain (‘CBB’) insurance licenseesG and approved personsG . They serve as a basis for other material in Volume 3 (Insurance), and help address specific circumstances not covered elsewhere in the Rulebook.

                  Amended: January 2007

                • PB-A.1.2

                  The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 3 (Insurance). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.

              • Legal Basis

                • PB-A.1.3

                  This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to insurance licenseesG (including their approved personsG ).

                  Amended: January 2011
                  Added: January 2007

                • PB-A.1.4

                  For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

                  Added: January 2007

            • PB-A.2 Module History

              • PB-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 that have subsequently been made 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.

                Amended: January 2007

              • PB-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.

                Added: January 2007

              • PB-A.2.3

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

                Module Ref. Change Date Description of Changes
                PB-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive.
                PB-1.1.1 01/2007 Small expansion of Principle 1 to refer to disclosure of all relevant information to customers, as required by CBB Regulations and Directives.
                PB-A.1.3 01/2011 Clarified legal basis

              • PB-A.2.3 [Deleted]

                Deleted: January 2007

              • PB-A.2.4

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

          • PB-B Scope of Application

            • PB-B.1 Scope of Application

              • PB-B.1.1

                The 10 Principles of Business apply to all CBB insurance licenseesG , in accordance with Paragraph PB-B.1.2. Principles 1–8 (Paragraphs PB-1.1 to PB-1.8 inclusive) also apply to all approved personsG , in accordance with Paragraph PB-B.1.3.

                Amended: January 2007

              • PB-B.1.2

                Principles 1 to 10 apply to activities carried out by the licensee, including activities carried out through overseas branches (if any). Principles 9 and 10 also take into account any activities of other members of the groupG of which the licensee is a member.

                Amended: October 2007

              • PB-B.1.3

                Principles 1 to 8 apply to approved personsG in respect of the controlled functionG for which they have been approved.

              • PB-B.1.4

                Principles 1 to 8 do not apply to behaviour by an approved personG with respect to any other functions or activities they may undertake. However, behaviour unconnected to their controlled functionG duties may nonetheless be relevant to an assessment of that person's fitness and propriety.

              • PB-B.1.5

                The CBB's requirements regarding approved personsG and controlled functionsG are located in Module AU (Authorisation).

                Amended: January 2007

            • PB-B.2 Non compliance

              • PB-B.2.1

                Breaching a Principle of Business makes the insurance licenseeG or approved personG concerned liable to enforcement action. In the case of a licensee, this may call into question whether they continue to meet the licensing conditions (see Chapter AU-2). In the case of an approved personG , this may call into question whether they continue to meet the 'fit and proper' requirements for the function for which they have been approved (see Chapter AU-3).

                Amended: October 2007

              • PB-B.2.2

                Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.

                Amended: January 2007

          • PB-1 The Principles

            • PB-1.1 Principle 1 — Integrity

              • PB-1.1.1

                Insurance licenseesG and approved personsG must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings with customersG , and disclose fully all relevant information to customersG , as required by the CBB's Regulations and Directives.

                Amended: January 2007

            • PB-1.2 Principle 2 — Conflicts of Interest

              • PB-1.2.1

                Insurance licenseesG and approved personsG must take all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of a customerG .

            • PB-1.3 Principle 3 — Due Skill, Care and Diligence

              • PB-1.3.1

                Insurance licenseesG and approved personsG must act with due skill, care and diligence.

            • PB-1.4 Principle 4 — Confidentiality

              • PB-1.4.1

                Insurance licenseesG and approved personsG must observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures.

            • PB-1.5 Principle 5 — Market Conduct

              • PB-1.5.1

                Insurance licenseesG and approved personsG must observe proper standards of market conduct, and avoid action that would generally be viewed as improper.

            • PB-1.6 Principle 6 — Customer Assets

              • PB-1.6.1

                Insurance licenseesG and approved personsG must take reasonable care to safeguard the assets of customersG for which they are responsible.

                Amended: January 2007

            • PB-1.7 Principle 7 — Customer Interests

              • PB-1.7.1

                Insurance licenseesG and approved personsG must pay due regard to the legitimate interests and information needs of their customersG and communicate with them in a fair and transparent manner. Insurance licenseesG and approved personsG , when dealing with customersG who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.

            • PB-1.8 Principle 8 — Relations with Regulators/Supervisors

              • PB-1.8.1

                Insurance licenseesG and approved personsG must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies under whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.

                Amended: January 2007

            • PB-1.9 Principle 9 — Adequate Resources

              • PB-1.9.1

                Insurance licenseesG must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

            • PB-1.10 Principle 10 — Management, Systems & Controls

              • PB-1.10.1

                Insurance licenseesG must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Insurance licensees'G systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.

                Amended: January 2007

        • HC High-Level Controls

          • HC-A Introduction

            • HC-A.1 Purpose

              • Executive Summary

                • HC-A.1.1

                  This Module presents requirements that have to be met by insurance licenseesG with respect to:

                  (a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code;
                  (b) International best practice corporate governance standards set by bodies such as the International Association of Insurance Supervisors; and
                  (c) Related high-level controls and policies.
                  January 2011

                • HC-A.1.2

                  The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.

                  January 2011

                • HC-A.1.3

                  The purpose of the Module is to establish best practice corporate principles in Bahrain, and to provide protection for investors and other company stakeholders through compliance with those principles.

                  January 2011

                • HC-A.1.4

                  Whilst the Module follows best practice, it is nevertheless considered as the minimum standard to be applied. This Module also includes additional rules and guidance issued by the CBB prior to the publication of the Code and previously contained in Module HC.

                  January 2011

              • Structure of this Module

                • HC-A.1.5

                  This Module follows the structure of the Corporate Governance Code and each Chapter deals with one of the nine fundamental Principles of corporate governance. In addition, a Chapter has been added to deal specifically with requirements imposed on insurance consultantsG , insurance managersG and captive insurance firmsG . The numbered directives included in the Code are Rules for purposes of Chapters HC-1 to HC-9. Recommendations under the Code have been included as guidance. However, where the previous version of Module HC had a similar recommendation as a Rule, the Module retains this Paragraph as a Rule.

                  January 2011

                • HC-A.1.6

                  The Module also incorporates other high-level controls and policies that apply in particular to insurance licenseesG .

                  January 2011

                • HC-A.1.7

                  All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

                  January 2011

              • The Comply or Explain Principle

                • HC-A.1.8

                  This Module is issued as a Directive (as amended from time to time) in accordance with Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). In common with other Rulebook Modules, this Module contains a mixture of Rules and Guidance (See Module UG-1.2 for detailed explanation of Rules and Guidance). All Rulebook content that is categorised as a Rule must be complied with by those to whom the content is addressed. Other parts of this Module are Guidance; nonetheless every insurance licenseeG to whom Module HC applies, is expected to comply with recommendations made as Guidance in Module HC or explain its noncompliance by way of an annual report to its shareholders and to the CBB (see Chapter HC-8).

                  January 2011

              • Monitoring and Enforcement of Module HC

                • HC-A.1.9

                  Disclosure and transparency are underlying principles of Module HC. Disclosure is crucial to allow outside monitoring to function effectively. This Module looks to a combined monitoring system relying on the Board, the insurance licensee'sG shareholders and the CBB.

                  January 2011

                • HC-A.1.10

                  It is the Board's responsibility to see to the accuracy and completeness of the insurance licensee'sG corporate governance guidelines and compliance with Module HC. Failure to comply with this Module is subject to enforcement measures as outlined in Module EN (Enforcement).

                  January 2011

              • Legal Basis

                • HC-A.1.11

                  This Module contains the CBB's Directive (as amended from time to time) relating to high-level controls and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to insurance licenseesG (including their approved personsG ).

                  January 2011

                • HC-A.1.12

                  For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

                  January 2011

              • Effective Date

                • HC-A.1.13

                  This updated Module issued is effective on 1st January 2011. All insurance licenseesG to which Module HC applies should be in full compliance by the financial year end 2011. At every insurance licensee'sG annual shareholder meeting held after 1st January 2011, corporate governance should be an item on the agenda for information and any questions from shareholders regarding the insurance licensee'sG governance. Where possible, the insurance licenseeG should also have corporate governance guidelines in place at that time and should have a "comply or explain" report as described in Paragraph HC-A.1.8.

                  January 2011

            • HC-A.2 Module History

              • HC-A.2.1

                This Module was first issued in April 2005 by the BMA and updated in January 2007 to reflect the switch to the CBB. Following the issuance of the Corporate Governance Code by the Ministry of Industry and Commerce in March 2010, the Module was amended in January 2011 to be in line with the new Code and to include previous requirements that were in place in the originally issued Module HC. Any material changes that have subsequently been made 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.

                January 2011

              • HC-A.2.2

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

                Module Ref. Change Date Description of Changes
                HC-1 to HC-10 01/2011 Amendments due to introduction of new MOIC Corporate Governance Code.
                HC-1.3.7 04/2011 Clarified the rules regarding the limitation on Directorships held by board members.
                HC-1.4 04/2011 Amendment made to reflect new Rules on attendance of Directors at Board of Directors meetings.
                HC-6.6.3 04/2011 Guidance added dealing with the compliance function.
                Appendix A 04/2011 Clarified membership of audit committee to be in line with Rule HC-3.2.1.
                HC-B.2.2 01/2012 Clarified language related to corporate governance.
                HC-1.2.5 and HC-1.6.3 01/2012 Clarified that the Chairman of the Board may delegate specific duties dealt with in these Paragraphs.
                HC-1.4.4B 01/2012 Corrected typo.
                HC-1.5.7, HC-1.5.7A and HC-1.5.7B 01/2012 Clarified rule and guidance on the chairman of the Board.
                HC-1.10.1 01/2012 Deleted last sentence.
                HC-5.6.6 01/2012 Amended Paragraph.
                Appendix D 01/2012 Disclosure to shareholders amended.
                HC-7.2.5 and HC-10.7.6 10/2012 Clarified Guidance on election of board members.
                Appendices A, B and C 10/2012 Amended requirement for written report on performance evaluation for various Board committees.
                Appendix A 10/2012 Included reference to compliance under Committee Duties and Responsibilities.
                HC-2.2.3 and HC-2.4.1 01/2013 Clarified scope of application for Rules.
                HC-1.3.4 and HC-10.1.8 10/2014 Minor corrections to be consistent with wording used in other Volumes of the CBB Rulebook.
                HC-1.11.2, HC-2.2.5, HC-6.5.1 and HC-8.2.1 10/2014 Removed reference to single person company as HC-B.1.1 clearly states that the contents of this Module do not apply to insurance licensees with this legal status.
                HC-2.3.3 and HC-10.2.5A 04/2016 Added a requirement (or guidance, based on type of insurance license) for the licensee to have in place a board approved policy on the employment of relatives of approved persons.
                HC-2.4.1A and HC-10.2.6A 04/2016 Added the requirement (or guidance, based on type of insurance license) to disclose to the board on annual basis relatives of any approved persons occupying controlled functions.
                HC-2.3, HC-2.4 and HC-10.2 07/2016 Clarified application of Rules (or guidance, based on the type of insurance license) for overseas licensees.

              • HC-A.2.3

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

                January 2011

          • HC-B Scope of Application

            • HC-B.1 Insurance Licensees

              • HC-B.1.1

                The contents of this Module - unless otherwise stated - apply to all Bahraini insurance licenseesG , incorporated under the Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Company Law'), except those companies operating as Bahraini single person company.

                January 2011

              • HC-B.1.2

                For insurance brokersG , Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply for insurance brokersG .

                January 2011

              • HC-B.1.3

                For insurance consultantsG , insurance managersG and captive insurance firmsG the applicable Guidance Paragraphs are included in Chapter HC-10. The Comply or Explain Principle (see Paragraph HC-A.1.8) applies to the content of Chapter HC-10.

                January 2011

              • HC-B.1.4

                Overseas insurance licenseesG must satisfy the CBB that equivalent arrangements are in place at the parentG entity level, and that these arrangements provide for effective high-level controls over activities conducted under the Bahrain license.

                January 2011

              • HC-B.1.5

                In assessing compliance with Paragraph HC-B.1.4, the CBB will take into account regulatory requirements applicable to the parentG entity, as well as the governance and systems and controls arrangements actually implemented by the parentG entity and applied to the Bahrain operation. With the exception of specific requirements that explicitly apply to overseas insurance licenseesG (i.e. Paragraph HC-B.1.4), overseas insurance licenseesG should consider the remaining contents of this Chapter as guidance, in judging whether high-level controls applied to the branch satisfy HC-B.1.4.

                January 2011

            • HC-B.2 Branches, Subsidiaries and Affiliates

              • HC-B.2.1

                Bahraini insurance licenseesG must ensure that, as a minimum, the same or equivalent provisions of this Module apply to their branchesG , whether located inside or outside the Kingdom of Bahrain, such that these are also subject to effective high-level controls. In instances where local jurisdictional requirements are more stringent than those applicable in this Module, the local requirements are to be applied.

                January 2011

              • HC-B.2.2

                Bahraini insurance licenseesG must satisfy the CBB that financial services activities conducted in subsidiariesG and other group members are subject to the same or equivalent arrangements for ensuring effective corporate governance over their activities.

                Amended: January 2012
                January 2011

              • HC-B.2.3

                Where an insurance licenseeG is unable to satisfy the CBB that its subsidiariesG and other group members are subject to the same or equivalent arrangements, the CBB will assess the potential impact of risks — both financial and reputational — to the licensee arising from inadequate high-level controls in the rest of the group of which it is a member. In such instances, the CBB may impose restrictions on dealings between the licensee and other group members. Where weaknesses in controls are assessed by the CBB to pose a major threat to the stability of the licensee, then its authorisation may be called into question.

                January 2011

          • HC-1 The Board

            • HC-1.1 Principle

              • HC-1.1.1

                All Bahraini insurance licenseesG must be headed by an effective, collegial and informed Board of Directors ('the Board').

                January 2011

            • HC-1.2 Role and Responsibilities

              • HC-1.2.1

                All directors must understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

                (a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
                (b) The Board's fiduciary duties of care and loyalty to the insurance licenseeG and the shareholders (see HC-2.1).
                January 2011

              • HC-1.2.2

                The Board's role and responsibilities include but are not limited to:

                (a) Approving and reviewing at least annually the overall business performance and strategy for the insurance licenseeG ;
                (b) Reviewing regularly the implementation of the strategy and operational performance;
                (c) Causing financial statements to be prepared which accurately disclose the insurance licensee'sG financial position;
                (d) Monitoring management performance;
                (e) Reviewing regularly the level of risk;
                (f) Approving and reviewing at least annually systems and controls framework (including policies and procedures);
                (g) Convening and preparing the agenda for shareholder meetings;
                (h) Monitoring conflicts of interest and preventing abusive related party transactions;
                (i) Assuring equitable treatment of shareholders including minority shareholders; and
                (j) Setting out clearly and reviewing on a regular basis who has authority to enter the licensee into contractual obligations.
                January 2011

              • HC-1.2.3

                With respect to Subparagraph HC-1.2.2(j), the Board should set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board will consider the financial impact the contractual obligation may have in relation to its capital.

                January 2011

              • HC-1.2.4

                The directors are responsible both individually and collectively for performing these responsibilities and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the insurance licenseeG . Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members and senior management.

                January 2011

              • HC-1.2.5

                When a new director is inducted, the chairman of the Board, or the licensee's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also HC-4.5.1).

                Amended: January 2012
                January 2011

              • HC-1.2.6

                The insurance licenseeG should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remunerationG and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                January 2011

              • HC-1.2.7

                The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

                January 2011

              • Additional Guidance

                • HC-1.2.8

                  In assessing the licensee's strategic plans (Paragraph HC-1.2.2), the CBB would expect the Board to address the licensee's current and future aspirations with respect to its position in the market place, its size, products, value and other key aspirations that would be considered important by investors. Furthermore, the Board should demonstrate that it is able to proactively identify and understand the significant risks that the licensee faces in achieving its business objectives. A description of the licensee's strategy should be included in the annual financial statements. See also Module PD (Public Disclosure).

                  January 2011

                • HC-1.2.9

                  In assessing the management framework (Paragraph HC-1.2.2), the CBB would expect the Board to have effective policies and processes in place for:

                  (a) Ensuring a formal and transparent Board nomination process;
                  (b) Appointing senior managersG , and ensuring that they have the necessary integrity, technical and managerial competence, and experience;
                  (c) Overseeing succession planning, and minimizing undue reliance on key individuals;
                  (d) Reviewing key senior managementG and Board remuneration packages and ensuring such packages are consistent with the corporate values and strategy of the licensee and encourage prudent risk taking;
                  (e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and
                  (f) Approving budgets and reviewing performance against those budgets.
                  January 2011

                • HC-1.2.10

                  In assessing the systems and controls framework (Paragraph HC-1.2.2), the CBB would expect the Board to be able to demonstrate that its operations, individually and collectively:

                  (a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the licensee's activities. These should pro-actively identify as well as monitor risk. The systems should produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;
                  (b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and
                  (c) Make effective use of the work of internal and external auditorsG .
                  January 2011

            • HC-1.3 Composition

              • HC-1.3.1

                Captive insurance firmsG are exempt from the requirements of this Section, except for Paragraph HC-1.3.2, which apply to all Bahraini insurance licenseesG .

                January 2011

              • HC-1.3.2

                The Memorandum and Articles of Association of licensees must adequately set out procedures for the appointment, removal and retirement of DirectorsG .

                January 2011

              • HC-1.3.3

                For insurance firmsG , the Board must comprise at least five DirectorsG . For Bahraini insurance licenseesG , other than insurance firmsG , the Board must comprise at least three DirectorsG . For all Bahraini insurance licenseesG , at least half the Board's members, including the Board's chairman, must be non-executive DirectorsG .

                January 2011

              • HC-1.3.4

                The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the insurance licensee'sG Memorandum of Association.

                Amended: October 2014
                January 2011

              • HC-1.3.5

                Potential non-executive directorG s should be made aware of their duties before their nomination, particularly as to the time commitment required. The Nominating Committee should regularly review the time commitment required from each non-executive directorG and should require each non-executive directorG to inform the Committee before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.

                January 2011

              • HC-1.3.6

                The Board must periodically assess its composition and size and, where appropriate, reconstitute itself and its committees by selecting new DirectorsG to replace long-standing members or those whose contributions to the licensee or its committees is not adequate.

                January 2011

              • HC-1.3.7

                A Board member may have a maximum of two Directorships of financial institutions inside Bahrain. However, two Directorships of licensees within the same category of licensees would not be permitted. For purposes of this Rule only, insurance firms and reinsurance firms are considered as different categories. Insurance firmsG may approach the CBB for exemption from this limit where the Directorships concern financial institutions within the same group.

                Amended: April 2011
                January 2011

              • HC-1.3.8

                A non-executive DirectorG is a DirectorG who is not involved in the day-to-day management of the licensee and is not an employeeG of the licensee. The Chairman of the Board cannot, therefore, also perform the role of Chief ExecutiveG .

                January 2011

              • HC-1.3.9

                The Board's non-executive DirectorG s must comprise a sufficient number of independent DirectorG s to apply independent judgement to, amongst other things, tasks where there is a potential for conflict of interest or there is a need for impartiality.

                January 2011

              • HC-1.3.10

                The appointment of Board members is conditional on the approval of the CBB (See Section AU-1.2).

                January 2011

            • HC-1.4 Decision Making Process

              • HC-1.4.1

                The Board must be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

                January 2011

              • HC-1.4.2

                The chairman must take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

                January 2011

              • HC-1.4.3

                The Board must meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

                January 2011

              • HC-1.4.4

                Individual board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively (see table below). Voting and attendance proxies for board meetings are prohibited at all times.

                Meetings per year 75% Attendance requirement
                4 3
                5 4
                6 5
                7 5
                8 6
                9 7
                10 8
                Amended: April 2011
                January 2011

              • HC-1.4.4A

                The absence of Board members at Board and committee meetings must be noted in the meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when Board members stand for re-election (e.g. Board member XYZ attended 95% of scheduled meetings this year).

                Added: April 2011

              • HC-1.4.4B

                In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the insurance licenseeG must immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance. The CBB shall then consider the matter and determine whether disciplinary action, including disqualification of that Board member pursuant to Article 65 of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.

                Amended: January 2012
                Added: April 2011

              • HC-1.4.5

                To meet its obligations under Rule HC-1.4.3 above, the Board should meet preferably no less than four times per year. The CBB recommends that meetings should take place once every quarter to address the Board's responsibilities for management oversight and performance monitoring. Furthermore, Board rules should require members to step down if they are not actively participating in Board meetings. Board members are reminded that non attendance at board meetings does not absolve them of their responsibilities as directors. It is important that each individual director should allocate adequate time and effort to discharge his responsibilities. All Directors are expected to contribute actively to the work of the Board in order to discharge their responsibilities and should make every effort to attend board meetings where major issues are to be discussed. Insurance licenseesG are encouraged to amend their Articles of Association to provide for telephonic and videoconference meetings. Participation in board meetings by means of video or telephone conferencing is regarded as attendance and may be recorded as such.

                Amended: April 2011
                January 2011

              • HC-1.4.6

                At least half the Board meetings of Bahraini insurance licenseesG in any twelve-month period must be held in the Kingdom of Bahrain.

                January 2011

              • HC-1.4.7

                The chairman must ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors must receive the same Board information. At the same time, directors have a legal duty to inform themselves and they must ensure that they receive adequate and timely information and must study it carefully.

                January 2011

              • HC-1.4.8

                The Board must also maintain adequate records of its meetings, such that key decisions and how they are arrived at can be traced.

                January 2011

            • HC-1.5 Independence of Judgment

              • HC-1.5.1

                The CBB requires Boards of insurance firmsG to include at least two independent non-executive members. For Bahraini insurance licenseesG , other than insurance firmsG , Boards must include at least one independent non-executive member.

                January 2011

              • HC-1.5.2

                In the case of a Bahraini insurance licenseeG , which is part of an overseas group, where there is sufficient independent scrutiny of the operations of the firm on a group wide basis, the CBB will consider exempting the licensee from the requirements of Paragraph HC-1.5.1.

                January 2011

              • HC-1.5.3

                Every director must bring independent judgment to bear in decision-making. No individual or group of directors must dominate the Board's decision-making and no one individual should have unfettered powers of decision.

                January 2011

              • HC-1.5.4

                Executive directorsG must provide the Board with all relevant business and financial information within their cognizance, and must recognise that their role as a director is different from their role as an officer.

                January 2011

              • HC-1.5.5

                Non-executive directorG s must be fully independent of management and must constructively scrutinise and challenge management including the management performance of executive directorG s.

                January 2011

              • HC-1.5.6

                At least half of an insurance licensee'sG Board should be non-executive directorG s and at least three of those persons should be independent directorG s. (Note the exception for controlled companies in Paragraph HC-1.6.2 and for possible exemption under Paragraph HC-1.5.2.)

                January 2011

              • HC-1.5.7

                The chairman of the Board should be an independent directorG , so that there will be an appropriate balance of power and greater capacity of the Board for independent decision making.

                Amended: January 2012
                January 2011

              • HC-1.5.7A

                The chairman and/or deputy chairman must not be the same person as the CEO.

                Added: January 2012

              • HC-1.5.7B

                The chairman must not be an executive directorG .

                Added: January 2012

              • HC-1.5.8

                The Board should review the independence of each director at least annually in light of interests disclosed by them and their conduct. Each independent directorG shall provide the Board with all necessary and updated information for this purpose.

                January 2011

              • HC-1.5.9

                To facilitate free and open communication among independent directorsG , each Board meeting should be preceded or followed with a session at which only independent directorsG are present, except as may otherwise be determined by the independent directorsG themselves.

                January 2011

            • HC-1.6 Representation of all Shareholders

              • HC-1.6.1

                Each director must consider himself as representing all shareholders and must act accordingly. The Board must avoid having representatives of specific groups or interests within its membership and must not allow itself to become a battleground of vested interests. If the company has a controllerG (or a group of controllersG acting in concert), the latter must recognise its or their specific responsibility to the other shareholders, which is direct and is separate from that of the Board of directors.

                January 2011

              • HC-1.6.2

                In insurance licenseesG with a controllerG , at least one-third of the Board must be independent directorsG . Minority shareholders must generally look to independent directors'G diligent regard for their interests, in preference to seeking specific representation on the Board.

                January 2011

              • HC-1.6.3

                In insurance licenseesG with a controllerG , both controllersG and other shareholders should be aware of controllersG specific responsibilities regarding their duty of loyalty to the insurance licenseeG and conflicts of interest (see Chapter HC-2) and also of rights that minority shareholders may have to elect specific directors under the Company Law or if the insurance licenseeG has adopted cumulative voting for directors. The chairman of the board or other individual delegated by the chairman of the board should take the lead in explaining this with the help of company lawyers.

                Amended: January 2012
                January 2011

            • HC-1.7 Directors' Access to Independent Advice

              • HC-1.7.1

                The Board must ensure that there are agreed-upon procedures for individual directors to have access to independent legal or other professional advice at the insurance licensee'sG expense whenever they judge this necessary to discharge their responsibilities as directors and this must be in accordance with the insurance licensee'sG policy approved by the Board.

                January 2011

              • HC-1.7.2

                Individual directors must also have access to the insurance licensee'sG corporate secretary, who must have responsibility for reporting to the Board on Board procedures. Both the appointment and removal of the corporate secretary must be a matter for the Board as a whole, not for the CEO or any other officer.

                January 2011

              • HC-1.7.3

                Whenever a director has serious concerns which cannot be resolved concerning the running of the insurance licenseeG or a proposed action, he should consider seeking independent advice and should ensure that the concerns are recorded in the Board minutes and that any dissent from a Board action is noted or delivered in writing.

                January 2011

              • HC-1.7.4

                Upon resignation, a non-executive directorG should provide a written statement to the chairman, for circulation to the Board, if he has any concerns such as those in Paragraph HC-1.7.3.

                January 2011

            • HC-1.8 Directors' Communication with Management

              • HC-1.8.1

                The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

                January 2011

              • HC-1.8.2

                Non-executive directorsG should have free access to the insurance licensee'sG management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

                January 2011

            • HC-1.9 Committees of the Board

              • HC-1.9.1

                For insurance firmsG , the Board must create specialised committees when and as such committees are needed. In addition to the Audit, Remuneration and Nominating Committees described elsewhere in this Module, these may include an Executive Committee to review and make recommendations to the whole Board on the insurance firm'sG actions, or a Risk Committee to identify and minimize specific risks of the insurance licensee'sG business.

                January 2011

              • HC-1.9.2

                Insurance brokersG should consider the Rules in this Section as guidance.

                January 2011

              • HC-1.9.3

                For insurance firmsG , the Board should establish a corporate governance committee of at least three independent members which should be responsible for developing and recommending changes from time to time in the insurance licensee'sG corporate governance policy framework.

                Amended: January 2012
                January 2011

              • HC-1.9.4

                The Board or a committee may invite non-directors to participate in, but not vote at committee meetings so that the committee may gain the benefit of their advice and expertise in financial or other areas.

                January 2011

              • HC-1.9.5

                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.
                January 2011

              • HC-1.9.6

                Committees must act only within their mandates and therefore the Board must not allow any committee to dominate or effectively replace the whole Board in its decision-making responsibility.

                January 2011

              • HC-1.9.7

                Committees may be combined provided that no conflict of interest might arise between the duties of such committees, subject to CBB prior approval.

                January 2011

              • HC-1.9.8

                Every committee should have a formal written charter similar in form to the model charters which are set forth in Appendices A, B and C of this Module for the Audit, Nominating and Remuneration Committees.

                January 2011

            • HC-1.10 Evaluation of the Board and of Each Committee

              • HC-1.10.1

                At least annually the Board must conduct an evaluation of its performance and the performance of each committee and each individual director.

                Amended: January 2012
                January 2011

              • HC-1.10.2

                Insurance brokersG should consider the Rules in this Section as guidance.

                January 2011

              • HC-1.10.3

                The evaluation process must include:

                (a) Assessing how the Board operates, especially in light of Chapter HC-1;
                (b) Evaluating the performance of each committee in light of its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;
                (c) Reviewing each director's work, his attendance at Board and committee meetings, and his constructive involvement in discussions and decision-making; and
                (d) Reviewing the Board's current composition against its desired composition with a view toward maintaining an appropriate balance of skills and experience and a view toward planned and progressive refreshing of the Board.
                January 2011

              • HC-1.10.4

                While the evaluation is a responsibility of the entire Board, it should be organised and assisted by an internal Board committee and, when appropriate, with the help of external experts.

                January 2011

              • HC-1.10.5

                The Board should report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.

                January 2011

            • HC-1.11 Annual Board Review and Certification

              • HC-1.11.1

                The Board must assess and document each year whether the internal corporate governance processes that it has implemented have successfully achieved their objectives, and consequently whether the Board has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.

                January 2011

              • HC-1.11.2

                The requirements in Section HC-1.11 do not apply to captive insurance firmsG , but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-1.11.3

                The results of the review referred to in Paragraph HC-1.11.1 must be summarised in a written certification, to be signed by all Board members, and sent to the CBB within 3 months of the financial year-end of the licensee. The Board must report any material deficiencies identified during the review, along with an action plan and timescales for their correction.

                January 2011

              • HC-1.11.4

                The Board certification comprises a prescribed standard statement, to be signed by all Board members, attached to which should be a summary of the steps the Board has taken in carrying out the review; a summary of the results of that review, and a summary action plan (with timescales) for addressing any identified material deficiencies. The prescribed standard statement is included in Part B of Volume 3 (Insurance), under 'CBB Reporting Forms': see 'DirectorsG ' High-Level Controls Certification' contained in the Insurance Firm Return (Form IFR) and the Insurance Intermediaries and Managers Return (Form IMR).

                January 2011

              • HC-1.11.5

                The Board's review should cover the following specific matters:

                (a) That the Board has reassessed the licensee's objectives and plans, and has reviewed the licensee's corporate strategy document;
                (b) That the Board has reassessed the licensee's overall risk profile, and its mapping of risks and the control environment put in place to meet those risks (see Paragraph HC-6.3.4). The Board must comment whether the control environment remains effective and appropriate;
                (c) That the Board has assessed the licensee's internal controls, to confirm that these are based on established policies and procedures approved by the Board and provide reasonable assurance of the integrity and reliability of its financial records;
                (d) That the Board has assessed whether adherence to established internal limits and controls was continuously monitored;
                (e) That the Board has assessed that all new (or material changes to) significant policies, procedures and products introduced by the licensee since the last Board certification were appropriately reviewed and approved at the time;
                (f) That the Board has assessed that management and staff have complied with the licensee's corporate code of conduct (see Section HC-2.2); and
                (g) That in the period under review, the Board had received and reviewed the external auditor's management letter within six months of the (previous) financial year end, together with the licensee's audit committee and senior management comments on the letter and any proposed actions.
                January 2011

              • HC-1.11.6

                With respect to HC-1.11.5 (g), a DirectorG 's certificate received (for example) no later than 31 March 2004, covering the year ending 31 December 2003, would need to certify that the management letter for the year ending 31 December 2002 was received and reviewed by the Board by 30 June 2003.

                January 2011

          • HC-2 Approved Persons Loyalty

            • HC-2.1 Principle

              • HC-2.1.1

                The approved personsG must have full loyalty to the insurance licenseeG .

                January 2011

            • HC-2.2 Personal Accountability

              • HC-2.2.1

                The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licensee, its shareholdersG and policyholdersG .

                January 2011

              • HC-2.2.2

                In assessing compliance with Paragraph HC-2.2.1, the CBB will take into account all actions of the Board and its members. The interest of the licensee includes the licensee's continued compliance with all relevant Rules and Regulations, and the interests of employeesG , customersG and other stakeholdersG . The interest of shareholdersG includes the current and future value of the licensee, its status as a going concern, transparency and disclosure of information to the market. The interest of policyholdersG includes ensuring that the licensee fulfils its obligations under its policiesG and treats all policyholdersG fairly and pays equal regard to the interests of all policyholdersG and groups of policyholdersG .

                January 2011

              • HC-2.2.3

                Each member of the board must understand that under the Company Law he is personally accountable to the insurance licenseeG and the shareholders if he violates his legal duty of loyalty to the insurance licenseeG , and that he can be personally sued by the insurance licenseeG or the shareholders for such violations.

                Amended: January 2013
                January 2011

              • HC-2.2.4

                An insurance licensee'sG Board must establish and disseminate to all employeesG and appointed representativesG of the licensee a corporate code of conduct.

                January 2011

              • HC-2.2.5

                The requirements of Paragraph HC-2.2.4 do not apply to captive insurance firmsG , but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-2.2.6

                The code of conduct must establish standards by giving examples or expectations of:

                (a) Honesty;
                (b) Integrity;
                (c) Leadership;
                (d) Reliability; and
                (e) Professionalism.
                January 2011

              • HC-2.2.7

                The Board must establish and disseminate to employeesG and appointed representativesG policies and processes for the identification, reporting and prevention or management of potential conflicts of interest, including matters such as:

                (a) Related party transactionsG ;
                (b) The misuse of the licensee's assets; and
                (c) The use of privileged information for personal advantage ('insider trading').
                January 2011

              • HC-2.2.8

                Any transaction in which Board members or any member of management have potential conflicts of interest should either be proscribed or require formal documented approval by the Board, with measures taken to manage those conflicts (See also Paragraph HC-2.4.1).

                January 2011

              • HC-2.2.9

                The Board must ensure that policies and procedures are in place to ensure that necessary customerG confidentiality is maintained.

                January 2011

              • HC-2.2.10

                The duty of loyalty includes a duty not to use property of the insurance licenseeG for his personal needs as though it was his own property, not to disclose confidential information of the insurance licenseeG or use it for his personal profit, not to take business opportunities of the insurance licenseeG for himself, not to compete in business with the insurance licenseeG , and to serve the insurance licensee'sG interest in any transactions with a company in which he has a personal interest, such as in related party transactionsG .

                January 2011

              • HC-2.2.11

                For purposes of Paragraph HC-2.2.10, an approved personG should be considered to have a "personal interest" in a transaction with a company if:

                (a) He himself; or
                (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
                (c) Another company of which he is a director or controllerG ,

                is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

                January 2011

            • HC-2.3 Avoidance of Conflicts of Interest

              • HC-2.3.1

                Each approved personG must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the insurance licenseeG .

                January 2011

              • HC-2.3.2

                Any Board member should absent himself from any discussion or decision-making that involves a subject where he is incapable of providing objective advice, or which involves a subject, transaction or proposed transaction where there is a potential conflict of interest.

                January 2011

              • HC-2.3.3

                Bahraini insurance licenseesG must have in place a board approved policy on the employment of relatives of approved personsG and a summary of such policy must be disclosed in the annual report of the Bahraini insurance licenseeG .

                Amended: July 2016
                April 2016

              • HC-2.3.4

                Overseas insurance licenseesG must have in place a policy on the employment of relatives of approved personsG pertaining to their Bahrain operations.

                Added: July 2016

            • HC-2.4 Disclosure of Conflicts of Interest

              • HC-2.4.1

                On an annual basis, each approved personG must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving the approved personG . The approved personsG must understand that any approval of a conflicted transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

                Amended: January 2013
                January 2011

              • HC-2.4.1A

                The chief executive/general manager of the Bahraini insurance licenseeG must disclose to the board of directors on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG within the Bahraini insurance licenseeG .

                Amended: July 2016
                April 2016

              • HC-2.4.1B

                The chief executive/general manager of the overseas insurance licenseesG must disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG within the overseas insurance licenseeG .

                Added: July 2016

              • HC-2.4.2

                The Board of the Bahraini insurance licenseeG should establish formal procedures for:

                (a) Periodic disclosure and updating of information by each approved personG on his actual and potential conflicts of interest; and
                (b) Advance approval by directors or shareholders who do not have an interest in the transactions in which an insurance licensee'sG approved personG has a personal interest. The Board should require such advance approval in every case.
                Amended: July 2016
                January 2011

            • HC-2.5 Disclosure of Conflicts of Interest to Shareholders

              • HC-2.5.1

                The insurance licenseeG must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

                January 2011

          • HC-3 Audit Committee and Financial Statements Certification

            • HC-3.1 Principle

              • HC-3.1.1

                The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.

                January 2011

            • HC-3.2 Audit Committee

              • HC-3.2.1

                The Board must establish an audit committee of at least three directors of which the majority should be independent including the Chairman. The committee must:

                (a) Review the company's accounting and financial practices;
                (b) Review the integrity of the insurance licensee'sG financial and internal controls and financial statements;
                (c) Review the insurance licensee'sG compliance with legal requirements;
                (d) Recommend the appointment, compensation and oversight of the insurance licensee'sG external auditor; and
                (e) Recommend the appointment of the internal auditor.
                January 2011

              • HC-3.2.2

                The Audit Committee should ensure that the external auditor firm and its partners are truly independent of the licensee and have no financial or other relationship with the licensee. Audit findings should be used as an independent check on the information received from management about the licensee's operations and performance and the effectiveness of internal controls.

                January 2011

            • HC-3.3 Audit Committee Charter

              • HC-3.3.1

                The audit committee must adopt a written charter which shall, at a minimum, state the duties outlined in Paragraph HC-3.2.1 and the other matters included in Appendix A to this Module.

                January 2011

              • HC-3.3.2

                A majority of the audit committee should have the financial literacy qualifications stated in Appendix A.

                January 2011

              • HC-3.3.3

                The Board should adopt a "whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the program, concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.

                January 2011

            • HC-3.4 CEO and CFO Certification of Financial Statements

              • HC-3.4.1

                To encourage management accountability for the financial statements required by the directors, the insurance licensee'sG CEOG and chief financial officer must state in writing to the audit committee and the Board as a whole that the insurance licensee'sG interim and annual financial statements present a true and fair view, in all material respects, of the insurance licensee'sG financial condition and results of operations in accordance with applicable accounting standards.

                January 2011

          • HC-4 Appointment, Training and Evaluation of the Board

            • HC-4.1 Principle

              • HC-4.1.1

                The insurance licenseeG must have rigorous procedures for appointment, training and evaluation of the Board.

                January 2011

            • HC-4.2 Nominating Committee

              • HC-4.2.1

                The Board must establish a Nominating Committee of at least three directors which must:

                (a) Identify persons qualified to become members of the Board of directors or Chief Executive Officer, Chief Financial Officer, Corporate Secretary and any other approved personsG of the insurance licenseeG considered appropriate by the Board, with the exception of the appointment of the internal auditor which shall be the responsibility of the Audit Committee in accordance with Paragraph HC-3.2.1 above; and
                (b) Make recommendations to the whole Board of directors including recommendations of candidates for Board membership to be included by the Board of directors on the agenda for the next annual shareholder meeting.
                January 2011

              • HC-4.2.2

                The committee must include only independent directorsG or, alternatively, only non-executive directorsG of whom a majority is independent directorsG and the chairman is an independent directorG . This is consistent with international best practice and it recognises that the Nominating Committee must exercise judgment free from personal career conflicts of interest.

                January 2011

            • HC-4.3 Nominating Committee Charter

              • HC-4.3.1

                The Nominating Committee must adopt a formal written charter which must, at a minimum, state the duties outlined in Paragraph HC-4.2.1 and the other matters included in Appendix B to this Module.

                January 2011

            • HC-4.4 Board Nominations to Shareholders

              • HC-4.4.1

                Each proposal by the Board to the shareholders for election or reelection of a director must be accompanied by a recommendation from the Board, a summary of the advice of the Nominating Committee, and the following specific information:

                (a) The term to be served, which may not exceed three years (but there need not be a limit on reelection for further terms);
                (b) Biographical details and professional qualifications;
                (c) In the case of an independent directorG , a statement that the Board has determined that the criteria of independent directorG have been met;
                (d) Any other directorships held;
                (e) Particulars of other positions which involve significant time commitments, and
                (f) Details of relationships between:
                (i) The candidate and the insurance licenseeG , and
                (ii) The candidate and other directors of the insurance licenseeG .

              • HC-4.4.2

                The chairman of the Board should confirm to shareholders when proposing re-election of a director that, following a formal performance evaluation, the person's performance continues to be effective and continues to demonstrate commitment to the role. Any term beyond six years (e.g. two three-year terms) for a director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the Board. Serving more than six years is relevant to the determination of a non-executive director's independence.

                January 2011

            • HC-4.5 Induction and Training of Directors

              • HC-4.5.1

                The chairman of the Board must ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction must include meetings with senior managementG , visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.

                January 2011

              • HC-4.5.2

                All continuing directors must be invited to attend orientation meetings and all directors must continually educate themselves as to the insurance licensee'sG business and corporate governance.

                January 2011

              • HC-4.5.3

                Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the insurance licensee'sG business and industry, which may include periodic attendance at conferences and management meetings. The Nominating Committee shall oversee directors' corporate governance educational activities.

                January 2011

          • HC-5 Remuneration of Approved Persons

            • HC-5.1 Principle

              • HC-5.1.1

                The insurance licenseeG must remunerate approved personsG fairly and responsibly.

                January 2011

            • HC-5.2 Remuneration Committee

              • HC-5.2.1

                The Board must establish a remuneration committee of at least three directors which must:

                (a) Review the insurance licensee'sG remunerationG policies for the approved personsG , which must be approved by the shareholders;
                (b) Make recommendations regarding remunerationG policies and amounts for approved personsG to the whole Board, taking account of total remunerationG including salaries, fees, expenses and employee benefits; and
                (c) Recommend Board member remuneration based on their attendance and performance.
                January 2011

              • HC-5.2.2

                The committee may be merged with the nominating committee.

                January 2011

            • HC-5.3 Remuneration Committee Charter

              • HC-5.3.1

                The committee must adopt a written charter which must, at a minimum, state the duties in Paragraph HC-5.2.1 and other matters in Appendix C of this Module.

                January 2011

              • HC-5.3.2

                The committee should include only independent directorsG or, alternatively, only non-executive directorsG of whom a majority are independent directorsG and the chairman is an independent directorG . This is consistent with international best practice and it recognises that the remuneration committee must exercise judgment free from personal career conflicts of interest.

                January 2011

            • HC-5.4 Standard for all Remuneration

              • HC-5.4.1

                RemunerationG (including incentives, bonuses and other rewards) of approved personsG must be sufficient enough to attract, retain and motivate persons of the quality needed to run the insurance licenseeG successfully, but the insurance licenseeG must avoid paying more than is necessary for that purpose.

                January 2011

              • HC-5.4.2

                Where remuneration is structured so as to link rewards to corporate and individual performance, criteria should avoid excessive focus on short-term profitability measures.

                January 2011

            • HC-5.5 Directors' Remuneration

              • HC-5.5.1

                The review of DirectorsG ' remuneration must be a standing item on the insurance licensee'sG Annual General Meeting agenda, and must be considered by shareholdersG at every Annual General Meeting. Policies in respect of DirectorsG ' remuneration (including pension and severance arrangements) and bonuses must be clearly disclosed in the annual financial statements.

                January 2011

              • HC-5.5.2

                DirectorsG ' remuneration must comply with all applicable laws and Regulations, including the provisions contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law, capping DirectorsG ' remuneration as a percentage of net profits.

                January 2011

              • HC-5.5.3

                RemunerationG of non-executive directorsG must not include performance-related elements such as grants of shares, share options or other deferred stock-related incentive schemes, bonuses, or pension benefits.

                January 2011

            • HC-5.6 Senior Management Remuneration

              • HC-5.6.1

                RemunerationG of senior managementG must be structured so that a portion of the total is linked to the insurance licensee'sG and individual's performance and aligns their interests with the interests of the shareholders.

                January 2011

              • HC-5.6.2

                Such rewards may include grants of shares, share options and other deferred stock-related incentive schemes, bonuses, and pension benefits which are not based on salary.

                January 2011

              • HC-5.6.3

                If a senior managerG is also a director, his remunerationG as a senior managerG must take into account compensation received in his capacity as a director.

                January 2011

              • HC-5.6.4

                All share incentive plans must be approved by the shareholders.

                January 2011

              • HC-5.6.5

                All performance-based incentives should be awarded under written objective performance standards which have been approved by the Board and are designed to enhance shareholder and the insurance licensee'sG value, and under which shares should not vest and options should not be exercisable within less than two years of the date of award of the incentive.

                January 2011

              • HC-5.6.6

                All policies for performance-based incentives should be approved by the shareholders, but the approval should be only of the plan itself and not of the grant to specific individuals of benefits under the plan.

                Amended: January 2012
                January 2011

          • HC-6 Management Structure

            • HC-6.1 Principle

              • HC-6.1.1

                The Board must establish a clear and efficient management structure.

                January 2011

            • HC-6.2 Establishment of Management Structure

              • HC-6.2.1

                The Board must approve and review at least annually the insurance licensee'sG management structure and responsibilities.

                January 2011

              • HC-6.2.2

                The Board must appoint senior managementG whose authority must include management and operation of current activities of the insurance licenseeG , reporting to and under the direction of the Board. The senior managementG must include at a minimum:

                (a) A CEOG ;
                (b) A chief financial officer;
                (c) A corporate secretary;
                (d) An internal auditor (see HC-6.5 and AU-1.2); and
                (e) A compliance officer (see HC-6.6 and AU-1.2)

                and must also include such other approved personsG as the Board considers appropriate and as a minimum must include persons occupying controlled functionsG as outlined in Paragraph AU-1.2.2.

                January 2011

            • HC-6.3 Titles, Authorities, Duties and Reporting Responsibilities

              • HC-6.3.1

                The Board must adopt by-laws prescribing each senior manager'sG title, authorities, duties and internal reporting responsibilities. This must be done with the advice of the Nominating Committee and in consultation with the CEOG , to whom the other senior managersG should normally report.

                January 2011

              • HC-6.3.2

                These provisions must include but should not be limited to the following:

                (a) The CEOG must have authority to act generally in the insurance licensee'sG name, representing the insurance licensee'sG interests in concluding transactions on the insurance licensee'sG behalf and giving instructions to other senior managersG and insurance licenseeG employees;
                (b) The chief financial officer must be responsible and accountable for:
                (i) The complete, timely, reliable and accurate preparation of the insurance licensee'sG financial statements, in accordance with the accounting standards and policies of the insurance licenseeG (see also HC-3.4.1); and
                (ii) Presenting the Board with a balanced and understandable assessment of the insurance licensee'sG financial situation;
                (c) The corporate secretary's duties must include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and
                (d) The internal auditor's (see HC-6.5) duties must include providing an independent and objective review of the efficiency of the insurance licensee'sG operations. This would include a review of the accuracy and reliability of the insurance licensee'sG accounting records and financial reports as well as a review of the adequacy and effectiveness of the insurance licensee'sG risk management, control, and governance processes.
                January 2011

              • HC-6.3.3

                The Board should also specify any limits which it wishes to set on the authority of the CEO or other senior managersG , such as monetary maximums which they authorise without separate Board approval.

                January 2011

              • HC-6.3.4

                In conjunction with the Board, the Chief Executive OfficerG /General ManagerG must maintain a clear mapping of the risks faced by the business and document the organisational and other controls maintained to meet those risks.

                January 2011

              • HC-6.3.5

                In conjunction with the Board, the Chief Executive OfficerG /General ManagerG must maintain a clear and appropriate apportionment of significant responsibilities amongst senior management.

                January 2011

              • HC-6.3.6

                The apportionment must be clear as to who has which responsibility, and must permit the business and affairs of the licensee to be adequately monitored and controlled by the Board, the Chief Executive OfficerG /General ManagerG , and relevant heads of functionG .

                January 2011

              • HC-6.3.7

                The apportionment must also ensure appropriate segregation of duties where these are required for effective controls.

                January 2011

              • HC-6.3.8

                The corporate secretary should be given general responsibility for reviewing the insurance licensee'sG procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training.

                January 2011

              • HC-6.3.9

                At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEOG , both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEOG .

                January 2011

            • HC-6.4 Executive Management Committee

              • HC-6.4.1

                Bahraini insurance firmsG must consider the need to establish an Executive Management Committee to support the Chief Executive OfficerG /General ManagerG .

                January 2011

              • HC-6.4.2

                Insurance intermediariesG and insurance managersG , unlike other insurance licenseesG , are not required to consider the need to operate an Executive Management Committee.

                January 2011

              • HC-6.4.3

                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 firmG 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.

                January 2011

              • HC-6.4.4

                The Committee should comprise the Chief Executive OfficerG /General ManagerG and appropriate heads of functionsG , such as the head of risk management, the Chief Finance Officer, the Chief Operations Officer, the head of underwriting and other key business divisions.

                January 2011

              • HC-6.4.5

                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).

                January 2011

              • HC-6.4.6

                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 OfficerG and other members of senior management.

                January 2011

            • HC-6.5 Internal Audit

              • HC-6.5.1

                Bahraini insurance licenseesG must establish an internal audit function to monitor the adequacy of their systems and controls.

                Amended: October 2014
                January 2011

              • HC-6.5.2

                The internal audit function should be independent of the senior managementG , reporting to the Audit committee.

                January 2011

              • HC-6.5.3

                The CBB considers it best practice for captive insurersG to fall within the remit of the internal audit functions of their groups and be subject to periodic review, although no formal arrangements for internal audit cover captive insurersG .

                January 2011

              • HC-6.5.4

                Part or all of the internal audit function may be outsourcedG , or provided at group level, subject to the requirements of Section RM-7.6. Amongst other things, these require licensees to retain responsibility for their internal audit programme, and that appropriate safeguards are built into the outsourcing contract. Furthermore, a licensee cannot outsourceG its internal audit function to its external auditorG (with limited exceptions). Prior approval from the CBB is required for significant outsourcingG arrangements, including all outsourcingG of internal audit. A licensee's head of internal audit is a controlled functionG and requires CBB approval prior to being appointed (see Section AU-1.2).

                January 2011

              • HC-6.5.5

                Internal audit functions must have terms of reference that clearly indicate:

                (a) The scope and frequency of audits;
                (b) Reporting lines; and
                (c) The review and approval process applied to audits.
                January 2011

              • HC-6.5.6

                Paragraph HC-6.5.5 applies irrespective of whether the internal audit function is outsourced. Where it is outsourcedG , the CBB would expect to see these matters addressed in the contract with the outsourcing providerG .

                January 2011

              • HC-6.5.7

                Internal audit functions must report directly to the Audit committee or, where none exists, to the Board. They must have unrestricted access to all the appropriate records of the insurance licenseeG . They must have open and regular access to the Audit Committee, the Board, the Chief ExecutiveG , and the licensee's external auditorG .

                January 2011

              • HC-6.5.8

                Internal audit functions must have adequate staff levels with appropriate skills and knowledge, such that they can act as an effective challenge to the business. Where the function is not outsourced, the head of the functionG should be a senior and experienced employeeG . Internal audit functions must not perform other activities that compromise their independence.

                January 2011

              • HC-6.5.9

                The CBB would expect to see in place a formal audit plan that:

                (a) Is reviewed and approved at least annually by the Audit Committee or, where none exists, the Board;
                (b) Is risk-based, with an appropriate scoring system; and
                (c) Covers all material areas of a licensee's operations over a reasonable timescale, including (where relevant) the process by which a licensee obtains professional actuarial expertise to develop and verify its pricing and reserving policies.
                January 2011

              • HC-6.5.10

                Internal Audit reports should also be:

                (a) Clear and prioritised, with action points directed towards identified individuals;
                (b) Timely; and
                (c) Distributed to the Audit Committee or Board and appropriate senior managementG .
                January 2011

              • HC-6.5.11

                Insurance licenseesG should also have processes in place to deal with recommendations raised by internal audit to ensure that they are:

                (a) Dealt with in a timely fashion;
                (b) Monitored until they are settled; and
                (c) Raised with senior management if they have not been adequately dealt with.
                January 2011

              • HC-6.5.12

                The internal auditor is considered as a head of functionG (see Paragraph AU-1.2.11) and is subject to CBB prior approval for the approved personG occupying this controlled functionG as outlined in Section AU-1.2.

                January 2011

            • HC-6.6 Compliance

              • HC-6.6.1

                Insurance licenseesG must take reasonable care to establish and maintain effective systems and controls for compliance with applicable requirements in the Kingdom's legislation and those set by the CBB, and those established under any other statute or regulator to which the insurance licenseeG is subject.

                January 2011

              • HC-6.6.2

                Depending on the nature, scale and complexity of its business, an insurance licenseeG should consider having a separate compliance function. A compliance function should:

                (a) Document its organisation and responsibilities;
                (b) Be appropriately staffed with competent individuals;
                (c) Have unrestricted access to the licensee's relevant records; and
                (d) Have ultimate recourse to the Board.
                January 2011

              • HC-6.6.3

                The compliance function may not be combined with the internal audit function or any other operational function as such combination may lead to a conflict of interest.

                Added: April 2011

          • HC-7 Communication between Board and Shareholders

            • HC-7.1 Principle

              • HC-7.1.1

                The insurance licenseeG must communicate with shareholders, encourage their participation, and respect their rights.

                January 2011

            • HC-7.2 Conduct of Shareholders' Meetings

              • HC-7.2.1

                The Board must observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:

                (a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;
                (b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;
                (c) Notices of meetings must encourage shareholders to attend shareholder meetings and, if not possible, to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");
                (d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;
                (e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;
                (f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;
                (g) The chairman of the meeting must encourage questions from shareholders, including questions regarding the insurance licensee'sG corporate governance guidelines;
                (h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and
                (i) Disclosure of all material facts must be made to the shareholders by the Chairman prior to any vote by the shareholders.
                January 2011

              • HC-7.2.2

                The insurance licenseeG should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).

                January 2011

              • HC-7.2.3

                The insurance licenseeG should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.

                January 2011

              • HC-7.2.4

                An insurance licenseeG should maintain a company website (see HC-8.2.1 for website disclosures). The insurance licenseeG should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The insurance licenseeG may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, the insurance licenseeG should grant a controlled access to such information to its shareholders.

                January 2011

              • HC-7.2.5

                In notices of meetings at which directors are to be elected or removed the insurance licenseeG should ensure that:

                (a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
                (b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.
                Amended: October 2012
                January 2011

            • HC-7.3 Direct Shareholder Communication

              • HC-7.3.1

                The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with controllersG to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy with controllersG . Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating the insurance licensee'sG corporate governance (see also HC-1.4 for other duties of the chairman).

                January 2011

            • HC-7.4 Controllers

              • HC-7.4.1

                In insurance licenseesG with one or more controllersG , the chairman and other directors must actively encourage the controllersG to make a considered use of their position and to fully respect the rights of minority shareholders (see also HC-1.3 for other duties of the chairman).

                January 2011

          • HC-8 Corporate Governance Disclosure

            • HC-8.1 Principle

              • HC-8.1.1

                The insurance licenseeG must disclose its corporate governance.

                January 2011

            • HC-8.2 Disclosure under the Company Law and CBB Requirements

              • HC-8.2.1

                The requirements in this Section do not apply to captive insurance firmsG , but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-8.2.2

                The Board must oversee the process of disclosure, including corporate governance, to all stakeholdersG . The Board must ensure that the licensee's communications are fair, transparent, comprehensive and timely.

                January 2011

              • HC-8.2.3

                In each insurance licenseeG :

                (a) The Board must adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;
                (b) The insurance licenseeG must publish the guidelines on its website, if it has a website (see HC-7.2.4);
                (c) At each annual shareholders' meeting the Board must report on the insurance licensee'sG compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and
                (d) At each annual shareholders' meeting the Board must also report on further items listed in Appendix D. Such information should be maintained on the insurance licensee'sG website or held at the insurance licensee'sG premises on behalf of the shareholders.
                January 2011

              • HC-8.2.4

                The CBB may issue a template as a guide for an insurance licensee'sG annual meeting corporate governance discussion.

                January 2011

              • HC-8.2.5

                The Board must outline in its annual report its criteria and materiality thresholds for the definition of 'independence'. The DirectorsG must be identified in the annual report as executive, non-executiveG , or independent non-executiveG .

                January 2011

              • HC-8.2.6

                Licensees should refer to Module PD (Public Disclosure) regarding all specific disclosures required.

                January 2011

          • HC-9 Takaful and Retakaful Companies

            • HC-9.1 Principle

              • HC-9.1.1

                Companies which refer to themselves as "Takaful or Retakaful" must follow the principles of Islamic Shari'a.

                January 2011

            • HC-9.2 Shari'a Supervisory Board

              • HC-9.2.1

                Takaful and Retakaful companies which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. In ensuring compliance with Shari'a principles, each Takaful or Retakaful insurance licenseeG must establish a Shari'a Supervisory Board ('SSB') consisting of at least three Shari'a scholars and must comply with AAOIFI Governance Standard for Islamic Financial Institutions No.1 ('Shari's Supervisory Board: Appointment, Composition and Report').

                January 2011

              • HC-9.2.2

                The function of the Shari'a Supervisory BoardG 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, the Shari'a Supervisory BoardG 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.

                January 2011

              • HC-9.2.3

                In the case of overseas insurance firmsG operating according to takaful principles, the requirement to appoint a Shari'a Supervisory Board in Paragraph HC-9.2.1 may be waived by CBB, if the firm has appointed an equivalent Shari'a Supervisory BoardG at the parent entity level, of sufficient expertise and credibility.

                January 2011

              • HC-9.2.4

                An insurance firmG licensed to conduct insurance business according to takaful principles must comply with all other AAOIFI governance standards for Islamic Financial Institutions.

                January 2011

              • HC-9.2.5

                For takaful firmsG , 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.

                January 2011

              • HC-9.2.6

                The office of Shari'a Board Member is a controlled functionG : see Module AU (Authorisation).

                January 2011

              • HC-9.2.7

                The Shari'a Board requirements contained in Section HC-9.2 are additional to the other high-level control requirements contained in this Module.

                January 2011

            • HC-9.3 Governance and Disclosure per Shari'a Principles

              • HC-9.3.1

                Insurance firmsG which refer to themselves as "Takaful" or "Retakaful" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles.

                January 2011

              • HC-9.3.2

                In addition to its duties outlined in Chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the insurance licensee'sG Corporate Governance Committee and the Shari'a Supervisory Board (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.

                January 2011

              • HC-9.3.3

                The Board shall set up a Corporate Governance Committee (see also Chapter HC-8). In this case, the Committee shall comprise at least three members to co-ordinate and integrate the implementation of the governance policy framework.

                January 2011

              • HC-9.3.4

                The Corporate Governance Committee established under Chapter HC-9 shall comprise at a minimum of:

                (a) An independent directorG to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;
                (b) A Shari'a scholar who is a SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues (if any), and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and
                (c) An independent directorG who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the Board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.
                January 2011

              • HC-9.3.5

                The Corporate Governance Committee shall be empowered to:

                (a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and
                (b) Provide the Board of directors with reports and recommendations based on its findings in the exercise of its functions.
                January 2011

          • HC-10 Insurance Consultants, Insurance Managers and Captive Insurance Firms

            • HC-10.1 The Board

              • HC-10.1.1

                All insurance consultantsG , insurance managersG and captive insurance firmsG should be headed by an effective, collegial and informed Board of Directors ('the Board').

                January 2011

              • Role and Responsibilities

                • HC-10.1.2

                  All directors should understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

                  (a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
                  (b) The Board's fiduciary duties of care and loyalty to the insurance consultantsG , insurance managersG and captive insurance firmsG and the shareholders (see HC-10.2).
                  January 2011

                • HC-10.1.3

                  The Board's role and responsibilities include but are not limited to:

                  (a) The overall business performance and strategy for the insurance consultantsG , insurance managersG or captive insurance firmsG ;
                  (b) Causing financial statements to be prepared which accurately disclose the insurance consultantsG , insurance managersG or captive insurance firms'G financial position;
                  (c) Monitoring management performance;
                  (d) Convening and preparing the agenda for shareholder meetings;
                  (e) Monitoring conflicts of interest and preventing abusive related party transactions; and
                  (f) Assuring equitable treatment of shareholders including minority shareholders.
                  January 2011

                • HC-10.1.4

                  The directors are responsible both individually and collectively for performing these responsibilities. Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.

                  January 2011

                • HC-10.1.5

                  When a new director is inducted, the chairman of the Board, assisted by company legal counsel or compliance officer, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC.

                  January 2011

                • HC-10.1.6

                  The insurance consultantsG , insurance managersG and captive insurance firmsG should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remunerationG and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                  January 2011

                • HC-10.1.7

                  The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

                  January 2011

              • Composition

                • HC-10.1.8

                  The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the insurance consultantsG , insurance managersG or captive insurance firms'G Memorandum of Association.

                  Amended: October 2014
                  January 2011

                • HC-10.1.9

                  Potential non-executive directorsG should be made aware of their duties before their nomination, particularly as to the time commitment required. The Board should regularly review the time commitment required from each non-executive directorG and should require each non-executive directorG to inform the Board before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.

                  January 2011

              • Decision Making Process

                • HC-10.1.10

                  The Board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

                  January 2011

                • HC-10.1.11

                  The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

                  January 2011

                • HC-10.1.12

                  The Board should meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

                  January 2011

                • HC-10.1.13

                  The chairman should ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors should receive the same Board information. At the same time, directors have a legal duty to inform themselves and they should ensure that they receive adequate and timely information and should study it carefully.

                  January 2011

              • Directors' Communication with Management

                • HC-10.1.14

                  The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

                  January 2011

                • HC-10.1.15

                  Non-executive directorsG should have free access to the insurance consultantsG , insurance managersG and captive insurance firms'G management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

                  January 2011

            • HC-10.2 Approved Persons Loyalty

              • HC-10.2.1

                The approved personsG shall have full loyalty to the insurance consultantsG , insurance managersG or captive insurance firmsG .

                January 2011

              • Personal Accountability

                • HC-10.2.2

                  Each approved personG should understand that under the Company Law he is personally accountable to the insurance consultantsG , insurance managersG or captive insurance firmsG and the shareholders if he violates his legal duty of loyalty to the insurance consultantsG , insurance managersG or captive insurance firmsG , and that he can be personally sued by the insurance consultantsG , insurance managersG or captive insurance firmsG or the shareholders for such violations.

                  January 2011

                • HC-10.2.3

                  The duty of loyalty includes a duty not to use property of the insurance consultantsG , insurance managersG or captive insurance firmsG for his personal needs as though it was his own property, not to disclose confidential information of the insurance consultantsG , insurance managersG or captive insurance firmsG or use it for his personal profit, not to take business opportunities of the insurance consultantsG , insurance managersG or captive insurance firmsG for himself, not to compete in business with the insurance consultantsG , insurance managersG or captive insurance firmsG , and to serve the insurance consultantsG , insurance managersG or captive insurance firms'G interest in any transactions with the company in which he has a personal interest.

                  January 2011

                • HC-10.2.4

                  For purposes of Paragraph HC-10.2.3, an approved personG should be considered to have a "personal interest" in a transaction with the company if:

                  (a) He himself;
                  (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
                  (c) Another company of which he is a director or controller,

                  is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

                  January 2011

              • Avoidance of Conflicts of Interest

                • HC-10.2.5

                  Each approved personG should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the insurance consultantsG , insurance managersG or captive insurance firmsG .

                  January 2011

                • HC-10.2.5A

                  Bahraini insurance consultantsG , Bahraini insurance managersG or Bahraini captive insurance firmsG should have in place a board approved policy on the employment of relatives of approved personsG and a summary of such policy must be disclosed in the annual report of the insurance consultantG , insurance managerG or captive insurance firmG .

                  Amended: July 2016
                  April 2016

                • HC-10.2.5B

                  Overseas insurance managers or overseas captive insurance firmsG should have in place a policy on the employment of relatives of approved personsG pertaining to their Bahrain operations.

                  Added: July 2016

              • Disclosure of Conflicts of Interest

                • HC-10.2.6

                  Each approved personG should inform the entire Board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure should include all material facts in the case of a contract or transaction involving the approved personG . The approved personsG should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

                  January 2011

                • HC-10.2.6A

                  The chief executive/general manager of the Bahraini insurance consultantsG , Bahraini insurance managersG or Bahraini captive insurance firmsG should disclose to the board of directors on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG occupying controlled functionsG within the insurance consultantG , insurance managerG or captive insurance firmG .

                  Amended: July 2016
                  April 2016

                • HC-10.2.6B

                  The chief executive/general manager of the overseas insurance managers or overseas captive insurance firmsG should disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG within the overseas insurance licenseeG .

                  Added: July 2016

                • HC-10.2.7

                  The Board of the Bahraini insurance consultantsG , Bahraini insurance managersG or Bahraini captive insurance firmsG should establish formal procedures for:

                  (a) Periodic disclosure and updating of information by each approved personG on his actual and potential conflicts of interest; and
                  (b) Advance approval by directors or shareholders who do not have an interest in the transactions in which an insurance consultantsG , insurance managersG and captive insurance firms'G approved personG has a personal interest. The Board should require such advance approval in every case.
                  Amended: July 2016
                  January 2011

              • Disclosure of Conflicts of Interests to Shareholders

                • HC-10.2.8

                  The insurance consultantsG , insurance managersG and captive insurance firmsG should disclose to their shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and should disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

                  January 2011

            • HC-10.3 Financial Statements Certification

              • HC-10.3.1

                The Board shall have rigorous controls for financial audit and reporting, internal control, and compliance with law.

                January 2011

              • CEO and CFO Certification of Financial Statements

                • HC-10.3.2

                  To encourage management accountability for the financial statements required by the directors, the insurance consultantsG , insurance managersG and captive insurance firms'G CEO and chief financial officer should state in writing to the audit committee and the Board as a whole that the insurance consultantsG , insurance managersG and captive insurance firms'G interim and annual financial statements present a true and fair view, in all material respects, of the insurance consultantsG , insurance managersG and captive insurance firms'G financial condition and results of operations in accordance with applicable accounting standards.

                  January 2011

            • HC-10.4 Appointment, Training and Evaluation of the Board

              • HC-10.4.1

                The insurance consultantsG , insurance managersG and captive insurance firmsG should have rigorous procedures for appointment, training and evaluation of the Board.

                January 2011

              • Induction and Training of Directors

                • HC-10.4.2

                  The chairman of the Board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction should include meetings with senior managementG , visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.

                  January 2011

                • HC-10.4.3

                  All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the insurance consultantsG , insurance managersG and captive insurance firms'G business and corporate governance.

                  January 2011

                • HC-10.4.4

                  Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the insurance consultantsG , insurance managersG and captive insurance firms'G business and industry, which may include periodic attendance at conferences and management meetings. The Board shall oversee directors' corporate governance educational activities.

                  January 2011

            • HC-10.5 Remuneration of Approved Persons

              • HC-10.5.1

                The insurance consultantsG , insurance managersG and captive insurance firmsG should remunerate approved personsG fairly and responsibly.

                January 2011

              • HC-10.5.2

                RemunerationG of approved personsG should be sufficient enough to attract, retain and motivate persons of the quality needed to run the insurance consultantsG , insurance managersG and captive insurance firmsG successfully, but the insurance consultantsG , insurance managersG and captive insurance firmsG should avoid paying more than is necessary for that purpose.

                January 2011

            • HC-10.6 Management Structure

              • HC-10.6.1

                The Board should establish a clear and efficient management structure.

                January 2011

              • Establishment of Management Structure

                • HC-10.6.2

                  The Board should appoint senior managementG whose authority must include management and operation of current activities of the insurance consultantsG , insurance managersG and captive insurance firmsG , reporting to and under the direction of the Board. The senior managersG should include at a minimum:

                  (a) A CEO;
                  (b) A chief financial officer;
                  (c) A corporate secretary; and
                  (d) An internal auditor (see AU-1.2)

                  and should also include such other approved personsG as the Board considers appropriate and as a minimum must include persons occupying controlled functionsG as outlined in Paragraph AU-1.2.2.

                  January 2011

              • Titles, Authorities, Duties and Reporting Responsibilities

                • HC-10.6.3

                  The Board should adopt by-laws prescribing each senior manager'sG title, authorities, duties and internal reporting responsibilities. This should be done with the advice of the Nominating Committee, where applicable, and in consultation with the CEOG , to whom the other senior managersG should normally report.

                  January 2011

                • HC-10.6.4

                  These provisions should include but should not be limited to the following:

                  (a) The CEOG should have authority to act generally in the insurance consultantsG , insurance managersG or captive insurance firms'G name, representing the insurance consultantsG , insurance managersG or captive insurance firms'G interests in concluding transactions on the insurance consultantsG , insurance managersG or captive insurance firms'G behalf and giving instructions to other senior managersG and insurance consultantsG , insurance managersG or captive insurance firmsG employees;
                  (b) The chief financial officer should be responsible and accountable for:
                  (i) The complete, timely, reliable and accurate preparation of the insurance consultantsG , insurance managersG or captive insurance firms'G financial statements, in accordance with the accounting standards and policies of the insurance consultantsG , insurance managersG or captive insurance firmsG (see HC-10.3.2); and
                  (ii) Presenting the Board with a balanced and understandable assessment of the insurance consultantsG , insurance managersG or captive insurance firms'G financial situation;
                  (c) The corporate secretary's duties should include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and
                  (d) The internal auditor's duties should include providing an independent and objective review of the efficiency of the insurance consultantsG , insurance managersG or captive insurance firms'G operations. This would include a review of the accuracy and reliability of the insurance consultantsG , insurance managersG or captive insurance firms'G accounting records and financial reports as well as a review of the adequacy and effectiveness of the insurance consultantsG , insurance managersG or captive insurance firms'G risk management, control, and governance processes.
                  January 2011

                • HC-10.6.5

                  The Board should also specify any limits which it wishes to set on the authority of the CEOG or other senior managersG , such as monetary maximums for transactions which they may authorise without separate Board approval.

                  January 2011

                • HC-10.6.6

                  The corporate secretary should be given general responsibility for reviewing the insurance consultantsG , insurance managersG or captive insurance firms'G procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training

                  January 2011

                • HC-10.6.7

                  At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEOG , both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEOG .

                  January 2011

            • HC-10.7 Communication between Board and Shareholders

              • HC-10.7.1

                The insurance consultantsG , insurance managersG and captive insurance firmsG should communicate with shareholders, encourage their participation, and respect their rights.

                January 2011

              • Conduct of Shareholders' Meetings

                • HC-10.7.2

                  The Board should observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:

                  (a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;
                  (b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;
                  (c) Notices of meetings must encourage shareholders to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");
                  (d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;
                  (e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;
                  (f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;
                  (g) The chairman of the meeting must encourage questions from shareholders, including questions regarding the insurance consultantsG , insurance managersG or captive insurance firms'G corporate governance guidelines;
                  (h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and
                  (i) Disclosure of all material facts must be made to the shareholders.
                  January 2011

                • HC-10.7.3

                  The insurance consultantsG , insurance managersG and captive insurance firmsG should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).

                  January 2011

                • HC-10.7.4

                  The insurance consultantsG , insurance managersG and captive insurance firmsG should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.

                  January 2011

                • HC-10.7.5

                  An insurance consultantsG , insurance managersG and captive insurance firmsG should maintain a company website. The insurance consultantsG , insurance managersG and captive insurance firmsG should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The insurance consultantsG , insurance managersG and captive insurance firmsG may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, the insurance consultantsG , insurance managersG and captive insurance firmsG should grant a controlled access to such information to its shareholders.

                  January 2011

                • HC-10.7.6

                  In notices of meetings at which directors are to be elected or removed the insurance consultantsG , insurance managersG and captive insurance firmsG should ensure that:

                  (a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
                  (b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.
                  Amended: October 2012
                  January 2011

              • Direct Shareholder Communication

                • HC-10.7.7

                  The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with controllersG to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy with controllersG . Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating the insurance consultantsG , insurance managersG or captive insurance firms'G corporate governance.

                  January 2011

              • Controllers

                • HC-10.7.8

                  In companies with one or more controllersG , the chairman and other directors should actively encourage the controllersG to make a considered use of their position and to fully respect the rights of minority shareholders.

                  January 2011

            • HC-10.8 Corporate Governance Disclosure

              • HC-10.8.1

                The insurance consultantsG , insurance managersG and captive insurance firmsG should disclose its corporate governance.

                January 2011

              • Disclosure under the Company Law

                • HC-10.8.2

                  In each insurance consultantsG , insurance managersG or captive insurance firmsG :

                  (a) The Board should adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;
                  (b) The insurance consultantsG , insurance managersG or captive insurance firmsG should publish the guidelines on its website, if it has a website (see HC-10.7.5);
                  (c) At each annual shareholders' meeting the Board should report on the insurance consultantsG , insurance managersG or captive insurance firms'G compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and
                  (d) At each annual shareholders' meeting the Board should also report on further items listed in Appendix D. Such information should be maintained on the insurance consultantsG , insurance managersG or captive insurance firms'G website or held at the insurance consultantsG , insurance managersG or captive insurance firms'G premises on behalf of the shareholders.
                  January 2011

                • HC-10.8.3

                  The CBB may issue a template as a guide for insurance consultantsG , insurance managersG and captive insurance firms'G annual meeting corporate governance discussion.

                  January 2011

            • HC-10.9 Captive Takaful Firms

              • HC-10.9.1

                Companies which refer to themselves as "Islamic" should follow the principles of Islamic Shari'a.

                January 2011

              • Governance and Disclosure per Shari'a Principles

                • HC-10.9.2

                  Captive Takaful firms which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. Captive Takaful firms which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a principles, each captive Takaful firm should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.

                  January 2011

          • Appendix A Audit Committee

            • Committee Duties

              The Committee's duties shall include those stated in Paragraph HC-3.2.1.

              January 2011

            • Committee Membership and Qualifications

              The Committee shall have at least three members. Such members must have no conflict of interest with any other duties they have for the insurance licenseeG .

              A majority of the members of the committee including the Chairman shall be independent directorsG .

              The Board must satisfy itself that at least a majority of the committee has recent and relevant financial ability and experience, which includes:

              (a) An ability to read and understand corporate financial statements including an insurance licensee'sG balance sheet, income statement and cash flow statement and changes in shareholders' equity;
              (b) An understanding of the accounting principles which are applicable to the insurance licensee'sG financial statements;
              (c) Experience in evaluating financial statements that have a level of accounting complexity comparable to that which can be expected in the insurance licensee'sG business;
              (d) An understanding of internal controls and procedures for financial reporting; and
              (e) An understanding of the audit committee's controls and procedures for financial reporting.
              Amended: April 2011
              January 2011

            • Committee Duties and Responsibilities

              In serving those duties, the Committee shall:

              (a) Be responsible for the selection, appointment, remuneration, oversight and termination where appropriate of the external auditor, subject to ratification by the insurance licensee'sG Board and shareholders. The external auditor shall report directly to the committee;
              (b) Make a determination at least once each year of the external auditor's independence, including:
              (i) Determining whether its performance of any non-audit services compromised its independence (the committee may establish a formal policy specifying the types of non-audit services which are permissible) and;
              (ii) Obtaining from the external auditor a written report listing any relationships between the external auditor and the insurance licenseeG or with any other person or entity that may compromise the auditor's independence;
              (c) Review and discuss with the external auditor the scope and results of its audit, any difficulties the auditor encountered including any restrictions on its access to requested information and any disagreements or difficulties encountered with management;
              (d) Review and discuss with management and the external auditor each annual and each quarterly financial statements of the insurance licenseeG including judgments made in connection with the financial statements;
              (e) Review and discuss and make recommendations regarding the selection, appointment and termination where appropriate of the head of internal audit and head of compliance and the budget allocated to the internal audit and compliance function, and monitor the responsiveness of management to the committee's recommendations and findings;
              (f) Review and discuss the adequacy of the insurance licensee'sG internal auditing and compliance personnel and procedures and its internal controls and compliance procedures, and any risk management systems, and any changes in those;
              (g) Oversee the insurance licensee'sG compliance with legal and regulatory requirements; and
              (h) Review and discuss possible improprieties in financial reporting or other matters, and ensure that arrangements are in place for independent investigation and follow-up regarding such matters.
              Amended: October 2012
              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least four times a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              The committee may meet without any other director or any officer of the insurance licenseeG present. Only the committee may decide if a non-member of the committee should attend a particular meeting or a particular agenda item. Non-members who are not directors of the insurance licenseeG may attend to provide their expertise, but may not vote. It is expected that the external auditor's lead representative will be invited to attend regularly but that this shall always be subject to the committee's decision.

              The committee shall report regularly to the full Board on its activities.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, accounting or other advisors as it deems necessary or appropriate, without seeking the approval of the Board or management. The insurance licenseeG shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Committee Performance Evaluation

              The committee shall prepare and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix B Nominating Committee

            • Committee Duties

              The committee's duties shall include those stated in Paragraph HC-4.2.1.

              January 2011

            • Committee Duties and Responsibilities

              In serving those duties with respect to Board membership:

              (a) The committee shall make recommendations to the Board from time to time as to changes the committee believes to be desirable to the size of the Board or any committee of the Board;
              (b) Whenever a vacancy arises (including a vacancy resulting from an increase in Board size), the committee shall recommend to the Board a person to fill the vacancy either through appointment by the Board or through shareholder election;
              (c) In performing the above responsibilities, the committee shall consider any criteria approved by the Board and such other factors as it deems appropriate. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate's experience with that of other Board members, and other factors;
              (d) The committee shall also consider all candidates for Board membership recommended by the shareholders and any candidates proposed by management;
              (e) The committee shall identify Board members qualified to fill vacancies on any committee of the Board and recommend to the Board that such person appoint the identified person(s) to such committee; and
              (f) Assuring that plans are in place for orderly succession of senior management.

              In serving those purposes with respect to officers the committee shall:

              (a) Make recommendations to the Board from time to time as to changes the committee believes to be desirable in the structure and job descriptions of the officers including the CEO, and prepare terms of reference for each vacancy stating the job responsibilities, qualifications needed and other relevant matters;
              (b) Recommend persons to fill specific officer vacancies including CEO considering criteria such as those referred to above;
              (c) Design a plan for succession and replacement of officers including replacement in the event of an emergency or other unforeseeable vacancy; and
              (d) If charged with responsibility with respect to insurance licensee'sG corporate governance guidelines, the committee shall develop and recommend to the Board corporate governance guidelines, and review those guidelines at least once a year.
              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or search firms used to identify candidates, without seeking the approval of the Board or management. The insurance licenseeG shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Performance Evaluation

              The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix C Remuneration Committee

            • Committee Duties

              The committee's duties shall include those stated in Paragraph HC-5.1.1.

              January 2011

            • Committee Duties and Responsibilities

              In serving those duties the committee shall consider, and make specific recommendations to the Board on, both remunerationG policy and individual remunerationG packages for the CEOG and other senior officers. This remunerationG policy should cover at least:

              (a) The following components:
              (i) Salary;
              (ii) The specific terms of performance-related plans including any stock compensation, stock options, or other deferred-benefit compensation;
              (iii) Pension plans;
              (iv) Fringe benefits such as non-salary perks; and
              (v) Termination policies including any severance payment policies; and
              (b) Policy guidelines to be used for determining remunerationG in individual cases, including on:
              (i) The relative importance of each component noted in a) above;
              (ii) Specific criteria to be used in evaluating an officer's performance.

              The committee shall evaluate the CEO'sG performance in light of corporate goals and objectives and may consider the insurance licensee'sG performance and shareholder return relative to comparable insurance licenseesG , the value of awards to CEOsG at comparable insurance licenseesG , and awards to the CEOG in past years.

              The committee should also be responsible for retaining and overseeing outside consultants or firms for the purpose of determining director or officer remuneration, administering remuneration plans, or related matters.

              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or compensation firms used to evaluate the compensation of directors, the CEOG or other officers, without seeking the approval of the Board or management. The insurance licensee'sG shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Performance Evaluation

              The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix D Corporate Governance Disclosure to Shareholders

            The insurance licenseeG shall disclose the following items to the shareholders, in addition to any disclosures required as per Module PD:

            Ownership of Shares

            1. Distribution of ownership by nationality
            2. Distribution of ownership by size of shareholder
            3. Ownership by Government
            4. Names of shareholders owning 5% or more and, if they act in concert, a description of the voting, shareholders' or other agreements among them relating to acting in concert, and of any other direct and indirect relationships among them or with the insurance licenseeG or other shareholders

            Board, Board Members and Management

            1. Board's functions — rather than a general statement (which could be disclosed simply as the Board's legal obligations under the law) the 'mandate' of the Board should be set out
            2. The types of material transactions that require Board approval
            3. Names, their capacity of representation and detailed information about the directors, including directorships of other Boards, positions, qualifications and experience (should describe each director as executive or non-executive)
            4. Number and names of independent members
            5. Board terms and the start date of each term
            6. What the Board does to induct/educate/orient new directors
            7. Director's ownership of shares
            8. Election system of directors and any termination arrangements
            9. Director's trading of insurance licensee'sG shares during the year
            10. Meeting dates (number of meetings during the year)
            11. Attendance of directors at each meeting
            12. Aggregate remuneration to board members
            12A. The remuneration policy of the insurance licenseeG for board members and senior management
            13. List of senior managersG and profile of each
            14. Shareholding by senior managersG
            15. Aggregate remuneration paid to senior managementG
            16. Details of stock options and performance-linked incentives available to executives
            17. Whether the Board has adopted a written code of ethical business conduct, and if so the text of that code and a statement of how the Board monitors compliance.

            Committees

            1. Names of the Board committees
            2. Functions of each committee
            3. Members of each committee divided into independent and non-independent
            4. Minimum number of meetings per year
            5. Actual number of meetings
            6. Attendance of committees' members
            7. [This item was deleted in January 2012]
            8. Work of committees and any significant issues arising during the period

            Corporate Governance

            1. Separate section in the Annual Report
            2. Reference to Module HC and its principles
            3. Changes in Module HC that took place during the year

            Auditors

            1. The charters and a list of members of the Audit (including external and internal; financial and non-financial experts), Nominating and Remuneration Committees of the Board.
            2. Audit fees
            3. Non-Audit services provided by the external auditor and fees
            4. Reasons for any switching of auditors and reappointing of auditors

            Other

            1. Related party transactions
            2. Approval process for related party transactions
            3. Means of communication with shareholders and investors
            4. Separate report on Management Discussion and Analysis is included in the Annual Report — in particular, this should identify and comment on the management of principal risks and uncertainties faced by the business.
            5. Review of internal control processes and procedures
            6. Announcements of the results in the press should include at least the followings:
            (a) Balance sheet, income statement, cash flow statement, statement of comprehensive income and changes in shareholders' equity
            (b) Auditor
            (c) Auditor's signature date
            (d) Board approval date

            Set out directors responsibility with regard to the preparation of financial statements

            Conflict of Interest — any issues arising must be reported, in addition describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.

            Board of Directors — whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution.

            Amended: January 2012
            Amended: April 2011
            January 2011

        • AA Auditors and Actuaries

          • AA-A Introduction

            • AA-A.1 Purpose

              • Executive Summary

                • AA-A.1.1

                  This Module presents requirements that have to be met by insurance licenseesG with respect to the appointment of external auditorsG and actuariesG (the requirement for actuariesG is only applicable to insurance firmsG ). This Module also sets out certain obligations that external auditorsG and actuariesG have to comply with, by virtue of their appointment by insurance licenseesG .

                  Amended: January 2007

                • AA-A.1.2

                  This Module is issued under the powers given to the Central Bank of Bahrain ('the CBB') under Decree No. (64) of 2006 with respect to promulgating the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). It supplements Article 61 of the CBB Law, which requires licenseesG to appoint an external auditorG acceptable to the CBB and Articles 72 to 74 dealing with actuariesG .

                  Amended: January 2007
                  Amended: October 2007

              • Legal Basis

                • AA-A.1.3

                  This Module contains the CBB's Directive (as amended from time to time) relating to auditorsG and actuariesG and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to insurance licenseesG .

                  Amended: January 2011
                  Amended: October 2007
                  Adopted: January 2007

                • AA-A.1.4

                  For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

                  Adopted: January 2007

            • AA-A.2 Module History

              • AA-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 that have subsequently been made 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.

                Amended: January 2007

              • AA-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.

                Amended: January 2007

              • AA-A.2.3

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

                Module Ref. Change Date Description of Changes
                AA-3.1 01/10/05 Corrected reference to Form IFR and IMR
                AA-4.1 01/10/05 Added transition rule for requirement for reporting actuary for insurance firms whose long-term insurance business is restricted to group life policies having a maturity of less than or equal to 1 year.
                AA-4.3.2 01/07/06 Added a requirement that the Signing Actuary is subject to the approval of the CBB.
                AA-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive.
                AA-1.2.3 01/2007 Rule redrafted to clarify reporting obligation.
                AA-1.5 01/2007 Paragraphs AA-1.5.3 and AA-1.5.5 updated to reflect CBB Law requirements on auditor independence.
                AA-3.1.1 01/2007 Clarified that the external auditor's Agreed Upon Procedures are to be submitted to the CBB within four months from the insurance licensee's financial year end.
                AA-3.2 01/2007 Added a new section referring to the audit report required as per Module FC.
                AA-3A 01/2007 Added a new Chapter on Accounting Standards
                AA-4.1.7 01/2007 Clarified that the first three-year period referred to for the report of the signing actuary is for the period ending 31 December 2008.
                AA-1.3.1A 10/2007 Clarified the transition period for the rotation of audit partner.
                AA-4 10/2007 Amended Actuarial reports Chapter to reflect new definitions of Registered ActuaryG and Signing ActuaryG
                AA-2.3 01/2008 Corrected reference to Registered ActuaryG .
                AA-A.1.3 01/2011 Clarified legal basis.
                AA-3.2.1 10/2012 Clarified that an approved consultancy firm can also provide the report on compliance with financial crime rules required under Section FC-3.3.
                AA-1.5.2 04/2013 Changed Guidance to Rule so that insurance licensees may not outsource their internal audit function to the same firm that acts as their external auditor.
                AA-4 04/2014 Amended to be in line with updated actuarial requirements.

              • AA-A.2.4

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

          • AA-B Scope of Application

            • AA-B.1 Insurance Licensees

              • AA-B.1.1

                The contents of this Module — unless otherwise stated — apply to all insurance licenseesG .

              • AA-B.1.2

                The requirements relating to actuariesG (Chapter AA-4), apply only to insurance firmsG , and differentiate between insurance firmsG undertaking long-term insuranceG and those undertaking general insuranceG .

                Amended: January 2007

            • AA-B.2 Auditors and Actuaries

              • AA-B.2.1

                Certain requirements in this Module extend to auditorsG and actuariesG , by virtue of their appointment by insurance licenseesG . AuditorsG and actuariesG appointed by insurance licenseesG must be independent (cf. Sections AA-1.4, AA-1.5and Paragraphs AA-4.2.3 and AA-4.2.4). AuditorsG and actuariesG who resign or are otherwise removed from office are required to inform the CBB in writing of the reasons for the termination of their appointment (cf. Paragraphs AA-1.2.3 and AA-4.2.8). Other requirements are contained in Sections AA-1.3 (Audit partner rotation) and AA-3.1 (AuditorG reports).

                Amended: January 2007

          • AA-1 Auditor Requirements

            • AA-1.1 Appointment of Auditor

              • AA-1.1.1

                In accordance with Article 61(a) of the CBB Law, insurance licenseesG must obtain prior written approval from the CBB before appointing or re-appointing their auditorG .

                Amended: January 2007
                Amended: October 2007

              • AA-1.1.2

                As the appointment of the auditorG normally takes place during the course of the firm's annual general meeting, insurance licenseesG should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated to shareholdersG . The CBB's approval of the proposed auditorG does not limit in any way shareholders'G rights to subsequently reject the Board's choice.

                Amended: January 2007
                Amended: October 2007

              • AA-1.1.3

                The CBB, in considering the proposed (re-)appointment of an auditorG , takes into account the expertise, resources and reputation of the audit firm, relative to the size and complexity of the licensee. The CBB will also take into account the track record of the audit firm in auditing insurance licenseesG within Bahrain; the degree to which it has generally demonstrated independence from management in its audits; and the extent to which it has identified and alerted relevant persons of significant matters.

                Amended: January 2007

              • AA-1.1.4

                In the case of overseas insurance licenseesG , the CBB will also take into account who acts as the auditorG of the parentG firm. As a general rule, the CBB does not favour different parts of an insurance group having different auditorsG .

                Amended: January 2007
                Amended: October 2007

            • AA-1.2 Removal or Resignation of Auditor

              • AA-1.2.1

                Insurance licenseesG must notify the CBB as soon as they intend to remove their auditorG , with an explanation of their decision, or as soon as their auditorG resigns.

                Amended: January 2007Amended: October 2007
                Amended: October 2007

              • AA-1.2.2

                Insurance licenseesG must ensure that a replacement auditorG is appointed (subject to CBB approval as per Section AA-1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.

                Amended: January 2007

              • AA-1.2.3

                In accordance with the powers granted to the CBB under Article 63 of the CBB Law, auditorsG of insurance licenseesG must inform the CBB in writing, should they resign or their appointment as auditor be terminated, within 30 calendar days of the event occurring, setting out the reasons for the resignation or removal.

                Amended: January 2007

            • AA-1.3 Audit Partner Rotation

              • AA-1.3.1

                Unless otherwise exempted by the CBB, insurance licenseesG must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.

                Amended: January 2007

              • AA-1.3.2

                Insurance licenseesG must notify the CBB of any change in audit partner.

                Amended: January 2007

              • AA-1.3.1A

                For purposes of Paragraph AA-1.3.1, the first five-year period referred to is for the period ending 31 December 2010 (Refer to Paragraph ES-2.4.3). Therefore, unless there has been a change in the partner appointed since the Rulebook was issued in May 2005, or if a company has been licensed since the Rulebook has been issued, insurance licenseesG will need to have a new partner responsible for the audit engagement for the year 2011

                Added: October 2007

            • AA-1.4 Auditor Independence

              • AA-1.4.1

                Article 61(d) of the CBB Law imposes conditions in order for the auditor to be considered independent. Before an insurance licenseeG appoints an auditorG , it must take reasonable steps to ensure that the auditorG has the required skill, resources and experience to carry out the audit properly, and is independent of the licensee.

                Amended: January 2007

              • AA-1.4.2

                For an auditorG to be considered independent, it must, among things, comply with the restrictions in Section AA-1.5.

                Amended: January 2007

              • AA-1.4.3

                If an insurance licenseeG becomes aware at any time that its auditorG is not independent, it must take reasonable steps to remedy the matter and notify the CBB of the fact.

                Amended: January 2007

              • AA-1.4.4

                If in the opinion of the CBB, independence has not been achieved within a reasonable timeframe, then the CBB may require the appointment of a new auditorG .

                Amended: January 2007
                Amended: October 2007

            • AA-1.5 Licensee/Auditor Restrictions

              • Financial Transactions with Auditors

                • AA-1.5.1

                  Insurance licenseesG must not provide regulated insurance servicesG to their auditorsG , including entering into any contracts of professional indemnity insurance with their auditorsG .

                  Amended: January 2007

              • Outsourcing to Auditors

                • AA-1.5.2

                  Insurance licenseesG may not outsource their internal audit function to the same firm that acts as their external auditor.

                  Amended: April 2013
                  Amended: January 2007

              • Other Relationships

                • AA-1.5.3

                  Insurance licenseesG and their auditorsG must comply with the restrictions contained in Article 217(c) of the Commercial Companies Law (Legislative Decree No. (21) of 2001), as well as in Article 61(d) of the CBB Law.

                  Amended: January 2007

                • AA-1.5.4

                  Article 217(c) prohibits an auditorG from (i) being the chairman or a member of the Board of DirectorsG of the company he/she audits; (ii) holding any managerial position in the company he/she audits; and (iii) acquiring any shares in the company he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, the auditorG must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.

                  Amended: January 2007
                  Amended: October 2007

                • AA-1.5.5

                  Article 61(d) prohibits an auditorG from (i) being the chairman or a member of the Board of DirectorsG of the company he/she audits; (ii) holding any managerial position in the company he/she audits; and (iii) acquiring any shares in the company he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, the auditorG must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.

                  Adopted: January 2007

                • AA-1.5.6

                  The restriction in Paragraph AA-1.5.3 applies to overseas insurance licenseesG as well as Bahraini insurance licenseesG .

                  Amended: January 2007

                • AA-1.5.7

                  A partner, Director or manager on the engagement team of auditing an insurance licensee