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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > Business Standards > CA Capital Adequacy > CA-4 Valuation and Admissibility of Assets
  • CA-4 Valuation and Admissibility of Assets

    • CA-4.1 General Requirements

      • CA-4.1.1

        The Asset Valuation Rules, being the Linked Asset Valuation Rules and/or General Asset Valuation Rules, as appropriate, relate to the determination of the value of all the assets of an insurance firmG subject to this Chapter.

        Amended: January 2007

      • CA-4.1.2

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

        Amended: January 2007

      • CA-4.1.3

        Where an insurance firmG has entered into any insurance contracts that are classified as a linked long term insurance businessG the value of the linked assets to the extent that they are held to match liabilities in respect of such business must be determined in accordance with the Linked Asset Valuation Rules (Paragraphs CA-4.3.1 to CA-4.3.4).

        Amended: January 2007

      • CA-4.1.4

        All other assets of an insurer subject to this Chapter must be valued in accordance with the General Asset Valuation Rules (Paragraphs CA-4.2.1 to CA-4.2.36).

        Amended: January 2007

      • CA-4.1.5

        Where in all the circumstances of the case, any asset is actually of a lesser value than the amount calculated in accordance with prescribed Rules (that is either assets subject to the General Asset Valuation Rules or the Linked Asset Valuation Rules) such lesser value must be taken to be the value of the asset.

        Amended: January 2007

      • CA-4.1.6

        The admissibility of assets for purposes of the General Asset Valuation Rules is determined based on the category of asset held and the counterpartyG .

        Amended: January 2007

      • CA-4.1.7

        An insurance firmG must ensure that its liabilities under a contract of insuranceG , other than linked long-term business, are covered by assets of appropriate safety, yield and marketability having regard to the classes of business carried on by the insurance firmG .

        Amended: January 2007

      • CA-4.1.8

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

        (a) Excessive reliance is not placed on reinsuranceG or any particular reinsurer; and
        (b) That its investments are appropriately diversified, adequately spread and that excessive reliance is not placed on investments of any particular category, description, type or counterpartyG .
        Amended: January 2007

    • CA-4.2 General Asset Valuation Rules

      • Asset Limits per Category of Assets

        • Investments in Non-Insurance Subsidiaries and Associates

          • CA-4.2.1

            Investments in subsidiariesG and associatesG that are not carrying out regulated insurance servicesG as defined in Chapter AU-1.4, must be valued at an amount not exceeding the insurance firm'sG proportionate share of the subsidiary'sG or associate'sG net asset value, determined as if that subsidiaryG or associateG applied these Rules in determining its net asset value.

            Amended: January 2007

          • CA-4.2.2

            The net asset value determined in Paragraph CA-4.2.1 must be reduced for any amounts that cannot be made available to the insurance firmG in the ordinary course of business. This includes but is not limited to:

            (a) Required solvency margins, base capital requirements or any other amounts required to be maintained in order to comply with regulatory requirements applicable to the subsidiaryG or associateG in Bahrain or any other jurisdiction. This restriction applies to any subsidiaryG or associateG (including banks and investment firms) subject to regulation in any jurisdiction;
            (b) Assets subject to currency control restrictions; and
            (c) Surplus assetsG in long-term insurance funds, as these assets belong to the long term policyholdersG .
            Amended: January 2007

          • CA-4.2.3

            Where a subsidiaryG or associateG carries on a regulated activity either in Bahrain or any other jurisdiction, an insurance firmG may, with the consent of the CBB, determine the net asset value of that subsidiaryG or associateG (as specified in Paragraph CA-4.2.1) in accordance with the Rules applicable in the jurisdiction where that subsidiary or associateG has both its head office and principal supervisor.

            Amended: January 2007

          • CA-4.2.4

            In determining the net asset value of a subsidiaryG or associateG (as specified in Paragraph CA-4.2.1) where that subsidiaryG or associateG is not carrying out regulated insurance servicesG , if the value of any single asset under Paragraph CA-4.2.1 exceeds 5% of the insurance business amountG , the admissible valueG of the said asset for the purpose of this Paragraph must be restricted to 5% of the insurance business amountG .

            Amended: January 2007

        • Real Estate Assets

          • CA-4.2.5

            Real estate assets such as land and buildings must be valued at market value as assessed by an independent qualified valuerG at a date no earlier than 3 years from the end of the financial year under consideration. An insurance firmG may elect to use book valueG where that value is less than market valueG however where no proper valuationG exists the value is deemed by this Module to be nil.

            Amended: January 2007

          • CA-4.2.6

            If the value of any single asset under Paragraph CA-4.2.5 exceeds 10% of the insurance business amountG , the admissible valueG of the said asset for the purpose of this Paragraph must be restricted to 10% of the insurance business amountG .

          • CA-4.2.7

            The 10% admissibility test of Paragraph CA-4.2.6 is to be applied in total to both land and building, in instances where the realisable value of the asset is dependent on both the land and the building.

        • Debt Securities

          • CA-4.2.8

            Debt securities (both fixed and variable interest securities) issued by, or guaranteed by, governments rated investment grade, or public authority with investment grade securityG must be valued at:

            (a) In the case of listed securitiesG , the closing market quotation or the latest available market quotation;
            (b) In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and
            (c) In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
            Amended: January 2007

          • CA-4.2.9

            There are no admissibility restrictions for fixed and variable interest securities meeting the requirements of Paragraph CA-4.2.8. However, admissibility restrictions pertaining to counterpartiesG may apply (CA-4.2.33).

            Amended: January 2007

          • CA-4.2.10

            Debt securities (both fixed and variable interest securities) not covered by Paragraph CA-4.2.8 must be valued at:

            (a) In the case of listed securitiesG , the closing market quotation;
            (b) In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and
            (c) In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
            Amended: January 2007

          • CA-4.2.11

            If the value of debt securities, other than those to which Paragraph CA-4.2.8 relates, (both fixed and variable interest securities), which are listed securitiesG , in any one company together with its associated companies exceeds 5% of the insurance business amountG , the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 5% of the insurance business amountG .

            Amended: January 2007

          • CA-4.2.12

            For debt securities (both fixed and variable interest) which are not listed securitiesG , if the value of those securities in any one company together with its associated companies exceeds 1.0% of the insurance business amountG the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 1.0% of the insurance business amountG .

            Amended: January 2007

        • Equity Shares

          • CA-4.2.13

            Equity shares that are listed securitiesG must be valued on the closing market quotation or the latest available market quotation.

            Amended: January 2007

          • CA-4.2.14

            If the value of equity shares, that are listed securitiesG , in any one company together with its associated companies exceeds 5% of the insurance business amountG the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 5% of the insurance business amountG .

            Amended: January 2007

          • CA-4.2.15

            Equity shares that are not listed securitiesG must be valued at the lower of:

            (a) The carrying value of these shares on the books of the insurance firmG ;
            (b) 75% of the net asset value for each share owned by the insurance firmG (based on the most recently available financial information); and
            (c) The amount which would reasonably be paid by way of consideration for an immediate transfer or assignment of the investment.
            Amended: January 2007

          • CA-4.2.16

            If the value of equity shares, that are not listed securitiesG , in any one company together with its associated companies exceeds 1.0% of the insurance business amountG , the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 1.0% of the insurance business amountG .

            Amended: January 2007

        • Unit Trust or Mutual Funds

          • CA-4.2.17

            Where the issuer can be required to purchase the units or other beneficial interests from the holder upon the holder giving notice of one month or less and the value of the holdings or other beneficial interests in any one unit trustG or mutual exceeds 5.0% of the insurance business amountG , the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 5.0% of the insurance business amountG .

            Amended: January 2007

          • CA-4.2.18

            Where the issuer is not required to purchase the units or other beneficial interests from the holder upon the holder giving notice of one month or less and the value of the holdings or other beneficial interests in any one unit trustG or mutual fund exceeds 1.0% of the insurance business amountG , the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 1.0% of the insurance business amountG .

            Amended: January 2007

        • Traded Derivative Contract

          • CA-4.2.19

            A traded derivative contractG that is a listed securityG , for a share or a debenture must be valued at the closing market quotation, and otherwise at the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof. If the value of the contracts in any one company or its connected companies exceeds 0.1% of the insurance business amountG , the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 0.1% of the insurance business amountG .

            Amended: January 2007

        • Loan

          • CA-4.2.20

            A loan secured by a policy of insurance issued by the company must be valued as the amount of the loan but not exceeding the amount payable on a surrender of the policy as at the date the policy is being valued.

          • CA-4.2.21

            A loan to an individual or an unincorporated body of persons shall be valued at the lower of the outstanding amount of the loan and the amount that would reasonably be paid by way of consideration for an immediate assignment of the loan together with the benefit of any security held in respect thereof.

          • CA-4.2.22

            Where paragraph CA-4.2.21 applies and the loan to any one individual or unincorporated body of persons is fully secured on assets whose value at least equals the amount of the loan and the loan exceeds 5% of the insurance business amountG , the admissible valueG of the secured loan for the purpose of this Chapter must be restricted to 5% of the insurance business amountG .

          • CA-4.2.23

            Where Paragraph CA-4.2.21 applies and the loan to any one individual or unincorporated body of persons is not fully secured on assets whose value at least equals the amount of the loan and the loan exceeds 1% of the insurance business amountG , the admissible valueG of the unsecured loan for the purpose of this Chapter must be restricted to 1% of the insurance business amountG .

        • Other Assets

          • CA-4.2.24

            Deposits and current account balances with approved financial institutionsG must be valued at their full face value. The admissible valueG of these assets is their face value.

          • CA-4.2.25

            Amounts due under contracts of insuranceG and reinsurance (either ceded or accepted), including salvage and subrogation rights, must be valued at the amounts that can reasonably be expected to be recovered. The exceptions being:

            (a) All debts (net of provisions) which have been due for more than 6 months, in which case they must be valued at nil;
            (b) Advance commission paid to intermediaries which must be valued at nil; and
            (c) Amounts that pertain to a subsidiaryG or associateG of the insurance firmG must be valued in accordance with Paragraph CA-4.2.4 above.
            Amended: April 2014
            Amended: October 2007
            Amended: January 2007

          • CA-4.2.25A

            The value of unearned reinsurance premiums is the value as determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate to insurance firmsG .

            Inserted: October 2008

          • CA-4.2.26

            In the case of general insurance businessG , the value of deferred acquisition costsG is the value as determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate to insurance firmsG .

            Amended: January 2007

          • CA-4.2.27

            The admissible valueG of any cash holding is its face value.

          • CA-4.2.28

            Office machinery, furniture, motor vehicles, computer and other equipment belonging to the company must be valued at an amount not greater than its book valueG . If the value of office machinery, furniture, motor vehicles computer and other equipment exceeds 3% of the insurance business amountG the admissible valueG of the said assets for the purpose of this Chapter must be restricted to 3% of the insurance business amountG .

            Amended: January 2007

          • CA-4.2.29

            Life interests, reversionary interests and similar interests in property must be valued as the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.

          • CA-4.2.30

            Investments, except investments that are specifically covered above, must be valued in accordance with this Paragraph:

            (a) If the investment is due, or will become due, within twelve months from the date at which the investment is being valued at (or would become so due if the company exercised some right), the amount which can reasonably be expected to be recovered in respect of the investment, taking due account of any security held in respect thereof;
            (b) Otherwise, the amount that would reasonably be paid by way of consideration for an immediate assignment of the debt together with the benefit of any security held in respect thereof.
            Amended: January 2007

          • CA-4.2.31

            Where Paragraph CA-4.2.30 applies to an investment in any one individual or unincorporated body of persons and the aggregate value of those investments (for that individual or unincorporated body of persons valued in accordance with Paragraph CA-4.2.30) exceeds 1% of the insurance business amountG , the admissible valueG of those investments for the purpose of this Chapter must be restricted to 1% of the insurance business amountG .

            Amended: January 2007

          • CA-4.2.32

            Where Paragraph CA-4.2.30 applies to an investment in any one company and the aggregate value of those investments (for that company valued in accordance with Paragraph CA-4.2.30) exceeds 2.5% of the insurance business amountG the admissible value of those investments for the purpose of this Chapter must be restricted to 2.5% of the insurance business amount.

            Amended: January 2007

        • Counterparty Exposure Limits

          • CA-4.2.33

            The admissible valueG for counterpartyG exposure limit is:

            (a) Where the counterpartyG is an individual or an unincorporated body of persons, 5% of the insurance business amountG ;
            (b) Where the counterpartyG is a government of a jurisdiction, other than a Zone A CountryG , GCC country, the Kingdom of Bahrain and any other jurisdiction approved by the CBB, the jurisdiction together with all the public bodies, local authorities or nationalised industries of that jurisdiction, 10% of the insurance business amountG ;
            (c) Where the counterpartyG is a body corporate or group, and:
            (i) The counterpartyG is an approved financial institutionG , 25% of the insurance business amountG or BD 1.5 million, whichever is the larger for all exposures including short term (3 months or less) deposits;
            (ii) The counterpartyG is an approved financial institutionG , 10% of the insurance business amountG or such lower amount as the insurance firmG may decide for all exposures other than short term deposits; and
            (iii) The counterpartyG is not an approved financial institutionG , 10% of the insurance business amountG for all exposures to that counterpartyG .
            Amended: April 2012
            Amended: January 2007

          • CA-4.2.34

            For the purposes of Section CA-4.2, 'insurance business amountG ' means 'general insurance business amountG ' or 'long-term insurance business amount' as follows:

            (a) In terms of general insurance businessG , the general insurance business amountG is the value of the insurance firm's assets (other than long-term insurance businessG assets) and excluding reinsurance recoveries as determined in accordance with Chapter CA-4; and
            (b) In terms of long-term insurance businessG , the long-term insurance business amount is the value of the insurance firm'sG assets (other than those relating to general insurance businessG ) and excluding reinsurance recoveries and assets required to match property-linked liabilities in accordance with Chapter CA-4.
            Amended: January 2007

          • CA-4.2.35

            For purposes of Paragraph CA-4.2.34, the value of an insurance firm'sG assets refers to the valuation assigned in this section, but does not refer to the admissible valueG of these assets, i.e. after adjusting for category limits and counterparty limits.

            Amended: January 2007
            Amended: October 2007

    • CA-4.3 Linked Asset Valuation Rules

      • CA-4.3.1

        Assets to the extent that they are held to match liabilities in respect of linked long-term insurance must comprise of no other types of property of any description other than property meeting the descriptions set out in Paragraph CA-4.3.2 of this Module.

        Amended: January 2007

      • CA-4.3.2

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

        (a) Real estate assets such as land and buildings (including any interest in land and buildings) each piece individually not exceeding 5% of linked long-term assets and 20% in aggregate;
        (b) Listed securitiesG which are readily realisable, other than securities which are:

        (i) Loans or deposits of the kinds mentioned in (c) or (d); and
        (ii) Derivative contractsG ;
        (c) Loans which are fully secured by mortgage or charge on land (or any interest in land) each loan individually not exceeding 5% of linked long-term assets and 20% in aggregate and in relation to which the rate of interest and the due dates for the payment of interest and the repayment of principal can be fully ascertained from the terms of any agreement relating to the loan;
        (d) Loans to or deposits with an approved financial institutionG ;
        (e) Holdings or other beneficial interests in unit trustsG or mutual/managed funds which satisfies the following conditions:

        (i) The property of the fund comprises property only consisting of the descriptions in this section;
        (ii) The units are readily realisable at a price which represents the net value per unit of the assets and liabilities of the fund; and
        (iii) The price at which the units may be bought and sold is published regularly;
        (f) Cash; and
        (g) Income due, or to become due, in respect of property of any of the descriptions in this section.
        Amended: April 2012
        Amended: January 2007

      • CA-4.3.3

        All of the property described in Paragraph CA-4.3.2 must either be classified as 'Available for sale investments' and valued in accordance with International Accounting Standards or valued at their fair market valueG .

        Amended: January 2007

      • CA-4.3.4

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

        Amended: January 2007

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