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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > Sector Guides > TA Takaful / Retakaful
  • TA Takaful / Retakaful

    • TA-A Introduction

      • TA-A.1 Purpose

        • Executive Summary

          • TA-A.1.1

            This Module summarises the key aspects of CBB requirements applicable to takaful and retakaful firms licensed in Bahrain, which are set out in full elsewhere in the different subject Modules of Volume 3 (Insurance). This Module is intended as an introductory guide to these Regulations and Directives, for potential license applicants, takafulG and retakaful insurance firms and other interested parties. This Module only contains guidance material; in the event of discrepancy between this Module and the rules themselves, the latter will prevail.

            Amended: January 2007

        • Legal Basis

          • TA-A.1.2

            This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) relating to Takaful/Retakaful 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

          • TA-A.1.3

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

            Added: January 2007

      • TA-A.2 Module History

        • TA-A.2.1

          This Sector Guide 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

        • TA-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

        • TA-A.2.3

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

          Module Ref. Change Date Description of Changes
          TA-1.1 01/07/05 Minor word change.
          TA-1.2 01/07/05 Minor word change.
          TA-2.2 01/07/05 Minor word change.
          TA-2.4 01/07/05 Minor word change.
          TA-3.2 01/07/05 Minor word change.
          TA-4.1 01/07/05 Corrected references.
          TA-4.2 01/07/05 Clarified language of takaful disclosure.
          TA-3.4 01/10/05 Update cross-references to Module FC.
          TA-A.1.2 01/2007 Updated to reflect new CBB Law and new Rule A.1.2 introduced categorising th Module as a Directive.
          TA-2.4 01/2007 Amended section to be in line with changes made for actuaries.
          TA-A.1.2 01/2011 Clarified legal basis
          TA-1.2.1 and TA-2.3 04/2011 Amended to reflect changes to Module HC.
          TA-1.2.1, TA-2.4.3, TA-2.4.4, TA-3.1.3 and TA-3.1.13A 04/2014 Updated to reflect the consultation on the enhanced operational and solvency framework for Takaful firms.

        • TA-A.2.3 [Deleted]



          Deleted: January 2007

        • TA-A.2.4

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

          Amended: January 2007

    • TA-1 Overview

      • TA-1.1 The Concept of Takaful

        • TA-1.1.1

          It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shari'a. Takaful firmsG (that is, those insurance firmsG that choose to apply Shari'a to govern their operations and products) provide products and services corresponding to those offered by a conventional insurer to an insured (policyholderG ) but in a legitimate co-operative manner consistent with Islamic principles. Accordingly, takaful contracts are designed so as to be free of any gharar (uncertainty that would render them non-compliant with Shari'a), riba (interest) and other prohibitions.

          Amended: January 2007
          Amended: October 2007

        • TA-1.1.2

          The concept of takafulG involves the payment of contributions that are wholly or partially donated to form an insurance portfolio. The pooled resources are then used to pay indemnity when the insured risk occurs. The pooling of donations and assisting those in need through indemnity payments does not contradict Shari'a but is in line with the principles of compensation and shared responsibilities among the community.

          Amended: January 2007
          Amended: October 2007

        • TA-1.1.3

          TakafulG has been undertaken using a number of different operational models or combinations thereof. The two most common bases of operating a takaful fund are as follows:

          a) The al mudaraba model; and
          b) The al wakala model.
          Amended: January 2007
          Amended: October 2007

        • TA-1.1.4

          The al mudaraba model, as the name suggests, is a profit sharing model whereby investors provide capital and contributions (investment funds/premiums) are received from the takaful participants. The contract specifies how the profit (surplus) from the operations is to be shared according to the principle of al mudaraba. Generally the sharing arrangements allow the operator to share in both the underwriting results from the operations as well as any favourable investment performance on the invested contributions.

          Amended: January 2007

        • TA-1.1.5

          The al wakala model operates somewhat differently. The takaful participants pay contributions to the takaful fund. However these contributions include the payment of fees and charges due to the operator together with a donation to the community (takaful) fund. All risks are borne by the fund and the annual operating surplus belongs exclusively to the participants. The takaful operator does not share directly in either the risk borne by the fund or any surplus/deficit of the fund. Instead, the operator receives a set fee for managing the operations on the participants' behalf. It should however be noted that the operator's remuneration may (depending on the terms of the contract) include a performance fee, charged against any surplus, as an incentive to effectively manage the takaful fund. Under the al wakala model the operator can only make a profit by ensuring expenses of managing the operations are less than the fees. Those costs and charges that can be charged to the takaful fund must be provided at the lowest possible cost level that the operator can negotiate.

          Amended: January 2007

        • TA-1.1.6

          In Bahrain, the current practice is to adopt the al wakala model for underwriting activities and the al mudaraba for the investment activities of takafulG . This approach appears to be that favoured by the 'Accounting and Auditing Organisation For Islamic Financial Institutions' ('AAOIFI'). The CBB Rules have been designed to be in line with AAOIFI standards and have been adapted to correspond to current industry practice.

          Amended: January 2007
          Amended: October 2007

        • TA-1.1.7

          Each licensed takaful firmG is required to have a Shari'a Supervisory BoardG , whose duty is to direct, review and supervise the activities of the company in order to ensure that they are in compliance with Islamic Shari'a rules and principles.

          Amended: January 2007

        • TA-1.1.8

          The CBB does not propose to establish Rules as to what constitutes a takaful product; this is a matter for each firm's Shari'a Supervisory BoardG . However, the CBB has an obligation to ensure that consumers of takaful products are afforded the same level of protection as that afforded to the purchasers of conventional insurance products. In addition, the CBB has an obligation to ensure that the operations of takaful firmsG do not represent a threat to the stability of Bahrain's financial services industry or wider economy.

          Amended: January 2007
          Amended: October 2007

      • TA-1.2 Structure of this Guidance

        • TA-1.2.1

          The table below lists the Modules of the CBB Insurance Rulebook and indicates those that apply to takafulG and retakaful firmsG . The remaining chapters of this guide describe, in more detail, the principal requirements of each Module of the Regulations and Directives that apply to takafulG and retakaful firmsG .

          HIGH LEVEL STANDARDS

          Module AU (Authorisation) Regulations and Directives dealing with the licensing requirements and conditions for providers of regulated insurance servicesG . All sections applicable to insurance firmsG are also applicable to takafulG and retakaful firmsG .
          Module PB (Principles of Business) Principles that are applicable to all insurance licenseesG regulated in Bahrain; these apply in full to takafulG and retakaful firmsG .
          Module HC (High-Level Controls) Directives in respect of governance, systems and controls of licensees. All sections apply in full to takafulG and retakaful firmsG . In addition, there are special requirements with respect to Takaful and Retakaful firmsG .
          Module AA (Auditors and Actuaries) Directives on the appointment and functions of external auditorsG and actuariesG of insurance licenseesG . These apply in full to takafulG and retakaful firmsG .
          Module GR (General Requirements) Regulations and Directives dealing with requirements covering other areas not included in other Modules. These include: books and records, corporate and trade names, dividends, business transfers, controllersG , close linksG , statutory deposits, cessation of business and appointed representativesG . These Regulations and Directives apply in full to takafulG and retakaful firmsG .


          BUSINESS STANDARDS

          Module CA (Capital Adequacy) Directives governing minimum capital and solvency requirements and the valuation of assets and liabilities. Some of these Directives apply to all insurance firmsG ; some are specific to takaful firmsG , dealing with solvency requirements for takaful firms and the potential for Qard Hassan from the takaful operator (shareholder fund) should the takaful fund fail to meet the liquidity requirements.
          Module BC (Business Conduct) The Code of Business Conduct governs the sale of insurance and applies to all insurance licenseesG . In addition, there are several requirements specifically applicable to takaful dealing with restrictions on the use of the term 'takaful/retakaful' marketing and promotion of takaful products and disclosure of wakala and mudaraba fees to participants.
          Module RM (Risk Management) Risk management standards applicable to licensees. These requirements apply in full to takafulG and retakaful firmsG .
          Module FC (Financial Crime) Directives governing the monitoring and reporting of financial crime. This Module applies in full to takafulG and retakaful firmsG .
          Module TC (Training & Competency) Directives to be developed will apply to both takaful insurance firmsG and conventional insurance firmsG .


          REPORTING REQUIREMENTS

          Module BR (CBB Reporting) Requirements for reporting to the CBB. Annual and quarterly reporting requirements, as well as group reporting, apply in full to takafulG and retakaful firmsG .
          Module PD (Public Disclosure) The public disclosure requirements pertaining to Bahraini insurance firmsG and overseas insurance firmsG apply in full to takafulG and retakaful firmsG .


          ENFORCEMENT AND REDRESS

          Module EN (Enforcement) This Module outlines enforcement powers and processes that may be applied by the CBB and applies in full to all insurance licenseesG .
          Module DP (Dispute Resolution) Directives will be developed later.
          Module CP (Compensation) Directives will be developed later.
          Amended: April 2014
          Amended: April 2011
          Amended: January 2007
          Amended: October 2007

    • TA-2 High Level Standards

      • TA-2.1 Authorisation

        • TA-2.1.1

          An entity in Bahrain must be authorised if it wishes to conduct regulated insurance servicesG , including effecting insurance contracts, the broking of insurance contracts, the offering of advice to third parties and the provision of insurance management services. Insurance firmsG must restrict their business to insurance under their memorandum and articles of association.

          Rulebook Reference AU-A.1.3

        • TA-2.1.2

          An insurance firm'sG license will state the classes of insurance that the firm is authorised to conduct. An insurance firmG , except for captive insurersG , cannot undertake both general insuranceG and long-term insurance businessG . Insurance firmsG must operate on either conventional insurance principles or on takaful principles; they cannot combine the two.

          Rulebook Reference AU-A.1.1.14
          Amended: January 2007
          Amended: October 2007

        • TA-2.1.3

          All persons wishing to undertake a controlled functionG in an insurance licenseeG must be approved by the CBB prior to their appointment. Membership of a Shari'a Supervisory BoardG is a controlled functionG and requires CBB approval.

          Rulebook Reference AU-A.1.2
          Amended: January 2007

        • TA-2.1.4

          A captive insurerG may also be licensed either as a takaful firmG in which case it will appoint a Shari'a Supervisory BoardG and will operate in accordance with the principles of the Shari'a.

          Amended: January 2007

      • TA-2.2 Principles of Business

        • TA-2.2.1

          There are 10 Principles of Business that apply to all insurance licenseesG including takafulG and retakaful firmsG .

          Amended: January 2007

        • TA-2.2.2

          Non compliance with the Principles of Business can lead to enforcement action, which can include the calling into question of whether the firm or its management continue to meet the fitness and propriety criteria for approval.

          Rulebook Reference PB-B.2.1

        • TA-2.2.3

          The Principles of Business are:

          1. Observing high standards of integrity and fair dealing. Insurance licenseesG and approved personsG should be honest and straightforward in their dealings with customersG .
          2. Taking all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of a customerG , and disclose fully all relevant information to customersG , as required by the CBB's Regulations and Directives.
          3. Acting with due skill, care and diligence.
          4. Observing in full any obligations of confidentiality, including with respect to clientG information. This requirement does not over-ride lawful disclosures.
          5. Observing proper standards of market conduct, and avoiding action that would generally be viewed as improper.
          6. Taking reasonable care to safeguard the assets of customersG .
          7. Paying due regard to the legitimate interests of customersG and communicating with them in a fair and transparent manner and, when dealing with customersG who are entitled to rely on advice or discretionary decisions, taking reasonable care to ensure the suitability of such advice or decisions.
          8. Maintaining an open and co-operative relationship with the CBB and other competent regulatory bodies and taking reasonable care to ensure that activities comply with all applicable laws and Regulations.
          9. Maintaining adequate resources, whether human, financial or otherwise, sufficient to run the business in an orderly manner.
          10. Taking reasonable care to ensure that affairs are managed effectively and responsibly, with appropriate management, and systems and controls in relation to the size and complexity of operations.
          Rulebook Reference PB-1
          Amended: January 2007
          Amended: October 2007

      • TA-2.3 High-Level Controls

        • TA-2.3.1

          In accordance with Principle of Business 10, insurance licenseesG must put in place effective management, systems and controls for their business. The High-Level Controls Module sets out the Directives that put this principle into practice and apply to all takaful and retakaful firms.

          Rulebook Reference PB-1.10
          Amended: January 2007
          Amended: October 2007

        • TA-2.3.2

          Some of these Rules govern the establishment, composition, functions and responsibilities of Boards of DirectorsG . All incorporated insurance licenseesG must have a Board, composed of a minimum of five DirectorsG , which is ultimately accountable and responsible for the management and performance of the firm.

          Rulebook Reference HC-1
          HC-1.3.3
          Amended: April 2011
          Amended: January 2007
          Amended: October 2007

        • TA-2.3.3

          In addition to a Board of DirectorsG , takafulG and retakaful firmsG must also have in place a Shari'a Supervisory BoardG .

          Rulebook Reference HC-9.2.1
          Amended: April 2011
          Amended: January 2007

        • TA-2.3.4

          The CBB expects, for Bahraini insurance licenseesG , for Bahrain to be the principal place of business and for Bahrain to be the centre of its governance and management. This must include:

          (a) The majority of Board meetings taking place in Bahrain;
          (b) Appointing a locally-resident Chief ExecutiveG or General ManagerG ; and
          (c) Premises and records being located in the Kingdom of Bahrain.

          Rulebook Reference AU-2.2.1 and
          GR-1
          Amended: April 2011
          Amended: January 2007

        • TA-2.3.5

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

          Rulebook Reference HC-6.5.1
          Amended: April 2011
          Amended: January 2007

        • TA-2.3.6

          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.

          Rulebook Reference AU-1.2.11A
          Amended: April 2011
          Amended: January 2007
          Amended: October 2007

        • TA-2.3.7

          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.

          Rulebook Reference HC-5
          Amended: April 2011
          Amended: January 2007
          Amended: October 2007

        • TA-2.3.8

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

          Rulebook Reference HC-2.2.4
          Amended: April 2011
          Amended: October 2007

        • TA-2.3.9

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

          Rulebook Reference HC-8.2.2
          Amended: April 2011

        • TA-2.3.10

          The Board must assess, document and provide a written certification to the CBB each year detailing 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.

          Rulebook Reference HC-1.1.11
          Amended: April 2011
          Amended: January 2007

      • TA-2.4 Auditors and Actuaries

        • TA-2.4.1

          All insurance firmsG must have an annual external audit. Firms must obtain prior written approval from the CBB before appointing or re-appointing their auditorG .

          Rulebook Reference AA-1.1.1
          Amended: January 2007
          Amended: October 2007

        • TA-2.4.2

          There are specific Rules and Guidance governing the duties and restrictions of external auditorsG .

          Rulebook Reference AA-1
          Amended: January 2007
          Amended: October 2007

        • TA-2.4.3

          All insurance firmsG that conduct long-term insurance businessG (family takaful)must appoint an actuaryG that must provide an annual financial condition report (FCR).

          Rulebook Reference AA-4.1
          Amended: April 2014
          Amended: January 2007
          Amended: October 2007

        • TA-2.4.4

          Insurance firmsG that undertake general takaful business must commission an actuarial opinion from an actuaryG , every two years.

          Rulebook Reference AA-4.1
          Amended: April 2014
          Amended: October 2007

        • TA-2.4.4A

          Insurance firmsG can appoint a Registered ActuaryG or Signing ActuaryG to meet the CBB requirements.

          Rulebook Reference AA-4.2
          Adopted: October 2007

        • TA-2.4.5

          The CBB maintains on its website a list of Registered ActuariesG that can practise in the Kingdom of Bahrain. A Registered ActuaryG must be independent of the insurance firm for which he is providing an actuarial evaluation and report.

          Rulebook Reference AU-1.3 and
          AA-4.2
          Amended: January 2007
          Amended: October 2007

        • TA-2.4.6

          A Signing ActuaryG is a DirectorG or employeeG of the licensee concerned; he occupies a controlled functionG , and is subject to CBB approval as per Section AU-1.2.

          Rulebook Reference AA-4.2.11
          Adopted: October 2007

      • TA-2.5 General Requirements

        • TA-2.5.1

          All insurance licenseesG are expected to maintain books and records sufficient to produce financial statements and show a record of the business undertaken.

          Rulebook Reference GR-1.1

        • TA-2.5.2

          All insurance licenseesG must keep customerG and transaction records in accordance with the requirement outlined in Section GR-1.2. Insurance licenseesG must also keep other records as required per Section GR-1.3.

          Rulebook Reference GR-1.2
          GR-1.3
          Amended: January 2007
          Amended: October 2007

        • TA-2.5.3

          Insurance licenseesG , other than captive insurersG , must seek prior approval from the CBB for their corporate name and any trade names, and those of their subsidiariesG located in Bahrain.

          Rulebook Reference GR-2.1
          Amended: January 2007
          Amended: October 2007

        • TA-2.5.4

          All Bahraini insurance licenseesG require CBB pre-approval for the distribution of dividends to shareholdersG .

          Rulebook Reference GR-3.1
          Amended: January 2007

        • TA-2.5.5

          An insurance firmG must seek prior written approval from the CBB before executing a business transfer.

          Rulebook Reference GR-4.1
          Amended: January 2007
          Amended: October 2007

        • TA-2.5.6

          Insurance licenseesG must obtain prior approval from the CBB for any of the following changes to its controllersG (as defined in Section GR-5.2):

          (a) A new controllerG ;
          (b) An existing controllerG increasing its holding from below 20% to above 20%;
          (c) An existing controllerG increasing its holding from below 50% to above 50%; and
          (d) An existing controllerG reducing its holding from above 50% to below 50%.
          Rulebook Reference GR-5.1
          Amended: January 2007

        • TA-2.5.7

          All requirements dealing with close linksG apply in full to all insurance firmsG .

          Rulebook Reference GR-6

        • TA-2.5.8

          Insurance firmsG are required to maintain statutory deposits as per Article 181 of the CBB Law.

          Rulebook Reference GR-7.1
          Amended: January 2007

        • TA-2.5.9

          In accordance with the Bahrain Commercial Companies Law, insurance licenseesG are required to set aside a proportion of their annual profits, being no less than 10 per cent as a compulsory reserve until the total of such compulsory reserve, equals 50 per cent of the paid-up capital.

          Rulebook Reference GR-7.2
          Amended: January 2007

        • TA-2.5.10

          An insurance firmG wishing to suspend its operations and liquidate its business must notify the CBB in writing, setting out whether it proposes to affect a transfer of its portfolio or go into run-off.

          Rulebook Reference GR-8
          Amended: January 2007

    • TA-3 Business Standards

      • TA-3.1 Capital Adequacy

        • TA-3.1.1

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

          Rulebook Reference PB-1.9

        • TA-3.1.2

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

          Rulebook Reference CA-1.2.1
          Amended: January 2007

        • TA-3.1.3

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

          Rulebook Reference CA-8.4.1 and CA-1.2.3
          Amended: April 2014

        • TA-3.1.4

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

          Category 1 firm: — BD 300,000;
          Category 2 firm: — BD 500,000;
          Category 3 firm: — BD 400,000; and
          Category 4 firm: — The relevant minimum fundG for Category 1 or 2 (depending on the type of general business underwritten) PLUS the Category 3 minimum. These amounts are to be maintained separately by the insurer.

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

          Rulebook Reference CA-2.1.5
          CA-8.4.2
          Amended: January 2007
          Amended: October 2007

        • TA-3.1.5

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

          Rulebook Reference CA-2
          Amended: April 2014
          Amended: January 2007

        • TA-3.1.6

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

          Rulebook Reference CA-2
          Amended: April 2014
          Amended: January 2007

        • TA-3.1.7

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

          Rulebook Reference CA-4
          Amended: January 2007

        • TA-3.1.8

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

          Rulebook Reference CA-5.1
          Amended: January 2007

        • TA-3.1.9

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

          Rulebook Reference CA-6.1
          Amended: October 2007

        • TA-3.1.10

          The CBB may require a takaful firm to provide:

          (a) A statement of the consolidated financial position of any group of which the insurance firmG is either the holding company, a subsidiaryG or a branchG of that group; and
          (b) A statement of the solvency margin that would be determined by this Module if the group identified in part (a) of this Rule were a Bahrain authorised insurance firmG .
          Rulebook Reference CA-7.1
          Amended: January 2007
          Amended: October 2007

        • TA-3.1.11

          All takaful firmsG licensed in Bahrain must organise and operate their business according to the al wakala model. Specifically, in exchange for the provision of management services to takaful fund(s), the shareholdersG of the takaful firmG will receive a specific consideration (wakala fee). For the insurance assets invested on behalf of takaful funds, the takaful operator will use the al mudaraba model, and will receive a set percentage of the profits generated from the investment portfolio.

          Rulebook Reference CA-8.2.1
          Amended: January 2007

        • TA-3.1.12

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

          Rulebook Reference CA-8.2.2

        • TA-3.1.13

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

          Rulebook Reference CA-8.3
          Amended: January 2007

        • TA-3.1.13A

          Where a participants' fund(s) has a cash deficit which results in its inability to meet its day to day expenses and obligations, a Qard Hassan must be extended immediately to the shareholder fund.

          Rulebook Reference CA-8.4A
          Added: April 2014

        • TA-3.1.14

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

          Rulebook Reference CA-8.5
          Amended: January 2007

      • TA-3.2 Business Conduct

        • TA-3.2.1

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

          Rulebook Reference BC-A.1
          Amended: January 2007

        • TA-3.2.2

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

          Rulebook Reference BC-3.2
          Amended: January 2007

        • TA-3.2.3

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

          Rulebook Reference BC-3.3

        • TA-3.2.4

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

          Rulebook Reference BC-3.4
          Amended: January 2007

      • TA-3.3 Risk Management

        • TA-3.3.1

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

          Rulebook Reference PB-1.10
          Amended: January 2007
          Amended: October 2007

        • TA-3.3.2

          The Module contains both:

          •  General requirements (on the overall management of risk); and
          •  Specific requirements on the management of specific risk classes.
          Rulebook Reference RM-1
          RM-2 to RM-8
          Amended: January 2007

      • TA-3.4 Financial Crime

        • TA-3.4.1

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

          Rulebook Reference Decree Law No. 4

        • TA-3.4.2

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

          Rulebook Reference Module FC
          FC-8 (details of penalties)
          Amended: October 2007

        • TA-3.4.3

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

          Rulebook Reference FC-1
          Amended: January 2007

        • TA-3.4.4

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

          Rulebook Reference FC-3.1.1
          Amended: January 2007

        • TA-3.4.5

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

          Rulebook Reference FC-3.3
          Amended: January 2007

        • TA-3.4.6

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

          Rulebook Reference Appendix FC-(iv)
          Amended: January 2007

    • TA-4 Reporting Requirements

      • TA-4.1 CBB Reporting

        • TA-4.1.1

          Takaful firmsG are required to file annual, quarterly and group insurance returns to the CBB providing details of the financial condition of the firm and the business undertaken.

          Rulebook Reference BR-1.1
          BR-1.3
          BR-1.4
          Amended: January 2007

        • TA-4.1.2

          Details of the content of the Insurance Firm Return can be found in Section BR-1.1. The content of the Insurance Firm Return is identical to that required for conventional insurance firmsG , except for the calculation of the solvency margin as outlined in Chapter CA-8. The Return must be:

          (a) Deposited with the CBB within 3 months of the year end;
          (b) Reviewed by the external auditorG based on agreed-upon procedures;
          (c) Be accompanied by a Directors'G Certificate; and
          (d) Where applicable, include an actuarial certificate and report.
          Rulebook Reference BR-1.1
          Amended: January 2007
          Amended: October 2007

        • TA-4.1.3

          Takaful firmsG must disclose to the CBB material information about changes in their situation including (but not limited to):

          (a) Significant breaches in Rules and other requirements;
          (b) Civil, criminal, and disciplinary procedures, fraud, errors and other irregularities;
          (c) Financial difficulties, breach of minimum solvency requirements, insolvency, bankruptcy, winding-up;
          (d) Changes in auditorsG and actuariesG :
          (e) Changes in address, legal status etc.; and
          (f) Changes in controllersG and close linksG .
          Rulebook Reference BR-2.2.4
          BR-2.2.6 to BR-2.2.8
          BR-2.2.11
          BR-2.3.29
          BR-2.3.3 and BR-2.3.4
          BR-2.3.7
          Amended: January 2007
          Amended: October 2007

        • TA-4.1.4

          An insurance licenseeG must permit representatives of the CBB, or persons appointed for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the CBB's functions under the relevant law.

          Rulebook Reference BR-3.1
          Amended: January 2007

      • TA-4.2 Public Disclosure

        • TA-4.2.1

          Takaful and Retakaful firms are subject to the same Public Disclosure requirements imposed in Module PD to insurance firmsG and overseas insurance firmsG .

          Rulebook Reference Module PD
          Amended: January 2007

        • TA-4.2.2

          Takaful and Retakaful firms must disclose to participants the calculation and amount of wakala fee and mudaraba share of profits paid by the takaful fund to the takaful operator.

          Rulebook Reference BC-3.4.2
          Amended: January 2007

    • TA-5 Enforcement and Redress

      • TA-5.1 Enforcement

        • TA-5.1.1

          The Enforcement Module of the CBB Rulebook applies in full to all insurance licenseesG .

          Rulebook Reference Module EN
          Amended: January 2007

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