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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > High Level Standards > AU Authorisation > AU-2 Licensing Conditions
  • 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

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