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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > High Level Standards > AA Auditors and Actuaries
  • 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 licenseeG may not serve on the Board or in a controlled functionG of the licensee, for two years following the end of their involvement in the audit, without prior authorisation of the CBB.

            Amended: January 2007

          • AA-1.5.8

            Chapter AU-1.2 sets out the CBB's 'controlled functionsG ' requirements.

            Amended: January 2007

        • Definition of 'Auditor'

          • AA-1.5.9

            For the purposes of Section AA-1.5, 'auditor' means the partners, Directors and managers on the engagement team responsible for the audit of the insurance licenseeG .

            Amended: January 2007

    • AA-2 Access

      • AA-2.1 CBB Access to Auditors

        • AA-2.1.1

          Insurance licenseesG must waive any duty of confidentiality on the part of their auditorG , such that their auditorG may report to the CBB any concerns held regarding material failures by the insurance licenseeG to comply with CBB requirements.

          Amended: January 2007
          Amended: October 2007

        • AA-2.1.2

          The CBB may, as part of its on-going supervision of insurance licenseesG , request meetings with a licensee's auditorG . If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management or DirectorsG .

          Amended: January 2007
          Amended: October 2007

      • AA-2.2 Auditor Access to Outsourcing Providers

        • AA-2.2.1

          Paragraph RM-7.4.12 on outsourcingG agreements between insurance licenseesG and outsourcing providersG requires licensees to ensure that their internal and external auditorsG have timely access to any relevant information they may require to fulfil their responsibilities. Such access must allow them to conduct on-site examinations of the outsourcing providerG , if required.

          Amended: January 2007

      • AA-2.3 CBB Access to Actuaries

        • AA-2.3.1

          Insurance licenseesG that appoint a Registered ActuaryG or Signing ActuaryG in compliance with the requirements in Section AA-4.1 must waive any duty of confidentiality on the part of the actuaryG , such that he may report to the CBB any concerns held regarding material failures by the insurance licenseeG to comply with CBB requirements.

          Amended: January 2007
          Amended: January 2008

        • AA-2.3.2

          The CBB may, as part of its on-going supervision of insurance licenseesG , request meetings with a licensee's Registered ActuaryG /Signing ActuaryG . If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management or DirectorsG .

          Amended: January 2007
          Amended: October 2007
          Amended: January 2008

    • AA-3 Auditor Reports

      • AA-3.1 Review of Annual Returns

        • AA-3.1.1

          Insurance licenseesG must arrange for their auditorG to review the licensee's annual return to the CBB. The auditorG must complete the prescribed form Agreed Upon Procedures (refer to Part B, Supplementary Information Appendices BR(i) and BR(ii)) attesting to his/her review, which must be submitted to the CBB by the insurance licenseeG within four months of the financial year end of the insurance licenseeG .

          Amended: January 2007
          Amended: October 2007

        • AA-3.1.2

          Insurance firmsG are required to submit an Insurance Firm Return (Form IFR). Insurance intermediariesG and insurance managersG are required to submit the Insurance Intermediary and Manager Return (Form IMR). Further details on the annual returns and other reporting requirements of the CBB, including the precise scope of the auditor'sG review and attestation, are contained in Module BR (CBB Reporting).

          Amended: January 2007

      • AA-3.2 Report on Compliance with Financial Crime Rules

        • AA-3.2.1

          Insurance licenseesG must arrange for their external auditorG or a consultancy firm approved by the CBB as per Paragraphs FC-3.3.2 and FC-3.3.2A, to report on the insurance licensee'sG compliance with the requirements contained in Module FC (Financial Crime), at least once a year.

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

        • AA-3.2.2

          The report specified in Paragraph AA-3.2.1 must be in the form agreed by the CBB, and must be submitted to the CBB within four months of the licensee's financial year-end.

          Adopted: January 2007

        • AA-3.2.3

          Further information on the above requirement can be found in Section FC-3.3.

          Adopted: January 2007
          Amended: October 2007

    • AA-3A Accounting Standards

      • AA-3A.1 General Requirements

        • AA-3A.1.1

          Insurance licenseesG must comply with International Financial Reporting Standards / International Accounting Standards ('IFRS/IAS') and, to the extent that they undertake Shari'a compliant activities, relevant standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

          Adopted: January 2007

        • AA-3A.1.2

          Overseas insurance licenseesG that do not, at the parentG company level, apply IFRS/IAS are still required under Paragraph AA-3A.1.1 to produce pro-forma accounts for the Bahrain branch in conformity with these standards.

          Adopted: January 2007

    • AA-4 Actuarial Reports

      • AA-4.1 General Requirements

        • Obligation to Appoint an Actuary for Long-Term Insurance Business

          • AA-4.1.1

            In accordance with Article 72(a) of the CBB Law, all insurance firmsG planning to undertake long-term insurance businessG must, no later than the date on which they start to carry out such business, appoint a Registered ActuaryG or Signing ActuaryG , subject to CBB approval.

            Amended: January 2007
            Amended: October 2007

          • AA-4.1.2

            For insurance firmsG whose long-term insurance businessG is restricted to group life policies, having a term of less than or equal to 1 year, and where this long-term insurance businessG represents less than 5% of the insurance firm'sG total gross premiums written, this business will be treated as general insurance businessG and is subject to actuarial requirements as outlined in Paragraph AA-4.1.4.

            Amended: January 2007
            Amended: October 2007

          • AA-4.1.3

            To secure CBB approval, the actuaryG must satisfy the CBB's criteria for Registered ActuaryG or Signing ActuaryG , contained in Paragraphs AA-4.2.1 to AA-4.2.12. The actuaryG of an insurance firmG undertaking long-term insurance businessG , except as provided for under Paragraph AA-4.1.2, must, on an annual basis, undertake an investigation to enable the preparation of the Financial Condition Report (FCR), as specified in Section AA-4.3.

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

        • Obligation to Appoint an Actuary for General Insurance Business

          • AA-4.1.4

            An insurance firmG that carries on general insurance businessG must commission an actuarial opinion, once every two years, from a Registered ActuaryG or Signing ActuaryG . The actuaryG must satisfy the criteria in Paragraphs AA-4.2.1 to AA-4.2.12.

            Amended: April 2014
            Amended: October 2007

          • AA-4.1.5

            The Board of the insurance firm carrying out long-term insurance business must commission annually an FCR and an insurance firm carrying out general insurance business must commission an FCR once every two years. A copy of this report must be provided to the CBB.

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

          • AA-4.1.6

            [This Paragraph was deleted in April 2014.]

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

          • AA-4.1.7

            [This Paragraph was deleted in April 2014.]

            Deleted: April 2014
            Adopted: January 2007

      • AA-4.2 Types of Actuaries

        • AA-4.2.1

          For purposes of Chapter AA-4, the CBB recognises two types of actuaries:

          (a) Registered ActuariesG as per Article 74 of the CBB Law; and
          (b) Signing ActuariesG that are DirectorsG or employeesG of the insurance firmG for which an actuarial report is prepared.
          Added: October 2007

        • AA-4.2.2

          The CBB’s authorisation requirements for Registered ActuariesG are contained in Module AU (Authorisation).

          Added: October 2007

        • AA-4.2.3

          A Signing ActuaryG is a controlled functionG and is subject to the CBB’s approval, as per Section AU-1.2, as an approved personG .

          Added: October 2007

        • AA-4.2.4

          All actuariesG authorised or approved by the CBB must hold appropriate professional qualifications from a relevant, recognised professional body.

          Added: October 2007

        • AA-4.2.5

          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 AA-4.2.4.

          Added: October 2007

        • CBB Approval Criteria for Registered Actuaries

          • AA-4.2.6

            The Registered ActuaryG must not be a DirectorG or employeeG of the insurance firmG for which he/she is providing the FCR and must be authorised by the CBB in accordance with Article 74 of the CBB Law, to carry on the business of an actuaryG within the Kingdom of Bahrain.

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

          • AA-4.2.7

            The Registered ActuaryG must be independent of the insurance firmG .

            Amended: October 2007

          • AA-4.2.8

            For a Registered ActuaryG to be considered independent, he, his spouse and dependant children must not be a related party to the insurance firmG .

            Amended: January 2007
            Amended: October 2007

          • AA-4.2.9

            For the purpose of this Section, a related party of an insurance firmG includes:

            (a) A controllerG of the insurance firmG as defined in Section GR-5.2;
            (b) A close linkG of the insurance firmG as defined in Section GR-6.2;
            (c) An associate of a controllerG as defined in Paragraph GR-5.2.2;
            (d) The extended family of a controllerG including a father, mother, father-in-law, mother-in-law, brother, sister, brother-in-law, sister-in-law, or grandparent;
            (e) A corporate entity, whether or not licensed or incorporated in Bahrain, where any of the persons identified in Subparagraphs (c) and (d) is a DirectorG or would be considered a controllerG were the definition of controllerG set out in Paragraph GR-5.2.1 applied to that corporate entity; and
            (f) An employeeG of an insurance firmG that is related to the insurance firmG submitting the FCR required under this Chapter.
            Amended: April 2014
            Added: October 2007

          • CBB Approval Criteria for Signing Actuary

            • AA-4.2.10

              The Signing ActuaryG may be a DirectorG or employeeG of the licensee concerned.

              Added: October 2007

            • AA-4.2.11

              Where the 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.

              Added: October 2007

            • AA-4.2.12

              The Signing ActuaryG must act independently of the insurance firmG in providing the FCR.

              Amended: April 2014
              Added: October 2007

      • AA-4.3 Content of Financial Condition Report (FCR)

        • AA-4.3.1

          The FCR must provide an objective assessment of the overall financial condition of the insurance firmG . The report must also comply with the following conditions:

          (a) The actuary responsible for the FCR must comply with the relevant professional standards;
          (b) Where relevant, the FCR must include:
          (i) A business overview;
          (ii) An assessment of the insurance firmG 's recent experience and profitability, including as a minimum the experience for the year ending on the valuation date;
          (iii) An assessment of all insurance liabilities outlined under Chapter CA-5;
          (iv) An assessment of the adequacy of past estimates for all insurance liabilities, particularly where there has been a change in assumptions or in the valuation method adopted for previous valuations;
          (v) Where there has been a change in assumptions or in the valuation method from that adopted previously, the effect of those changes on the insurance liabilities and assets arising in respect of those liabilities;
          (vi) An explanation of the assumptions used in the valuation process including, without limitation, assumptions made as to inflation and discount rates, future expense rates and ,where relevant, future investment income;
          (vii) An assessment of the adequacy and appropriateness of data made available to the actuary by the insurance firmG ;
          (viii) A description of the procedures undertaken by the actuary to assess the reliability of the data provided;
          (ix) The model(s) used by the actuary;
          (x) The approach taken to estimate the variability of the estimate; and
          (xi) The nature and findings of the sensitivity analyses undertaken;
          (c) The establishment of the surplus or deficit on any conventional long-term insurance fund and in the case of a surplus, the amount that is proposed to be transferred to the shareholder fund and available for distribution;
          (d) The establishment of the surplus or deficit, if any, for all participants' funds for Takaful firmsG . In the case of surplus, the amount available for distribution must be specified;
          (e) For long-term insurance and Family Takaful, include an assessment of asset and liability management, including the insurance firmG 's investment strategy;
          (f) An assessment of current and future capital adequacy and a discussion of the insurance firmG 's approach to capital management;
          (g) An assessment of pricing, including adequacy of premiums;
          (h) An assessment of the suitability and adequacy of reinsurance/retakaful arrangements, including documentation of reinsurance/retakaful arrangements and the existence and impact of any limited risk transfer/sharing arrangements;
          (i) Where the implications of the report have an adverse impact on the financial condition of the insurance firmG , the report must include recommendations on how to address any shortcomings and eliminate any negative trends; and
          (j) For overseas insurance firmsG , the report must be prepared for Bahraini operations, but consideration must be given to the financial position of the head office.
          Amended: April 2014
          Amended: October 2007
          Amended: January 2007

        • AA-4.3.1A

          The signing actuary or registered actuary may rely on other expert opinions in order to address those matters required in the FCR that are outside of scope of the actuary's qualifications. Where such outside opinions are sought, these should be clearly identified in the report.

          Added: April 2014

        • AA-4.3.2

          The report required under Article 72(a) of the CBB Law must accompany the Insurance Firm Return (Form IFR) submitted to the CBB and cover the period covered by that return, as required under Paragraph BR-1.1.22.

          Amended: January 2007
          Amended: October 2007

        • AA-4.3.2A

          The CBB may require a FCR on a more frequent basis than the requirement outlined. In addition, the CBB may appoint an actuary as an appointed expertG as outlined in Section BR-3.5 to conduct a special purpose review of the insurance firm's operations, risk management, financial affairs or other areas as specified by the CBB.

          Added: April 2014

        • AA-4.3.3

          In accordance with Article 73 of the CBB Law, the evaluation should include:

          (a) A valuation of the liabilities of the insurance firmG attributable to its long-term insurance businessG ;
          (b)The establishment of the surplus, if any, on any long-term insurance fundsG that it is proposed be transferred to shareholders'G funds and available for distribution; and
          (c) The establishment of the deficit, if any, on any long-term insurance fundsG established by the insurance firmG .
          Amended: January 2007
          Amended: October 2007

        • AA-4.3.4

          Where the Registered Actuary'sG or Signing Actuary'sG investigation establishes a deficit on any fund or part of any fund, the insurance firmG concerned must immediately notify the CBB and ensure that remedial action is taken to make good the deficit.

          Amended: January 2007
          Amended: October 2007

        • AA-4.3.5

          Possible remedial action to address the deficit noted in Paragraph AA-4.3.4 may include a transfer to be made from shareholders'G funds of sufficient assets to make good the deficit or a reduction in non-guaranteed bonuses.

          Amended: January 2007
          Amended: October 2007

        • AA-4.3.6

          [This Paragraph was deleted in April 2014.]

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

        • AA-4.3.7

          [This Paragraph was deleted in April 2014.]

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

        • General Insurance Business

          • AA-4.3.8

            [This Paragraph was deleted in April 2014.]

            Deleted: April 2014
            Amended: October 2007

        • Qualified FCR

          • AA-4.3.9

            While the actuaryG is not required to check the data on which the report is based, he should disclose any material concerns in respect of data accuracy, integrity and sufficiency in the context of the work undertaken.

            Amended: October 2007

          • AA-4.3.10

            If, for whatever reason, the actuaryG is unable to give an unqualified report, he must inform the CBB as soon as possible.

            Amended: January 2007
            Amended: October 2007

        • Duties of the Insurance Firm

          • AA-4.3.11

            The DirectorsG of the insurance firmG must provide the Registered ActuaryG or Signing ActuaryG with the data and information required for the preparation of the FCR. The insurance firmG must advise the Registered ActuaryG or Signing ActuaryG of all known changes in internal methods or procedures that could materially affect the determination of reserves and financial condition.

            Amended: April 2014
            Added: October 2007

          • AA-4.3.12

            For general insurance businessG , claims development data provided to the Registered ActuaryG or Signing ActuaryG must be reconciled to the accounting information forming the basis of the statutory accounts.

            Added: October 2007

      • AA-4.3A Role of Actuary in Takaful Firm

        • AA-4.3A.1

          In addition to the requirements under Section AA-4.3, all Family Takaful firmsG must submit to the CBB an annual FCR and all General Takaful firmsG must submit an FCR once every two years from their actuary which must comply with the requirements outlined in this Section as well as in other parts of this Chapter in carrying out their actuarial duties.

          Added: April 2014

        • Certification of Wakala Fees

          • AA-4.3A.2

            Takaful firmsG must ensure their actuary certifies the Wakala fees being charged by the shareholder fund to the participants fund(s). The certified Wakala fee must also be approved by the Shari'a Supervisory Board.

            Added: April 2014

          • AA-4.3A.3

            The actuary must ensure that the contributions charged to the participants, must, at a minimum, cover the claims costs and Wakala fees.

            Added: April 2014

        • Participants' Fund(s) Underwriting Loss

          • AA-4.3A.4

            Where a participants fund(s) incurs an underwriting loss, the Takaful firmG actuary must provide an explanation which outlines the reasons for such loss and the remedial steps being taken by the Takaful firmG to address any deficit in the participants' fund(s).

            Added: April 2014

        • Distribution of Surplus

          • AA-4.3A.5

            In accordance with Section CA-8.5, any distribution of surplus from a participants' fund(s) must be recommended by the Takaful firmG 's actuary and must be based on a full valuation of liabilities as certified by the actuary and in line with audited financial statements.

            Added: April 2014

        • Earmarked Assets

          • AA-4.3A.6

            As outlined in Paragraph CA-8.4.4 and Section CA-8.4A, earmarked assetsG are an integral component of the solvency and liquidity requirements of a Takaful firmG . A separate amount of earmarked assetsG must be allocated for each participants' fund, for each reporting period by estimating:

            (a) The likely impact of adjustments (deductions) of the participants' fund assets as per the admissibility rules (limits) under Chapter CA-4; and
            (b) The liquidity needs of the participants' fund.
            Added: April 2014

          • AA-4.3A.7

            The computed figure of the earmarked assetsG for each participants' fund are allocated to the insurance business amountG of the respective fund to reduce the effect of the admissibility deductions on the participants' funds available capital. As outlined in Chapter CA-4, the insurance business amountG is used in the calculation of the participants' fund available capital to meet the solvency requirements.

            Added: April 2014

          • AA-4.3A.8

            Earmarked assetsG , and in particular cash and those assets converted to cash, are also used to provide the necessary liquidity to the participants' fund(s) as outlined in Section CA-8.4A and are separately allocated to meet the liquidity needs.

            Added: April 2014

          • AA-4.3A.9

            In light of the critical role of earmarked assetsG in assessing solvency and addressing any liquidity shortfall in a Takaful firmG , the actuary must carry out quarterly, or more frequently as required, appraisals of the solvency and liquidity status of the participants' fund(s). The actuary must determine and document the level at which the reassessment of earmarked assets is triggered.

            Added: April 2014

          • AA-4.3A.10

            The actuary's appraisals required under Paragraph AA-4.3A.9 are required to determine the impact of the admissibility deductions and liquidity needs in case of a cash deficit and to ensure that the Takaful firmG maintains a sufficient level of earmarked assetsG to meet any solvency or liquidity requirements.

            Added: April 2014

          • AA-4.3A.11

            As a follow up to the required appraisals of solvency and liquidity requirements outlined under Paragraph AA-4.3A.9, the actuary must determine if the level of earmarked assetsG meets the solvency and liquidity requirements and recommend to the Takaful firmG any increase needed to the earmarked assetsG to comply with these requirements. The actuary's recommendation must also be approved by the Takaful firmG 's board of directors.

            Added: April 2014

      • AA-4.4 Removal or Resignation of an Actuary

        • AA-4.4.1

          An insurance firmG must notify the CBB as soon as it intends to remove its actuaryG , together with an explanation of its decision, or as soon as its actuaryG resigns.

          Added: October 2007

        • AA-4.4.2

          Insurance firmsG must ensure that a replacement actuaryG is appointed (subject to CBB approval as per Paragraph AA-4.1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.

          Added: October 2007

        • AA-4.4.3

          If an insurance firmG fails to make a fresh appointment of an actuaryG in accordance with the provisions of Paragraph AA-4.4.2, the insurance firmG must not – until such an appointment is made – effect any new contract which constitutes long-term insurance businessG without the written permission of the CBB.

          Added: October 2007

        • AA-4.4.4

          An actuaryG who resigns or is otherwise removed from the office of actuaryG must, within 30 days of his resignation or removal, write to the CBB setting out the reasons for his resignation or removal.

          Added: October 2007

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