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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > Business Standards > CA Capital Adequacy > CA-A Introduction
  • CA-A Introduction

    • CA-A.1 Purpose

      • CA-A.1.1

        This Module presents requirements that have to be met by insurance licenseesG , with respect to the level of capital they must maintain. Condition 5 of the Central Bank of Bahrain ('the CBB') Licensing Conditions (cf. Chapter AU-2.5) requires insurance licenseesG to maintain adequate financial resources, in excess of the minimum requirements specified in Module CA (Capital Adequacy).

        Amended: January 2007

      • CA-A.1.2

        The requirements specified in this Module vary according to the Category of insurance licenseeG concerned, the volume of business undertaken and its inherent risk. The purpose of such requirements is to ensure that insurance licenseesG maintain levels of capital sufficient to absorb unexpected losses, within a reasonable confidence interval. The capital levels specified here, in other words, are not sufficient to absorb all unexpected losses. Insurance licenseesG are also required to make their own assessment of the prudent level of capital that they need to hold.

        Amended: January 2007

      • CA-A.1.3

        This Module covers requirements to be met by both conventional and Takaful insurers. Specific requirements for Takaful firmsG are given in Chapter CA-8.

        Amended: January 2007
        Amended: October 2008

      • Legal Basis

        • CA-A.1.4

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

          Amended: January 2011
          Adopted: January 2007

        • CA-A.1.5

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

          Adopted: January 2007

    • CA-A.2 Module History

      • CA-A.2.1

        This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes to 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

      • CA-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

      • CA-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
        CA-1.2 01/07/05 Changes made to the definitions of Tier 1 and Tier 2.
        CA-4.1 01/07/05 Correction to cross-reference.
        CA-4.2 01/07/05 Clarified valuation of amounts receivable.
        CA-7.1 01/07/05 Minor correction to list.
        CA-8.2 01/07/05 Minor correction.
        CA-8.3 01/07/05 Minor correction.
        CA-8.4 01/07/05 Minor correction.
        CA-8.5 01/07/05 Minor correction.
        CA-1.2 01/10/05 Amended requirement for minimum paid-in capital to minimum Tier 1 capital and related transition rules; clarified the definition of Tier 1 capital with respect to reserves and appropriations; clarified definition of Tier 2 in relation to the investment fair value reserve; amended determination of capital available chart in line with other changes in Section CA-1.2.
        CA-2.1 01/10/05 Added class of short term medical for solvency calculation of premiums basis and claims basis.
        CA-4.2 01/10/05 Clarified the treatment of unlisted equity shares and deleted the reference to managed funds.
        CA-7.1 01/10/05 Corrected reference to Group Insurance Firm Return.
        CA-3.1 01/01/06 Clarified that rule applies to related parties, as defined in Glossary.
        CA-2.1.14 01/04/06 Clarified the calculation of the average gross claims incurred.
        CA-4.2.25 01/04/06 Corrected that receivables from contracts of insurance are also included under general asset valuation regulations.
        CA-6.1.6 01/04/06 Clarified the definitions of 'assets' and 'liabilities' for purposes of currency matching and localisation requirements.
        CA-1.2.8 and CA-1.2.21 01/07/06 Added minority interest as part of the components of Tier 1 and clarified excess tier 2 capital.
        CA-2.1.14 01/07/06 Clarified calculation of required solvency margin on the Claims basis.
        CA-4.3.2 01/07/06 Clarified category limits for assets linked to long-term liabilities.
        CA-8.4.3 01/07/06 Clarified definition of capital available for a takaful fund.
        CA-A.1.4 01/2007 New Rule introduced, categorising this Module as a Directive.
        CA-1.2.8 and 1.2.21 01/2007 Minority interest was deleted as part of Tier 1 capital as solvency test is performed on an unconsolidated basis.
        CA-1.2.21 01/2007 Deleted reference to negative reserves as no discounting is permitted that would give rise to negative reserves. Clarified that there should be a deduction for solvency margin deduction required for branches in other jurisdictions. Added a deduction for assets pledged or provided as collateral.
        CA-2.1.8A 01/2007 The required solvency margin for pure reinsurers, other than for the reinsurance of linked business, is to be calculated in accordance with Paragraph CA-2.1.12.
        CA-2.1.15 01/2007 The reference period for the calculation of average gross claims and met claims incurred is now limited to 3 years. The 7-year option has been deleted.
        CA-4.2.25 01/2007 Clarified that all amounts due under contracts of insurance and reinsurance that have been due for more than 6 months must be valued at nil.
        CA-1.2.1
        and 1.2.2
        10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firmsG
        CA-4.2.25A 10/2008 Added a Paragraph to deal with the valuation of unearned reinsurance premiums.
        CA-8.4.6A 10/2008 Clarified treatment of income generated from the assets forming part of the free loan to the Takaful fund.
        CA-8.4.13 10/2008 Introduced Rules for transition period for newly established Takaful funds.
        CA-6.1.1 04/2009 Clarified non-application of localisation requirements to unit-linked products.
        CA-8.4.8 04/2009 Paragraph 8.4.8 deleted on funding of deficit for Family Takaful funds
        CA-1.2.4 10/2009 Paragraph amended to allow for the zillmer adjustment as outlined in Paragraph CA-5.1.24
        CA-3.1 10/2009 Section amended to reemphasize the need for separate accounting funds for different lines of business and different funds.
        CA-5.1 10/2009 Various amendments in line with consultation document issued in July 2009.
        CA-A.1.4 01/2011 Clarified legal basis
        CA-1.3.1 and CA-1.3.1A 04/2012 Updated capital requirements for insurance brokers.
        CA-1.2.3,
        CA-1.2.23,
        CA-4.2.25,
        CA-8.2,
        CA-8.3,
        CA-8.4,
        CA-8.4A,
        CA-8.5
        04/2014 Various amendments to reflect consultation undertaken on the enhanced operational and solvency framework. Some changes are applicable to all insurance firms and some only applicable to Takaful firms.

      • CA-A.2.4

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

        Amended: January 2007

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