CBB Volume 3: Contents

Central Bank of Bahrain Volume 3—Insurance
BackRich TextPrint

You need the Flash plugin.

Download Macromedia Flash Player



  • Central Bank of Bahrain Volume 3—Insurance

    • Part A


      Table of Contents
        Module Title Module
      Code
      Date last
      changed
       
      Introduction Users Guide UG Oct 16 PDF Version
      Executive Summary ES Apr 14 PDF Version
      High Level Standards Authorisation AU Jul 19 PDF Version
      Principles of Business PB Jan 11 PDF Version
      High Level Controls HC Jul 16 PDF Version
      Auditors and Actuaries AA Apr 14 PDF Version
      General Requirements GR Apr 19 PDF Version
      Business Standards Capital Adequacy CA Apr 14 PDF Version
      Business Conduct BC Apr 16 PDF Version
      Client Money CL Jul 15 PDF Version
      Risk Management RM Oct 17 PDF Version
      Financial Crime FC Jan 19 PDF Version
      Training and Competency TC Oct 07 PDF Version
      Reporting Requirements CBB Reporting BR Apr 17 PDF Version
      Public Disclosure PD Apr 14 PDF Version
      Enforcement & Redress Enforcement EN Apr 19 PDF Version
      Compensation CP Oct 07 PDF Version
      Sector Guides Captive Insurance CI Apr 11 PDF Version
      Insurance Intermediaries and Managers IM Apr 12 PDF Version
      Takaful / Retakaful TA Apr 14 PDF Version

      • Introduction

        • UG Users Guide

          • UG-A Introduction

            • UG-A.1 Purpose

              • UG-A.1.1

                The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook’s substantive content was previously issued by the Bahrain Monetary Agency (‘the BMA’), and was carried forward when the CBB replaced the BMA in September 2006.

                Amended: January 2007

              • UG-A.1.2

                The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional and Islamic bank licensees respectively, were issued in July 2004 and January 2005. This Volume (Volume 3), was issued in April 2005. Volume 4, covering investment business, was issued in April 2006. Volumes 5 (covering specialised licensees), and Volume 6 (capital markets) are being issued gradually. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

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

              • UG-A.1.3

                This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 3 (Insurance); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

                Amended: January 2007

              • UG-A.1.4

                Volume 3 (Insurance) covers insurance licensees, i.e. those CBB licensees that solely undertake regulated insurance services. It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on providing insurance services and the treatment of policyholders). Collectively, these requirements are aimed at ensuring the safety and soundness of the CBB, and providing an appropriate level of protection for policyholders.

                Added: January 2007
                Amended: October 2007

              • Legal Basis

                • UG-A.1.5

                  This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 3 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the of the Central Bank of Bahrain and Financial Institutions Law 2006 ("CBB Law"). The Directive in this Module is applicable to all insurance licensees (including their approved persons), and to registered actuaries and loss adjusters.

                  Amended: January 2011
                  Added: January 2007

                • UG-A.1.6

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

                  Added: January 2007

            • UG-A.2 Module History

              • UG-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 date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                Amended: January 2007

              • UG-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 the actual requirements.

                Added: January 2007

              • UG-A.2.3

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

                Module Ref. Change Date Description of Changes
                UG-A.1 01/2007 Updated to reflect new CBB Law, various references changed and new Rule UG-A.1.6 introduced categorising this Module as a Directive.
                UG-1.2 01/2007 New Rules UG-1.2.6 and UG-1.2.7 to reflect the CBB Law, other material reorderd as a consequence.
                UG-3.2.1 10/2007 Updated CBB policy re distribution of hard copies of Volumes of Rulebook.
                Order Form 10/2007 Amended Order Form to reflect new policy re hard copy availability.
                UG-A.1.5 01/2011 Clarified legal basis
                UG-2.1.2 01/2011 Updated to reflect structure of Volume 5.
                UG-A.1.2, UG-1.2.1, UG-1.2.2, UG-1.2.7, UG-2.1.1, UG-2.1.2, UG-2.1.3, and UG-2.2.2 10/2012 Various minor amendments to reflect the structure of the Rulebook, including the issuance of Volume 7.
                UG-3.2 and Annex 01/2013 Amended as CBB Rulebook only now available on CBB Website.
                UG-1.3.4 10/2016 Added Section to clarify reference to 'he' 'his' 'she' 'her'.

              • UG-A.2.4

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

              • Superseded Requirements

                Deleted: January 2007

                • UG-A.2.3

                  Deleted: January 2007

          • UG-1 Rulebook Status and Application

            • UG-1.1 Legal Basis

              • UG-1.1.1

                Volume 3 (Insurance) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Artilces 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

                Amended: January 2007

              • UG-1.1.2

                The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

                Amended: January 2007

              • UG-1.1.3

                The requirements for representative offices will be covered as part of Volume 5 (Specialised activities) of the Rulebook and will be issued at a later date.

                Amended: January 2007
                Amended: October 2007

              • CBB's Rulemaking Instruments

                • UG-1.1.4

                  Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).

                  Added: January 2007

                • UG-1.1.5

                  Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.

                  Added: January 2007

                • UG-1.1.6

                  Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific licensees (or categories of licensees), approved persons or registered persons. Directives are binding to whom they are addressed.

                  Added: January 2007

                • UG-1.1.7

                  Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.

                  Added: January 2007

                • UG-1.1.8

                  All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. When this is the case, then the Rulebook crossrefers to the Regulation in question and specifies the requirements concerned.

                  Adopted: July 2007

                • UG-1.1.9

                  In keeping with the nature of these regulatory requirements, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licensees, approved persons, or registered persons.

                  Adopted: July 2007
                  Amended: October 2007

            • UG-1.2 Status of Provisions

              • UG-1.2.1

                The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. If a licensee breaches a Rule to which it is subject, it is liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.

                Amended: October 2012
                Amended: January 2007

              • UG-1.2.2

                Guidance is not binding; rather, it is material that helps inform a particular Rule or sets of Rules, or provides other general information. Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.

                Amended: October 2012
                Amended: January 2007

              • UG-1.2.3

                The status of each Paragraph within the Rulebook is identified by its text format, as follows:

                •  Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.
                •  Guidance is in normal type, font size 11.


                Amended: January 2007

              • UG-1.2.4

                Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.

                Amended: January 2007

              • UG-1.2.5 [Deleted]

                Deleted: January 2007

              • UG-1.2.6 [Deleted]

                Deleted: January 2007

              • UG-1.2.7 [Deleted]

                Deleted: January 2007

              • UG-1.2.5

                Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.

                Amended: January 2007

              • UG-1.2.6

                All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.

                Added: January 2007

              • UG-1.2.7

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Added: January 2007

              • UG-1.2.8

                The CBB’s enforcement processes are set out in Module EN.

                Added: January 2007

            • UG-1.3 Application

              • UG-1.3.1

                Volume 3 of the CBB Rulebook for the most part applies to all insurance licensees; to individuals undertaking key functions in those licensees (so-called “approved persons”); and to certain support services (actuaries and loss adjusters). (Representative offices are subject to the relevant requirements in Volume 5 of the CBB Rulebook). Further information and relevant definitions are provided in Module AU (Authorisation). Most of the content of Volume 3 only has the formal status of a Directive.

                Amended: January 2007
                Amended: October 2007

              • UG-1.3.2 [Deleted]

                Deleted: January 2007

              • UG-1.3.2

                A few Rules and Guidance have general applicability (and thus also have the formal status of a Regulation); for instance, no one may carry on an insurance business within or from Bahrain without the appropriate license, and controllers of insurance licensees are also subject to various requirements.

                Amended: January 2007
                Amended: October 2007

              • UG-1.3.3

                Each Module in Volume 3 (except those listed under the 'Introduction' and 'Sector Guides' headings) contains a Scope of Application Chapter, setting out which Rules and Guidance apply to which particular type of insurance licensee or person, for the Module concerned. In addition, each Rule, (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

                Amended: January 2007

              • UG-1.3.4

                All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

                Added: October 2016

            • UG-1.4 Effective Date

              • UG-1.4.1

                Volume 3 (Insurance) of the CBB Rulebook was first issued in April 2005. Its contents have immediate effect, subject to transition arrangements that may be specified.

                Amended: January 2007

              • UG-1.4.2

                Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 3 (Insurance).

          • UG-2 Rulebook Structure and Format

            • UG-2.1 Rulebook Structure

              • Rulebook Volumes

                • UG-2.1.1

                  The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:

                  Volume 1 Conventional Banks
                  Volume 2 Islamic Banks
                  Volume 3 Insurance
                  Volume 4 Investment Business
                  Volume 5 Specialised Activities
                  Volume 6 Capital Markets
                  Volume 7 Collective Investment Undertakings
                  Amended: October 2012
                  Amended: January 2007

                • UG-2.1.2

                  Volume 5 (Specialised Activities), covers money changers; financing companies; representative offices; administrators; trust service providers, micro-finance institutions and ancillary services providers.

                  Amended: October 2012
                  Amended: January 2011
                  Amended: October 2007
                  Amended: January 2007

              • Rulebook Contents (Overview)

                • UG-2.1.3

                  Except for Volumes 5, 6 and 7, the basic structure of each Rulebook is the same. Each Volume starts with a contents page and an introduction containing a User's Guide and Executive Summary. Subsequent material is organised underneath the following headings:

                  (a) High Level Standards;
                  (b) Business Standards;
                  (c) Reporting Requirements;
                  (d) Enforcement and Redress; and, where appropriate,
                  (e) Sector Guides.
                  Amended: October 2012
                  Amended: January 2007
                  Amended: October 2007

                • UG-2.1.4

                  Volume 5 is organised by the category of specialised firm concerned, whilst Volume 6 by subject area (authorised exchanges; issuers of securities, etc).

                  Amended: January 2007

                • UG-2.1.5

                  The material in Volumes 1–4 is contained in Modules, each covering a specific area of requirements (e.g. capital). In turn, each Module is divided into Chapters, Sections and Paragraphs, as detailed below.

                • UG-2.1.6

                  Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called "Part A" and the appendix Volume is called "Part B".

            • UG-2.2 Volume Structure

              • Modules

                • UG-2.2.1

                  Rulebook Volumes are subdivided into Modules, arranged in groups according to their subject matter, underneath the headings listed in Paragraph UG-2.1.3 above.

                • UG-2.2.2

                  Each Module in a Volume is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. These codes are used for cross-referencing within the text.

                  Amended: October 2012

              • Chapters

                • UG-2.2.3

                  Each Module consists of Chapters, categorised into two types:

                  •  A standard introductory Chapter (referenced with a letter: e.g. UG-A); and
                  •  Chapters containing the substantive content of the Module (referenced with a number: e.g. CA-1, ML-2, etc.)

                • UG-2.2.4

                  The introductory Chapters summarise the purpose of the Module and its history (in terms of changes made to its contents). A separate introductory Chapter also prescribes the scope of application of the Module’s requirements.

                  Amended: January 2007

              • Sections and Paragraphs

                • UG-2.2.5

                  Chapters are further sub-divided into Sections; these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-section headings may be used, to guide the reader through a Section; sub-section headings are italicised and unnumbered, and act purely as an indicator (without limitation), as to the status of the Paragraphs that follow.

                  Amended: January 2007

              • Table of Contents

                • UG-2.2.6

                  Each Volume's contents page lists all the Modules contained within it (Part A), and the information contained in the relevant appendix Volume (Part B).

                • UG-2.2.7

                  The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.

                  Amended: January 2007

            • UG-2.3 Format and Page Layout

              • Headers

                • UG-2.3.1

                  The top of each page in the Rulebook identifies the Volume, Module and Chapter in question.

              • Footers

                • UG-2.3.2

                  The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.

                  Amended: January 2007

              • Defined Terms

                • UG-2.3.3

                  Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

                  Amended: January 2007

              • Cross-references

                • UG-2.3.4

                  Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the First Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.

                  Amended: July 2007

              • Text format

                • UG-2.3.5

                  Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.

                  Amended: July 2007

                • UG-2.3.6

                  When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, the words ‘Rule’ or ‘Guidance’ may be used instead of ‘Paragraph’, followed by the reference number (e.g. “As required by Rule FC-1.1.1, licensees must …”).

                  Amended: January 2007

          • UG-3 Rulebook Maintenance and Access

            • UG-3.1 Rulebook Maintenance

              • Quarterly Updates

                • UG-3.1.1

                  Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required) in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.

                  Amended: January 2007

                • UG-3.1.2

                  The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the “date Last Changed” column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.

                  Amended: January 2007

                • UG-3.1.3

                  A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change and, the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.

                  Amended: July 2007

                • UG-3.1.4

                  Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module’s contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module’s contents page.

                  Amended: January 2007

                • UG-3.1.5

                  The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter , to notify them of changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.

                  Amended: January 2007

              • Changes to Numbering

                • UG-3.1.6

                  In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:

                  (a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an "A"; a second inserted Paragraph that follows immediately afterwards would be numbered with a "B", and so on.

                  For example, if a new Paragraph needs to inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter).
                  (b) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: "(This Paragraph was deleted in April 2006.)" ( The date given being the actual end-calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.
                  Amended: January 2007

                • UG-3.1.7

                  Where many such changes have built up over time, then the CBB may reissue the whole section, Paragraph, Chapter or even Module concerned, consolidating all these changes into a renumbered version.

                  Amended: January 2007

            • UG-3.2 Rulebook Access

              • Availability

                • UG-3.2.1

                  The Rulebook is available on the CBB website.

                  Amended: January 2013
                  Amended: January 2007
                  Amended: October 2007

              • Queries

                • UG-3.2.2

                  Questions regarding the administration of the Rulebook (e.g. ordering additional copies, website availability, the updating of material etc) should be addressed to the Rulebook Section of the Licensing & Policy Directorate
                  Rulebook Section
                  Licensing & Policy Directorate
                  Central Bank of Bahrain
                  PO Box 27
                  Manama
                  Kingdom of Bahrain

                  Tel: +973 - 17 54 7413
                  Fax: +973 - 17 53 0228
                  E-mail: rulebook@cbb.gov.bh
                  Web: www.cbb.gov.bh

                  Questions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.
                  Amended: January 2013
                  Amended: January 2007

              • CBB Rulebook Order Form [This form was deleted in January 2013]

                Deleted: January 2013

        • ES Executive Summary

          • ES-A Introduction

            • ES-A.1 Purpose

              • Executive Summary

                • ES-A.1.1

                  The purpose of this Module is to:

                  (a) Provide an overview of the structure of Volume 3 (Insurance);
                  (b) Provide a summary of each Module; and
                  (c) Outline the transition rules for the implementation of the Volume 3.
                  Amended: January 2007

                • ES-A.1.2

                  The Central Bank of Bahrain ('CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, has as its mission:

                  (a) To ensure monetary and financial stability in the Kingdom of Bahrain; and
                  (b) To regulate, develop and maintain confidence in the financial sector.
                  Amended: January 2007

                • ES-A.1.3

                  As the single regulator, the CBB ensures the consistent application of regulatory standards in banking, insurance and capital markets, as well as encourages an open and cooperative approach in dealing with financial institutions.

                  Amended: January 2007

                • ES-A.1.4

                  The supervision of the insurance sector in the Kingdom pays particular regard to the standards set by the International Association of Insurance Supervisors (IAIS). The CBB plays an important role in meeting stakeholders' expectations — the principal stakeholders of the CBB are the Government of the Kingdom of Bahrain, the regulated financial institutions, the consumers, the IAIS and several other international organizations.

                  Amended: January 2007

                • ES-A.1.5

                  To carry out its responsibilities in relation to the insurance sector, the CBB has four supervisory objectives, namely to:

                  (a) Promote the stability and soundness in the insurance system;
                  (b) Provide an appropriate degree of protection to insurance company policyholders;
                  (c) Promote transparency and market discipline; and
                  (d) Reduce the likelihood of insurance licensees being used for financial crime (including money laundering activities).
                  Amended: January 2007

              • Legal Basis

                • ES-A.1.6

                  This Module contains the CBB's (as amended from time to time) Directive relating to transition rules 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 licensees (including their approved persons).

                  Amended: January 2011
                  Amended: January 2007

                • ES-A.1.7

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

                  Amended: January 2007

            • ES-A.2 Module History

              • ES-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 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

              • ES-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.

                Adopted: January 2007

              • ES-A.2.3

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

                Module Ref. Change Date Description of Changes
                ES-1.1 01/07/05 Module BR: Corrected first quarterly return due for the period ending 31 March 2006.
                ES-1.1 01/10/05 Clarified application of Module FC to insurance managers.
                ES-1.10 01/10/05 Corrected cross-reference referring to examples of suspicious transactions.
                ES-2.4 01/10/05 Added transition period for actuarial requirements 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.
                ES-2.5 01/10/05 Corrected cross-reference.
                ES-2.6 01/10/05 Updated transition rules for minimum Tier 1 capital.
                ES-1.1 01/01/06 Transition rules for reporting by insurance firms updated.
                ES-2.7 01/01/06 A Section on transition rules for reporting by insurance firms was added.
                ES-1.1.5 01/07/06 Transition rule for Modules RM and PD has been added.
                ES-2.6A 01/07/06 Added transition rules for physical security measures and third party insurance.
                ES-2.8 01/07/06 Transition rules in respect of semi-annual disclosure requirements have been added.
                ES-A.1.6 01/2007 New Rule introduced, categorising this Module as a Directive.
                ES-1.1.9 and ES-2.4.2 01/2007 Clarified the first period for which a report from the Signing Actuary is required.
                ES-1.1.9 and ES-2.6B.1 01/2007 Allowed for a transition period for the external auditor's report required under Subparagraph FC-3.3.1(d).
                ES-1.1.9 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firms.
                ES-1.2.2 10/2007 Pure reinsurers can undertake both general insurance business and long-term insurance business within the same entity.
                ES-2.4.3 10/2007 Clarified the transition period for the rotation of audit partner.
                ES-2.6.2 10/2007 Minimum Tier 1 capital only applies to Bahraini insurance firms.
                ES-1.1, ES-1.2, ES-1.11, ES-1.14 10/2009 Reference added to appointed representatives as per Resolution (11) of 2009.
                ES-1.2.3 10/2009 Amended list of controlled functions to be consistent with Module AU.
                ES-1.5.4 10/2009 Amended to be consistent with Section AA-4.2.
                ES-2.5.4 10/2009 Introduced transition rule for new requirements for appointed representatives as per Resolution (11) of 2009.
                ES-A.1.6 01/2011 Clarified legal basis
                ES1.1.9, ES-1.4, ES-1.17.3 and ES-2.3 04/2011 Amended to reflect changes to Module HC.
                ES-1.1.9, ES-1.8A and ES-2.6AA2 04/2012 Amendments made to reflect the issuance of Module CL (Client Money).
                ES-2.6AA1 04/2012 Added transition period to have in place customer complaints procedures as outlined in Chapter BC-4.
                ES-2.7.4 and ES-2.7.5 04/2012 Added transition period for filing of IBR and IBRS.
                ES-1.1.9
                ES-1.15
                10/2012 The reference to Module DP was deleted as customer complaints procedures are included in Chapter BC-4.
                ES-1.1.9 04/2014 Updated transition period to repay/write of Qard Hassan granted for solvency purposes.
                ES-1.2.3 04/2014 Updated list of approved persons to be in line with AU-1.2.2.
                ES-1.7.5, ES-1.19.3, ES-2.4 and ES-2.6 04/2014 Updated to reflect the consultation on the enhanced operational and solvency framework for Takaful firms.

          • ES-1 Structure and Summary of Insurance Modules

            • ES-1.1 Structure of Volume 3 (Insurance)

              • ES-1.1.1

                Volume 3 (Insurance) of the Rulebook covers insurance activities, i.e. the provision of regulated insurance services by insurance licensees. It also includes requirements regarding approved persons; and the registration requirements for actuaries, loss adjusters and appointed representatives.

                Amended: October 2009
                Amended: January 2007

              • ES-1.1.2

                Volume 3 excludes representative offices of insurance firms, and ancillary services providers. These Regulations will later be incorporated into Volume 5 (Specialised Activities) of the CBB Rulebook, to be released at a later date.

                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.3

                Volume 3 (Insurance) is made up of two volumes: Part A is the main Volume containing detailed Modules containing the Rules and Guidance and Part B is an appendix Volume containing a glossary of defined terms, CBB authorisation forms, CBB reporting forms and any supplementary information.

                Amended: January 2007

              • ES-1.1.4

                Part A of Volume 3 (Insurance) is organized under the following headings:

                •  Introduction;
                •  High Level Standards;
                •  Business Standards;
                •  Reporting Requirements;
                •  Enforcement and Redress; and
                •  Sector Guides.
                Amended: January 2007
                Amended: October 2007

              • ES-1.1.5

                Including this Executive Summary Module, there are 20 Modules that make up Part A of Volume 3 (Insurance). The requirements for the various insurance license categories are embedded throughout Part A. In addition, for some specialised licenses (captive insurers, insurance intermediaries and takaful/retakaful) there are sector guides summarizing the key requirements, specifically applicable to these categories.

                Amended: January 2007

              • ES-1.1.6

                Part B of Volume 3 is organized under the following headings:

                •   Glossary;
                •   Authorisations Forms;
                •   Reporting Forms; and
                •   Supplementary Information.
                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.7

                Defined terms used in the Rulebook are underlined; their definition can be found in the Glossary. Each volume has its own Glossary, as definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different volume with a different meaning.

                Adopted: January 2007

              • ES-1.1.8

                There are four authorisation forms, comprising (i) Form 1 (application for a license); (ii) Form 2 (application for the authorisation of a controller); (iii) Form 3 (application for approved person status); and (iv) Form 4 (application for registration).

                Adopted: January 2007
                Amended: October 2007

              • ES-1.1.9

                A summary of the Modules, their application and implementation is given in the table below:

                Module Application Transition Rules
                Module AU All new applicants for licenses, approved persons and registration of actuaries, loss adjusters and appointed representatives. Effective 1 June 2005. AU-1.1.11 where an insurance licensee carries on a prohibited commercial business, the licensee must notify the CBB and establish the transitional rules.
                Module PB All insurance licensees and approved persons. None.
                Effective 1 June 2005.
                Module HC
                1. Applies to all Bahraini insurance licensees except for Bahraini single person companies.
                2. Insurance consultants, insurance managers and captive insurers are subject to Guidance under HC-10.
                3. Exemption possible from the requirement to have 2 independent non-executive Directors for Bahraini insurance licensees that are part of an overseas group and exemption to have Board Committees (HC-1.5.2).
                4. Where an insurance broker's Board does not consider it necessary to create an audit committee, it must be prepared to give reasons for its decision to the CBB (HC-B.1.2).
                The updated Module is effective on 1st January 2011. All insurance licensees to which Module HC applies must be in full compliance by the financial year end 2011.
                Module AA All insurance licenseesauditors
                All insurance firmsactuaries
                For insurance firms whose business is restricted to group life policies, having a maturity of less than or equal to 1 year, actuarial requirements must be met by December 31, 2007.
                The first period for which a report is required by a Signing Actuary is for the period ending December 31, 2008.
                All other requirements are effective 1 July 2005.
                Module GR Refer to chart in GR-B.1.1 for application All insurance licensees must comply with the requirements for books and records within Bahrain, effective 1 July 2005.
                Professional indemnity coverage must be met by all insurance brokers and insurance consultants by 31 Dec. 2005.
                For unincorporated brokers licensed prior to 1 June 2005, professional indemnity coverage must be met by 31 Dec 2006.
                All other provisions of Module GR are to be applied effective 1 June 2005.
                Compliance with Resolution (11) of 2009 dealing with appointed representatives is effective 1st January 2010.
                Module CA All insurance licensees, with specific requirements applicable to different types of licensees.
                Also special rules in place for takaful firms.
                Minimum Tier 1 capital for Bahraini insurance firms to be met by December 31, 2007.
                For insurance brokers licensed prior to 1 June 2005, implementation effective 31 Dec. 2006.
                For Qard Hassan granted for solvency purposes, repayment or write off over a period of 5 years from April 2014.
                For other insurance licensees licensed prior to 1 June 2005, implementation effective 31 Dec. 2005.
                Module BC Applicable to direct domestic business. Reinsurance business is exempted. Also special rules in place for takaful firms. None.
                Effective 1 July 2005.
                Module CL Applies to all insurance brokers and appointed representatives licensed by the CBB that undertake the broking of insurance contracts (see Rule AU-1.4.10) and hold client money. Effective 1 July 2012.
                Module RM Only applies to insurance firms and insurance brokers. Physical Security Measures and Third Party Insurance are effective December 31, 2006.
                Module FC Measures for the prevention of money laundering and terrorism financing apply to insurance firms and insurance brokers, with some exemptions for captive insurers managed by an insurance manager. Where captive insurers are managed by an insurance manager, this Module also applies to the insurance manager.
                Some exemption possible for reinsurers (FC-B.1.2).
                Measures dealing with fraud (FC-8) apply to all insurance licensees.
                Effective 1 July 2005. For long-term insurance contracts, the CBB expects the Module to be applied to current clients gradually on a case by case basis.
                Module TC To be developed in the future.  
                Module BR All insurance licensees, with specific requirements applicable to different types of licensees. For insurance firms, first annual and group reporting due for the period ending 31 December 2006 and first quarterly report due for the quarter ending 31 March 2007. Notification and approval requirements effective 1 June 2005.
                Module PD Only applies to insurance firms. First disclosure requirements required for the period ending 31 December 2005.
                First semi-annual disclosure requirements required for the period ending 30 June 2008.
                Module EN All insurance licensees, approved persons and registered persons. None.
                Effective 1 June 2005.
                Module DP [Deleted as included in Chapter BC-4]  
                Module CP To be developed in the future.  
                Module CI Captive insurers Transition rules as per those stated in main Modules.
                Module IM Insurance intermediaries Transition rules as per those stated in main Modules.
                Module TA Takaful/retakaful Transition rules as per those stated in main Modules.
                Amended: April 2014
                Amended: October 2012
                Amended: April 2012
                Amended: April 2011
                Amended: October 2009
                Amended: October 2007
                Amended: January 2007

            • ES-1.2 Module AU — Authorisation

              • ES-1.2.1

                Module AU covers the licensing requirements for insurance licensees; registration requirements for actuaries, loss adjusters and appointed representatives; and authorisation requirements for approved persons. The Module defines what is included as part of regulated services, specifically providing definitions for:

                (a) Carrying on of insurance business (insurance firms);
                (b) The broking of insurance contracts (insurance brokers);
                (c) The offering of insurance advice (insurance consultants);
                (d) The provision of insurance management services (insurance managers); and
                (e) Operators of an insurance exchange (insurance exchange operators).
                Amended: October 2009
                Amended: October 2007
                Amended: January 2007

              • ES-1.2.2

                With the exception of captive insurersand pure reinsurers, an insurance firm cannot undertake both long-term insurance business and general insurance business. Insurance firms (including captive insurers), must operate on either conventional insurance principles or on takaful principles: they cannot combine the two. Grandfathering provisions apply for those companies whose past license granted them the right to undertake both long-term insurance business and general business.

                Amended: January 2007
                Amended: October 2007

              • ES-1.2.3

                Module AU deals with the requirements and conditions for approved persons, i.e. those wishing to undertake a controlled function in an insurance licensee. Controlled functions are those of:

                (a) Director;
                (b) Chief executive or general manager;
                (c) Head of function;
                (d) Head of risk management;
                (e) Compliance officer;
                (f) Money Laundering Reporting Officer;
                (g) Member of Shari'a Supervisory Board;
                (h) Internal Shari'a reviewer;
                (i) Unit-linked investment adviser; and
                (j) Signing Actuary (where the function is undertaken by a Director or an employee of the insurance firm).
                Amended: April 2014
                Amended: October 2009
                Amended: January 2007

              • ES-1.2.4

                The licensing conditions that must be abided by all insurance licensees are outlined as part of Chapter AU-2 of the Module.

                Amended: January 2007

              • ES-1.2.5

                The Module outlines the information requirements and procedures that must be followed as part of the process for:

                (a) Licensing;
                (b) Approved persons; and
                (c) Registration of actuaries, loss adjusters and appointed representatives.
                Amended: October 2009
                Amended: January 2007

            • ES-1.3 Module PB — Principles of Business

              • ES-1.3.1

                The 10 Principles of Business covered in Module PB are a general statement of the fundamental obligations of all CBB insurance licensees and approved persons. They have the status of Rules and provide a basis for other more detailed Rules elsewhere in Volume 3.

                Amended: January 2007

              • ES-1.3.2

                All Principles of Business apply to activities carried out by the licensees, including activities carried out through overseas branches. Principles 1 to 8 also apply to approved persons, in respect of controlled functions for which they have been approved. Principles 9 (Adequate Resources) and Principles 10 (Management, Systems and Controls) also take into account any activities of other members of the group of which the licensee is a member.

                Amended: January 2007

              • ES-1.3.3

                The Principles of Business are:

                Principle 1 — Integrity

                Principle 2 — Conflicts of Interest

                Principle 3 — Due Skill, Care and Diligence

                Principle 4 — Confidentiality

                Principle 5 — Market Conduct

                Principle 6 — Customer Assets

                Principle 7 — Customer Interests

                Principle 8 — Relations with Regulators/Supervisors

                Principle 9 — Adequate Resources

                Principle 10 — Management, Systems and Controls

            • ES-1.4 Module HC — High-Level Controls

              • ES-1.4.1

                Module HC outlines the requirements that must be met by insurance licensees with respect to:

                (a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code; and
                (b) Related high-level controls and policies.
                Amended: April 2011
                Amended: January 2007

              • ES-1.4.1A

                The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.

                Added: April 2011

              • ES-1.4.1B

                The requirements distinguish between different types of insurance licensees. For insurance brokers, Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply for insurance brokers. Because of their limited business activities, and consequent lesser risk to customers, insurance consultants, insurance managers and captive insurance firms are subject to applicable Guidance Paragraphs included in Chapter HC-10.

                Added: April 2011

              • ES-1.4.2

                The high-level controls covered by this Module deal with:

                (a) The function of chief executive officer and general manager;
                (b) The mapping of risks and responsibilities;
                (c) Internal audit;
                (d) Compliance;
                (e) Remuneration policies for approved persons;
                (f) Corporate ethics; and
                (g) Transparency and disclosure.
                (h) Committees of the Board;
                (i) Financial statements certification;
                (j) Appointment, training and evaluation of the Board;
                (k) Management structure;
                (l) Communication between the Board and shareholders; and
                (m) Governance and disclosure per Shari'a principles.
                Amended: April 2011
                Amended: January 2007

              • ES-1.4.3

                Module HC also includes requirements for an annual Board review and certification, on the implementation of internal governance processes and their effectiveness in achieving the Board's objectives, and whether the Board can attest that it has fulfilled its responsibilities for directing and monitoring the overall conduct of the licensee's affairs.

            • ES-1.5 Module AA — Auditors and Actuaries

              • ES-1.5.1

                Module AA deals with requirements on the appointment and functions of auditors and actuaries of insurance licensees. Requirements dealing with actuaries only apply to insurance firms and are not applicable to insurance intermediaries and insurance managers.

                Amended: January 2007

              • ES-1.5.2

                The auditor requirements deal with:

                (a) The appointment of auditors;
                (b) The removal and resignation of auditors;
                (c) Audit partner rotation;
                (d) Auditor independence; and
                (e) Restrictions on the relationship between the insurance licensee and the auditor.
                Amended: January 2007

              • ES-1.5.3

                The Module covers the CBB's requirements regarding access to auditors and actuaries as well as the auditors' access to outsourcing providers. In addition, the Module outlines the requirement for insurance licensees to arrange for their auditors to review the licensee's annual return submitted to the CBB.

                Amended: January 2007

              • ES-1.5.4

                Module AA provides requirements for both Registered Actuaries and Signing Actuaries.

                Amended: October 2009
                Amended: January 2007

            • ES-1.6 Module GR — General Requirements

              • ES-1.6.1

                Module GR covers requirements dealing with areas not covered in other Modules. The areas covered are:

                (a) Books and records;
                (b) Corporate and trade names;
                (c) Dividends;
                (d) Business transfers;
                (e) Controllers;
                (f) Close links;
                (g) Statutory deposits and compulsory reserve;
                (h) Cessation of business;
                (i) Appointed representatives; and
                (j) Professional indemnity coverage.
                Amended: January 2007
                Amended: October 2007

              • ES-1.6.2

                Item (i) applies only to insurance firms; item (g) applies to insurance firms and insurance brokers, whereas item (j) only applies to insurance brokers and insurance consultants.

                Amended: January 2007
                Amended: October 2007

            • ES-1.7 Module CA — Capital Adequacy

              • ES-1.7.1

                Module CA covers requirements governing the minimum capital and solvency requirements as well as the valuation of assets and liabilities.

                Amended: January 2007

              • ES-1.7.2

                Considering the nature of their business, the requirements regarding capital and solvency for insurance firms are far more detailed than for insurance intermediaries and insurance managers.

                Amended: January 2007

              • ES-1.7.3

                Similarly the rules dealing with the valuation of assets and valuation of liabilities are only applicable to insurance firms.

                Amended: January 2007

              • ES-1.7.4

                For insurance firms, Module CA outlines various currency matching and localisation requirements as well as whole firm and group solvency requirements.

                Amended: January 2007

              • ES-1.7.5

                The Module provides detailed rules for requirements dealing with takaful and retakaful specifically addressing:

                (a) General capital requirements;
                (b) The basis of operating a takaful business;
                (c) The segregation of funds;
                (d) The capital adequacy and solvency requirements for both the Takaful firm; and
                (e) The distribution of surplus.
                Amended: April 2014
                Amended: January 2007

            • ES-1.8 Module BC — Business Conduct

              • ES-1.8.1

                This Module presents under the form of an Insurance Code of Practice the minimum standards of good practice for market conduct in relation to direct insurance activities. This Module applies to domestic business. Reinsurance business is exempted from the requirements of this Module.

                Amended: January 2007

              • ES-1.8.2

                The Insurance Code of Practice is made up of overarching principles applied throughout the customer relationship. These principles cover:

                (a) Marketing and promotion;
                (b) Initial customer information service;
                (c) Identification of customer requirements;
                (d) Advice and recommendation;
                (e) Customer identification before commitment to contract;
                (f) Confirmation of cover and policy documentation;
                (g) Service after the point of sale;
                (h) Claims;
                (i) Renewal, expiry and cancellation;
                (j) Complaints;
                (k) Information conditions applying to all customer information;
                (l) Fair treatment; and
                (m) Confidentiality and security of customer assets.
                Amended: January 2007

              • ES-1.8.3

                Module BC has additional requirements dealing specifically with requirements unique to takaful and retakaful, including the requirement to clearly disclose to participants the calculation of wakala and mudaraba fees paid by the takaful fund(s) to the takaful operator.

                Amended: January 2007

            • ES-1.8A Module CL – Client Money

              • ES-1.8A.1

                This Module provides detailed Rules and Guidance with respect to the holding of client money by insurance brokers and appointed representatives. They are aimed at ensuring proper protection of client money to minimise the risk of client money being used by insurance brokers and appointed representatives and to prevent the commingling of client money with the insurance brokers' and appointed representatives' assets.

                Added: April 2012

              • ES-1.8A.2

                As a general rule, client monies are required to be segregated from a firm's own assets, and client money must be held in a client money account. Various other restrictions and protections apply to client money, whilst the rules also apply certain reconciliation and reporting requirements.

                Added: April 2012

              • ES-1.8A.3

                Rules applying to appointed representatives are applicable based on the type of appointed representatives. The Module deals with:

                (a) Individual appointed representatives;
                (b) Corporate appointed representatives that are financial institutions; and
                (c) Corporate appointed representatives, other than financial institutions.
                Added: April 2012

            • ES-1.9 Module RM — Risk Management

              • ES-1.9.1

                This Module provides detailed Rules and Guidance on risk management systems and controls required for insurance firms and insurance brokers. The Module imposes on these licensees the obligation to identify the range of risks that they face and to effectively manage these through the implementation of risk management systems that monitor and control all material risks.

                Amended: January 2007

              • ES-1.9.2

                Module RM specifically addresses certain risk categories. However, insurance firms and insurance brokers must determine any additional risk categories relevant to their business and how these are addressed.

                Amended: January 2007

              • ES-1.9.3

                The risk management standards addressed in Module RM are:

                (a) Credit risk;
                (b) Liquidity risk;
                (c) Market risk;
                (d) Insurance technical risk;
                (e) Operational risk;
                (f) Outsourcing risk; and
                (g) Group risk.
                Amended: January 2007
                Amended: October 2007

            • ES-1.10 Module FC — Financial Crime

              • ES-1.10.1

                Module FC implements the Financial Action Task Force (FATF) recommendations on money laundering and special recommendations on terrorism financing that are relevant to the insurance sector in Bahrain.

              • ES-1.10.2

                The Module covers the detailed procedures required for:

                (a) Customer identification;
                (b) Reporting;
                (c) Staff awareness and training;
                (d) The appointment of a money laundering reporting officer;
                (e) Compliance monitoring;
                (f) Record keeping arrangements;
                (g) Segregation of duties;
                (h) Special measures for non-cooperative countries; and
                (i) Contact with relevant authorities.
                Amended: January 2007

              • ES-1.10.3

                Item FC (iv) in Part B of Volume 3 (Insurance) provides further examples of transactions that may be suspicious or unusual.

              • ES-1.10.4

                In addition, Module FC has a chapter dealing with the area of insurance fraud and steps that must be taken by insurance licensees to address this area.

                Amended: January 2007

            • ES-1.11 Module TC — Training and Competency

              • ES-1.11.1

                This Module is to be issued at a later date.

                Amended: January 2007
                Amended: October 2007

              • ES-1.11.2

                When finalised, the Module will provide detailed Rules and Guidance on training and competency requirements for employees of insurance licensees as well as for actuaries, loss adjusters and appointed representatives.

                Amended: October 2009
                Amended: January 2007

            • ES-1.12 Module BR — BMA Reporting

              • ES-1.12.1

                Module BR outlines the CBB's reporting requirements. The reporting requirements are broken down into three main categories:

                (a) Financial reporting;
                (b) Notifications; and
                (c) Approvals.
                Amended: January 2007

              • ES-1.12.2

                Annual financial reporting is required for all insurance licensees. Group and quarterly reporting are required only for insurance firms. The financial reporting Chapter contains various Rules, Directives and Guidance which underpin the reporting forms included in Part B of Volume 3 (Insurance).

                Amended: January 2007
                Amended: October 2007

              • ES-1.12.3

                The Module outlines instances and procedures to be followed where insurance licensees must submit written notifications to the CBB. These include matters having a serious supervisory impact, breaches of Regulations and Directives and other requirements and the removal or resignation of auditors or Reporting Actuaries.

                Amended: January 2007

              • ES-1.12.4

                The Module also outlines where insurance licensees must seek the CBB's prior approval for changes in their operations, such as change in legal status, mergers, acquisitions, disposals and establishment of new subsidiaries. The CBB's prior approval is also required for insurance licensees undertaking business transfers and for related party transactions above a specified threshold.

                Amended: January 2007
                Amended: October 2007

              • ES-1.12.5

                Finally, the Module outlines the various ways in which the CBB gathers its information from insurance licensees including onsite visits by the CBB, and where deemed necessary the use of Appointed Experts.

                Amended: January 2007

            • ES-1.13 Module PD — Public Disclosure

              • ES-1.13.1

                Module PD governs the minimum requirements to be followed by insurance firms with respect to corporate and financial transparency through meaningful public disclosures. Public disclosures help protect customers of insurance firms and facilitate market discipline.

                Amended: October 2007

              • ES-1.13.2

                The disclosure requirements for insurance firms cover both annual and semi-annual disclosure requirements.

              • ES-1.13.3

                Module PD outlines what information and by what means this information must be disclosed, distinguishing the type of information to be disclosed by the insurance firm subject to these requirements.

              • ES-1.13.4

                To assist those insurance firms subject to this Module wishing to go further than the CBB's minimum requirements, further guidance and best practice are set out in Chapter PD-3.

                Amended: January 2007

            • ES-1.14 Module EN — Enforcement

              • ES-1.14.1

                This Module outlines enforcement powers and processes that may be applied by the CBB to address failures by insurance licensees, approved persons or registered persons. The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk to policyholders and the financial system.

                Amended: January 2007

              • ES-1.14.2

                The enforcement measures contained in the Module are of varying severity and will be used in keeping with the CBB's assessment of the contravention, reserving the most serious enforcement measures for the most serious of contraventions.

                Amended: January 2007

              • ES-1.14.3

                The CBB follows a proportionality principle in its enforcement measures, and will usually opt for the least severe of appropriate enforcement measures, consistent with the desired outcome. The CBB's enforcement approach includes:

                (a) Formal requests for information;
                (b) Investigations;
                (c) Formal warnings;
                (d) Directions;
                (e) Financial penalties;
                (f) Administration;
                (g) Cancellation of license;
                (h) Cancellation of "fit and proper" approval; and
                (i) Cancellation of registration (for actuaries, loss adjusters and appointed representatives only).
                Amended: October 2009
                Amended: January 2007

              • ES-1.14.4

                A reminder of criminal sanctions in the CBB Law and other legislation is set out in Chapter EN-10.

                Amended: January 2007

            • ES-1.15 [This Section was deleted in October 2012 as it is included in Chapter BC-4]

              • ES-1.15.1

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Amended: January 2007
                Amended: October 2007

              • ES-1.15.2

                [This Paragraph was deleted in October 2012].

                Deleted: October 2012
                Adopted: January 2007

            • ES-1.16 Module CP — Compensation

              • ES-1.16.1

                This Module provides space, for possible inclusion at a later date, for a description of a policyholder protection scheme, should such a scheme be developed in cooperation with the industry.

                Amended: January 2007

            • ES-1.17 Module CI — Captive Insurers

              • ES-1.17.1

                This Module provides a summary of Rules and Guidance applicable to captive insurance firms, that are contained in the main subject Modules of Volume 3 (Insurance). Module CI (Captive Insurers) only contains Guidance material.

                Amended: January 2007

              • ES-1.17.2

                While Module CI is primarily focused for captive insurers, it contains the requirements that would need to be fulfilled by captive management firms (insurance managers), in meeting the regulatory obligations of captive insurers.

                Amended: January 2007

              • ES-1.17.3

                The Module extracts several of the rules applicable to captive insurers, and tailored to meet the unique nature of captive insurers, including:

                (a) The option to be licensed as a special purpose vehicle (SPV), specifically established to carry out the activities of a captive insurer (Module AU);
                (b) Lighter requirements with respect to high-level controls (Module HC);
                (c) Exemptions to rules in respect of due diligence requirement for client records, approval for corporate and trade names and pre-approval for distribution of dividends to shareholders (Module GR);
                (d) Capital requirements based on the type (Category C1 or Category C2 firm) of captive insurers (Module CA);
                (e) Exemptions from quarterly and group financial reporting (Module BR); and
                (f) The non-application of public disclosure requirements for captive insurers (Module PD).
                Amended: April 2011
                Amended: January 2007
                Amended: October 2007

            • ES-1.18 Module IM — Insurance Intermediaries and Managers

              • ES-1.18.1

                This Module provides a summary of Rules and Guidance applicable to insurance intermediaries (insurance brokers and insurance consultants) and insurance managers, that are contained in the main subject Modules of Volume 3 (Insurance). Module IM (Insurance Intermediaries and Managers) only contains Guidance material.

                Amended: January 2007

              • ES-1.18.2

                The regulated insurance services of insurance consultants and insurance managers are defined in Section AU-1.4, detailing the type of services that can be offered by these intermediaries.

                Amended: January 2007

              • ES-1.18.3

                The category of insurance manager is being introduced in the Rulebook, as the CBB has also introduced a regulatory framework to cater to the unique nature of captive insurers. The CBB recognises that, in most cases, the operations of captive insurers are sub-contracted to insurance managers. To simplify the approval of the management subcontracted by a captive insurer, the licensing of insurance managers will have been considered by the CBB in detail as part of its licensing process.

                Amended: January 2007

              • ES-1.18.4

                The Module extracts the rules applicable to insurance intermediaries and insurance managers, including:

                (a) The requirements to have in place professional indemnity coverage for insurance brokers and insurance consultants. (Module GR);
                (b) The capital requirements for insurance intermediaries and insurance managers (Module CA); and
                (c) Exemptions from quarterly and group financial reporting (Module BR).
                Amended: January 2007
                Amended: October 2007

            • ES-1.19 Module TA — Takaful/retakaful

              • ES-1.19.1

                This Module provides a summary of Rules and Guidance applicable to takaful and retakaful business that are contained in the main subject Modules of Volume 3 (Insurance). Module TA (Takaful/retakaful) only contains Guidance material.

                Amended: January 2007

              • ES-1.19.2

                Module TA recognises the unique nature of the takaful/retakaful business and has carved out Rules in instances where conventional Rules could not be applied to a takaful entity.

                Amended: January 2007

              • ES-1.19.3

                Included in the Rules tailored to meet the requirements of the takaful industry are:

                (a) The requirement for takaful firms to have a Shari'a Supervisory Board in addition to a Board of Directors (Module HC); and
                (b) Capital and solvency Rules taking into account the participants' funds and the possibility of Qard Hassan from the shareholder fund in instances where the takaful fund does not fully meet the liquidity requirements (Module CA).
                Amended: April 2014
                Amended: January 2007

          • ES-2 Transition Rules

            • ES-2.1 General Requirements

              • ES-2.1.1

                Insurance licensees who were licensed prior to the publication of Volume 3 (Insurance), do not need to resubmit an application for a license.

              • ES-2.1.2

                Insurance licensees licensed prior to 1 June 2005 will have their license category, and the scope of their authorisation, confirmed in an exchange of letters.

                Amended: January 2007

              • ES-2.1.3

                Insurance licensees licensed prior to 1 June 2005, must comply with all other requirements of the Rulebook, when these take effect on 1 June 2005, unless different transition arrangements have been agreed in writing with the CBB beforehand or in accordance with the transition rules incorporated throughout in this Module.

                Amended: January 2007

            • ES-2.2 Module AU — Authorisation

              • ES-2.2.1

                In instances where an insurance licensee carries on a commercial business, at the time where the Insurance Rulebook becomes effective, the insurance licensee must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to AU-1.1.11).

                Amended: January 2007

            • ES-2.3 Module HC — High-Level Controls

              • ES-2.3.1

                Insurance brokers who were licensed prior to the introduction of Volume 3 (Insurance), and who were unincorporated entities or natural persons at that time, may continue as such until 31 December 2006.

              • ES-2.3.2

                [This Paragraph was deleted in April 2011].

                Deleted: April 2011
                Amended: January 2007

              • ES-2.3.3

                The updated Module is effective on 1st January 2011. All insurance licensees to which Module HC applies must be in full compliance by the financial year end 2011.

                Added: April 2011

            • ES-2.4 Module AA — Auditors and Actuaries

              • ES-2.4.1

                [This Paragraph was deleted in April 2014.]

                Deleted: April 2014
                Amended: July 2007

              • ES-2.4.2

                [This Paragraph was deleted in April 2014.]

                Deleted: April 2014
                Amended: April 2008
                Adopted: January 2007

              • ES-2.4.3

                The first five year-period where the requirement for the rotation of audit partner referred to in Paragraph AA-1.3.1 takes effect, ends 31 December 2010. 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 licensees will need to have a new partner responsible for the audit engagement for the year 2011.

                Adopted: October 2007

            • ES-2.5 Module GR — General Requirements

              • Books and Records (GR-1)

                • ES-2.5.1

                  All insurance licensees must comply with the requirements for books and records outlined in Chapter GR-1, effective 1 July 2005.

              • Professional Indemnity Coverage (GR-10)

                • ES-2.5.2

                  Except as provided for by Paragraph ES-2.5.3, professional indemnity coverage requirements must be met by insurance brokers and insurance consultants by 31 December 2005.

                • ES-2.5.3

                  Unincorporated Bahraini insurance brokers licensed prior to 1 June 2005 must meet the professional indemnity coverage requirements by 31 December 2006.

              • Appointed Representatives (GR-9)

                • ES-2.5.4

                  Requirements for the registration of appointed representatives and minimum qualifications as outlined in Chapter GR-9 are effective 1st January 2010.

                  Adopted: October 2009

            • ES-2.6 Module CA — Capital Adequacy

              • ES-2.6.1

                Except as otherwise noted below, the requirements of Module CA are to be implemented, effective 31 December 2005.

              • Insurance Firm

                • ES-2.6.2

                  Bahraini insurance firms licensed prior to 1 April 2005 that do not meet the requirements of Paragraph CA-1.2.1, will be required to meet the requirements for minimum Tier 1 capital by 31 December 2007. In addition, the requirements to maintain a capital available in excess of the greater of the Required Solvency Margin and minimum fund must be met by insurance firms by 31 December 2005. Insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.8, are grandfathered and not required to apply the requirements of Paragraph CA-1.2.1.

                  Amended: January 2007
                  Amended: October 2007

              • Insurance Broker

                • ES-2.6.3

                  In respect of licensees who were carrying out activities that fall within the definition of the regulated activity of insurance broker prior to 1 April 2005, the requirements of Paragraph CA-1.3.1 (capital requirements) will apply from 1 January 2007.

                  Amended: January 2007

              • Takaful Firms

                • ES-2.6.4

                  Where a takaful firm was licensed prior to the Rulebook coming into force, Section ES-2.6.5 applies.

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

                • ES-2.6.5

                  A takaful firm operating on a basis other than that prescribed by Paragraph CA-8.2.1 at the date the Rulebook comes into force, must in respect of all takaful contracts written after this date, manage those contracts in accordance with Paragraph CA-8.2.1. Takaful contracts written before this date hereafter referred to as pre-existing contracts, must continue to be managed in accordance with the takaful model or models operated by the takaful firm prior to Paragraph CA-8.2.1 coming into force, until such time as all obligations of the takaful fund or funds under those pre-existing contracts have been discharged in full.

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

                • ES-2.6.6

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: January 2007

                • ES-2.6.7

                  [This Paragraph was deleted in April 2014.]

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

                • ES-2.6.8

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: January 2007

            • ES-2.6AA1 Module BC – Business Conduct

              • ES-2.6AA1.1

                All insurance licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31st March 2012.

                Added: April 2012

            • ES-2.6AA2 Module CL – Client Money

              • ES-2.6AA2.1

                All insurance brokers and appointed representatives and where applicable, insurance firms, must comply with the requirements of Module CL, effective 1st July 2012 (See Paragraph CL-A.1.5).

                Added: April 2012

            • ES-2.6A Module RM — Risk Management

              • ES-2.6A.1

                Insurance licensees are required to comply with physical security measures and third party insurance (Paragraphs RM-6.1.13 to RM-6.1.17), by 31 December 2006.

                Amended: January 2007

            • ES-2.6B Module FC — Financial Crime

              • ES-2.6B.1

                For the year ending 31 December 2006, insurance licensees must submit the report required as per Paragraph FC-3.3.1 (d), no later than 30 June 2007.

                Adopted: January 2007

            • ES-2.7 Module BR — CBB Reporting

              • ES-2.7.1

                The first Insurance Firm Return (IFR) for both conventional insurance firms and takaful firms, required under Section BR-1.1, must be submitted to the CBB for the financial year ending 31 December 2006.

                Amended: January 2007

              • ES-2.7.2

                The first Group Insurance Firm Return (GIFR) for insurance firms, required under Section BR-1.3, must be submitted to the CBB for the financial year ending 31 December 2006.

                Amended: January 2007

              • ES-2.7.3

                The first quarterly return (IFRQ) for insurance firms, required under Section BR-1.4, must be submitted to the CBB for the quarter ending 31 March 2007.

                Amended: January 2007

              • ES-2.7.4

                The first annual return (IBR) for insurance brokers, required under Section BR-1.2A, must be submitted to the CBB for the semi-annual period ending 31 December 2012.

                Added: April 2012

              • ES-2.7.5

                The first semi-annual return (IBRS) for insurance brokers, required under Section BR-1.4A, must be submitted to the CBB for the semi-annual period ending 30 June 2012.

                Added: April 2012

            • ES-2.8 Module PD — Public Disclosure

              • ES-2.8.1

                For purposes of Chapter PD-2, semi-annual disclosure requirements are effective for the period ending 30 June 2008.

                Amended: January 2007

      • High Level Standards

        • AU Authorisation

          • AU-A Introduction

            • AU-A.1 Purpose

              • Executive Summary

                • AU-A.1.1

                  The Authorisation Module sets out the Central Bank of Bahrain's (CBB) approach to licensing providers of regulated insurance services in the Kingdom of Bahrain. It also sets out CBB requirements for approving persons undertaking key functions in those providers. Finally, it sets out requirements for registering certain support services (actuaries, loss adjusters and appointed representatives).

                  Amended: October 2011
                  Amended: October 2009
                  Amended: July 2007

                • AU-A.1.2 [Deleted]

                  Deleted July 2007

                • AU-A.1.2

                  Persons who provide any of the following regulated insurance services within or from the Kingdom of Bahrain require a license:

                  (a) The carrying on of insurance business;
                  (b) The broking of insurance contracts;
                  (c) The offering of advice to third parties regarding individual insurance requirements and products;
                  (d) The provision of insurance management services (such as captive managers); and
                  (e) The operating of a recognised insurance exchange.
                  Amended: July 2007

                • AU-A.1.3

                  The categories of regulated insurance services listed in AU-A.1.2 in turn determine the license category of the provider. The requirements in Volume 3 (Insurance) are tailored in certain respects, according to the license category concerned, in order to address the specific features and risks associated with each type of regulated insurance services.

                  Amended: July 2007

                • AU-A.1.4

                  For the purposes of Volume 3 (Insurance), providers licensed to undertake activities falling under AU-A.1.2 (a) are categorised as 'insurance firms'; those under (b), as 'insurance brokers'; those under (c), as 'insurance consultants'; those under (d), as 'insurance managers'; and those under (e), as 'insurance exchange operators'. A provider of regulated insurance services can only hold one of the above license categories; different categories may not be combined.

                  Amended: July 2007

                • AU-A.1.5

                  Collectively, licensed providers of regulated insurance services are called insurance licensees. Bahrain-incorporated insurance licensees are called Bahraini insurance licensees. Insurance licensees that are incorporated in an overseas jurisdiction and operate via a branch presence in the Kingdom of Bahrain are called overseas insurance licensees. The same naming convention applies to the various categories of license holders: for example, Bahraini insurance brokers are incorporated in Bahrain and overseas insurance brokers operate via a branch presence.

                  Amended: July 2007

              • Licensing

                Effective up to Jun 30 2007.

              • Approved Persons

                • AU-A.1.6

                  Persons undertaking certain functions in relation to CBB insurance licensees require prior CBB approval. These functions (called 'controlled functions') include Directors and members of senior management. The controlled functions regime supplements the licensing regime by ensuring that key persons involved in the running of insurance licensees are fit and proper. Those authorised by the CBB to undertake controlled functions are called approved persons.

                  Amended: July 2007

              • Registration

                • AU-A.1.7

                  Persons wishing to carry on the business of an actuary, loss adjuster or licensed principal wishing to appoint appointed representative within the Kingdom of Bahrain are required to register with the CBB. Registrants are subject to basic screening to verify their expertise and general suitability, at the point of application. Unlike insurance licensees, they are not subject to detailed Directives and Regulations and continuous, risk-based supervision.

                  Amended: October 2009
                  Amended: July 2007

              • Retaining Authorised Status

                • AU-A.1.8

                  The requirements set out in Chapters AU-2, AU-3 and AU-4 represent the minimum conditions that have to be met in each case, both at the point of authorisation and on an on-going basis thereafter, in order for authorised status to be retained.

                  Amended: July 2007

                   

              • Ancillary Services Providers

                • AU-A.1.9

                  Ancillary services providers are not covered in Volume 3 (Insurance) of the Rulebook. Requirements covering these types of activities will instead be included in Volume 5.

                  Amended: October 2011
                  Amended: July 2007

                • AU-A.1.10

                  Until such time as Volume 5 (Specialised Activities) of the CBB Rulebook is issued, ancillary services providers remain subject to the requirements contained in the CBB's 'Standard Conditions and Licensing Criteria', a copy of which is available from the CBB Licensing Directorate.

                  Amended: April 2018
                  Amended: October 2011
                  Amended: July 2007

                • AU-A.1.11

                  [This Paragraph was merged with Paragraph AU-A.1.9 above, in January 2007].

                  Amended: July 2007

                • AU-A.1.12

                  [This Paragraph was merged with Paragraph AU-A.1.10 above, in January 2007]

                  Amended: July 2007

              • Legal Basis

                • AU-A.1.13

                  This Module contains the CBB's Regulations, Resolutions and Directive (as amended from time to time) regarding authorisation requirements applicable to insurance licensees, approved persons and registered bodies and is issued under the powers available to the CBB under Articles 37 to 42, 44 to 48 and 180 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding regulated insurance services as per Article 39 (see Chapter AU-1), licensing conditions and processes as per Articles 44 to 48 (see Chapters AU-2 and AU-5) and licensing and registrations fees as per Article 180 (see Chapter AU-6) are also included in Resolutions and included in this Module. Module AU includes the requirements contained in Resolution No (1) of 2007 with respect to determining fees categories due for licensees and services provided by the CBB. Module AU also contains the minimum qualifications and fit and proper requirements for appointed representatives issued in 2009 under Resolution 11 in accordance with Article 74 of the CBB Law. The Module contains requirements governing the conditions of granting a license for the provision of regulated services as prescribed under Resolution No (43) of 2011 and issued under the powers available to the CBB under Article 44(c). Finally, the Module contains requirements under Resolution No.(16) for the year 2012 including the prohibition of marketing financial services pursuant to Article 42 of the CBB Law. This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                  Amended: July 2015
                  Amended: January 2013
                  Amended: October 2011
                  Amended: January 2011
                  Amended: October 2009
                  Added: July 2007

                • AU-A.1.14

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

                  Added: July 2007

            • AU-A.2 Module History

              • AU-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. UG-3 provides further details on Rulebook maintenance and version control.

                Amended: July 2007

              • AU-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 these involved changes in the substance of Rules.

                Added: July 2007

              • AU-A.2.3

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

                Module Ref. Change Date Description of Changes
                AU-1.1 01/07/05 Corrections made to cross references.
                AU-1.2 01/07/05 Correction to typo and clarification to AU-1.2.4.
                AU-1.4 01/07/05 Clarified possible exclusion to regulated insurance services.
                AU-5.1 01/07/05 Clarified AU-5.1.2 and amended AU-5.1.8(e) to reflect that the cash deposit to be held with a commercial bank also applies to insurance brokers.
                AU-5.2 01/07/05 Correction made to cross reference.
                AU-5.3 01/07/05 Corrected reference to Form 4 (Application for Registration).
                AU-1.1 01/10/05 Clarified application of grandfathering provisions for composite companies.
                AU-2.1 01/10/05 Clarified legal status for E.C. companies and added the option for insurance manager to operate as a branch resident in Bahrain of a company incorporated in another jurisdiction.
                AU-2.2 01/10/05 Clarified guidance on mind and management for insurance licensees originally licensed as exempt companies.
                AU-2.8 01/10/05 Clarified the application of IFRS and AAOIFI standards.
                AU-2.1 01/01/06 Clarified legal status for EC companies that are insurance brokers and insurance consultants.
                AU-2.1.6 01/04/06 Guidance Paragraph deleted in October 2005.
                AU-1.2.2 01/01/07 Added Signing Actuary (where the Signing Actuary is an employee of the insurance firm) to the list of controlled functions for which an application for approved person must be submitted.
                AU-A.1.13 01/2007 New Rule introduced, categorising this Module as a Directive.
                AU-1.1.24 01/2007 Added Rule pertaining to suitability of applicants for authorisation.
                AU-2.1.11 01/2007 Corrected legal status requirements for insurance consultants.
                AU-2.6.1A 01/2007 Added a Rule dealing with the segregation of staff responsibilities.
                AU-5.1. 01/2007 Section amended to reflect new procedures reflecting CBB Law.
                AU-5.4 01/2007 Amended to reflect new CBB Law procedures.
                AU-5.5 01/2007 Amended to reflect new CBB Law procedures.
                AU-6 01/2007 New Chapter on Licensing and Registration Fees added.
                AU-1.1.14 10/2007 Pure reinsurers can undertake both general insurance business and long-term insurance business within the same entity.
                AU-1.2.3 and 1.2.4 10/2007 Clarified the controlled functions for which CBB prior approval is required.
                AU-2.5.4 10/2007 Clarified that insurance brokers must also maintain a cash deposit as per Section GR-7.1.
                AU-5.1.5 and 5.1.5A 01/2008 Clarified CBB's requirements for letters of comfort and/or letters of guarantee.
                AU-5.1.13 01/2008 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued.
                AU-5.2.2 04/2008 Clarified to whom Form 3 should be sent to if dealing with a request for an appointment of MLRO from an existing investment firm licensee.
                AU-5.5.6 04/2008 Outlined CBB's requirements in instances where a controlled function becomes vacant.
                AU-6.3 04/2008 Clarified the payment of annual fees for new insurance licensees and registered persons.
                AU-5.2.5 07/2008 Clarified that the refusal decision by the CBB to grant a person 'approved person' status is issued to the insurance licensee.
                AU-5.2.6 07/2008 Added cross reference.
                AU-6.3 10/2008 Introduced a minimum licensing fee for new applicants whose annual licensing fees may be prorated.
                AU-2.1.8 04/2009 Amended the legal status of insurance broker to no longer allow the establishment of new licensees as single person company.
                AU-6.3.12 and 6.3.12A 04/2009 Clarified the rules regarding annual license fees to be paid by new licensees in relation to the first year in which the license has been granted.
                AU-6.3.16 04/2009 Deleted Paragraph waiving annual fees for insurance licensees in run-off and whose license has been restricted to servicing existing business.
                AU-A.1, AU-B.2, AU-1.3A, AU-4, AU-5.3, AU-5.5 and AU-6.3 10/2009 Added registration requirements for appointed representatives.
                AU-A.1.13 10/2009 Reference to Regulations added to Paragraph under Legal Basis.
                AU-2.1.8 and AU-2.1.11 10/2009 The legal status option for insurance brokers and insurance consultants to be established as a branch resident in Bahrain of a company incorporated in another jurisdiction has been deleted.
                AU-1.4.16A 04/2010 Guidance provided on the definition of regulated services for insurance consultants.
                AU-2.1.8 04/2010 Clarified the legal status for insurance brokers.
                AU-4.1.2A 04/2010 Added guidance on relevant loss adjusters associations used in evaluating expertise condition.
                AU-5.2.1 04/2010 Added requirement for licensees to verify accuracy of information contained in form 3 (Approved persons).
                AU-5.2.2A and B 04/2010 Clarified requirements when submitting Form 3.
                AU-5.2.7 and 5.2.8 04/2010 Clarified notification requirements when applying for Approved person status.
                AU-A.1.13 01/2011 Clarified legal basis.
                AU-5.1.5A 01/2011 Removed the reference to a letter of comfort that may be provided with an application for license.
                AU-1.2.9A 04/2011 Clarified the position of Chairman and that of managing director. This Rule was moved from the former version of Module HC.
                AU-1.2.11A 04/2011 Added a definition Paragraph for the compliance officer.
                AU-A.1.10 10/2011 Guidance Paragraph amended as Volume 5_Representative Offices was issued in December 2010.
                AU-A.1.13 10/2011 Legal basis updated to reflect all Articles of the CBB Law covered by this Module as well as applicable Resolutions.
                AU-5.1.13 10/2011 Clarified CBB's requirements for items that must be in place within 6 months of a new license being issued to be in line with other Volumes of the Rulebook.
                AU-5.5 10/2011 Clarified language on cancellation of a license to be in line with other Volumes of the CBB Rulebook.
                AU-1.4.10 04/2012 Reference added to appointed representatives.
                AU-2.1.8 and AU-2.1.9 10/2012 Clarified legal status for single person company and natural person.
                AU-5.5.4A 10/2012 Corrected cross reference.
                AU-A.1.13 01/2013 Updated legal basis.
                AU-B.1.1 01/2013 Updated prohibition as per issuance of Resolution No.(16) for the year 2012.
                AU-1.1 01/2013 References added to requirements under Resolution No.(16) for the year 2012.
                AU-6.3 07/2013 Amended due date and collection process for annual license and registration fees.
                AU-1.2 04/2014 Approved persons requirement updated to reflect consultation undertaken on the enhanced operational and solvency framework.
                AU-1.4.13 10/2014 Amended the definition of exempt introducer.
                AU-2.1.11 10/2014 Aligned with Commercial Companies Law.
                AU-A.1.13 07/2015 Legal basis updated to reflect Resolution No (23) of 2015.
                AU-5.2 07/2015 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                AU-1.2 01/2016 Clarified general requirements for approved persons.
                AU-3 01/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                AU-4.2.2 01/2016 Corrected cross reference.
                AU-5.1.4 01/2016 Paragraph deleted as no longer applicable.
                AU-5.2 01/2016 Minor amendments to be aligned with other Volumes of the Rulebook.
                AU-5.6 07/2017 Added new Section on Publication of the Decision to Grant, Cancel or Amend a License.
                AU-A.1.10 04/2018 Amended Paragraph.
                AU-5.1.1 04/2018 Amended Paragraph.
                AU-5.1.12E 04/2018 Amended sub-paragraph.
                AU-5.2.2 04/2018 Amended Paragraph.
                AU-5.3.1 04/2018 Amended Paragraph.
                AU-5.1.1 07/2019 Amended Paragraph to remove references to hardcopy Form 1 submission to online submission.

              • AU-A.2.3

                Effective up to Jun 30 2007.

                This Module supersedes various articles contained in Ministerial Order No. 6 of 1990 regarding the issue of regulations for implementing legislative decree No. 17 of 1987 with respect to insurance companies and organisations. The specific articles in the Ministerial Order that have been cancelled by this Module are listed below:

                Order No. 6 Article Ref. Module Ref. Subject
                2–8   Licensing of insurance firms
                21–27   Licensing of insurance brokers
                33–42   Registration of actuaries
                43–51   Registration of loss adjusters
                53–64   Licensing of insurance consultants

              • AU-A.2.4

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

                Amended: July 2007

          • AU-B Scope of Application

            • AU-B.1 The Public

              • AU-B.1.1

                The Authorisation requirements in Chapter AU-1 are generally applicable to the public, in that they prevent a person (whether legal or natural) from undertaking certain specified activities if they do not hold the appropriate authorisation from the CBB or marketing any financial services unless specifically allowed to do so by the CBB (see Rule AU-1.1.1). In addition, those applying for authorisation are also required to comply with the relevant requirements and procedures contained in this Module.

                Amended: January 2013
                Amended: July 2007

              • AU-B.1.2

                Three types of authorisation are prescribed:

                (i) Any person who provides a regulated insurance service within or from the Kingdom of Bahrain requires a license (see AU-1.1);
                (ii) Natural persons wishing to perform a controlled function in an insurance licensee require prior CBB approval, as an approved person (see AU-1.2); and
                (iii) Any person wishing to provide actuarial or loss adjuster services within the Kingdom of Bahrain is required to register with the CBB (see AU-1.3).
                Amended: July 2007

              • AU-B.1.3

                Because of the general applicability of many of the requirements contained in this Module, they are supported by way of a Regulation (see Section UG-1.1 for an explanation of the CBB’s rule-making powers and different regulatory instruments).

                Added: July 2007

            • AU-B.2 Authorised Persons

              • AU-B.2.1

                Various requirements in Chapters AU-2 to AU-5 inclusive also apply to persons once they have been authorised by the CBB (whether as licensees, approved persons or registered actuaries, loss adjusters and appointed representatives).

                Amended: October 2009
                Amended: July 2007

              • AU-B.2.2

                Chapter AU-2 applies to insurance licensees (not just applicants), since licensing conditions have to be met on a continuous basis by licensees. Similarly, Chapter AU-3 applies to approved persons on a continuous basis; it also applies to insurance licensees seeking an approved person authorisation. Chapter AU-4 applies to actuaries, loss adjusters and appointed representatives that are either registered by the CBB or are seeking to be registered by the CBB. Chapter AU-5 contains requirements applicable to licensees, with respect to the starting up of their operations, as well as to licensees, approved persons and registered actuaries, loss adjusters and appointed representatives with respect to the amendment or cancellation of their authorised status. Finally, Section AU-6.2 imposes annual fees on licensees and registered actuaries, loss adjusters and licensed principals for their registered appointed representatives.

                Amended: October 2009
                Amended: July 2007

          • AU-1 Authorisation Requirements

            • AU-1.1 Insurance Licensees

              • General Prohibition

                • AU-1.1.1

                  No person may:

                  (a) Undertake (or hold themselves out to undertake) regulated insurance services, by way of business, within or from the Kingdom of Bahrain unless duly licensed by the CBB;
                  (b) Hold themselves out to be licensed by the CBB unless they have as a matter of fact been so licensed; or
                  (c) Market any financial services in the Kingdom of Bahrain unless:
                  (i) Allowed to do by the terms of a license issued by the CBB;
                  (ii) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
                  (iii) Has obtained the express written permission of the CBB to offer financial services.
                  Amended: January 2013
                  Amended: July 2007

                • AU-1.1.1A

                  For the purposes of Rule AU-1.1.1(a), please refer to Section AU-1.4 for the definition of ‘regulated insurance services’ and ‘by way of business’. Such activities will be deemed to be undertaken within or from the Kingdom of Bahrain if, for example, the person concerned:

                  (a) Is incorporated in the Kingdom of Bahrain;
                  (b) Uses an address situated in the Kingdom of Bahrain for its correspondence; or
                  (c) Directly solicits clients, who are resident within the Kingdom of Bahrain.
                  Added: July 2007

                • AU-1.1.2

                  For the purposes of AU-1.1.1(b), and in accordance with Article 41(b) of the CBB Law persons would be considered in breach of this requirement if they were to trade as, or incorporate a company in Bahrain with a name containing the words '(re)insurance', '(re)assurance' or '(re)takaful', or the words 'broker', 'consultant', or 'manager' in combination with '(re)insurance', '(re)assurance' or '(re)takaful' (or the equivalents in any language), without holding the appropriate CBB license or the prior approval of the CBB.

                  Amended: July 2007

                • AU-1.1.2A

                  In accordance with Resolution No.(16) for the year 2012 and for the purpose of Subparagraph AU-1.1.1(c), the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration.

                  Added: January 2013

                • AU-1.1.2B

                  Persons in breach of Subparagraph AU-1.1.1(c) are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law (see also Section EN-10.3A).

                  Added: January 2013

              • Authorisation

                • AU-1.1.3

                  Depending on the type of regulated insurance service that a person wishes to undertake, applicants must seek to be licensed either as an insurance firm, an insurance broker, an insurance consultant, an insurance manager or an insurance exchange operator. These license categories cannot be combined.

                  Amended: July 2007

                • AU-1.1.4

                  Within the Kingdom of Bahrain and in respect of Bahrain residents, licensed insurance firms and insurance brokers may only effect contracts of insurance through intermediaries when these intermediaries are:

                  (a) Licensed by the CBB (e.g., as an insurance broker);
                  (b) Exempt introducers (as defined in Paragraph AU-1.4.13); or
                  (c) Appointed representatives.
                  Amended: July 2007

                • AU-1.1.5

                  Persons wishing to be licensed to undertake regulated insurance services within or from the Kingdom of Bahrain must apply in writing to the CBB.

                  Amended: July 2007

                • AU-1.1.6

                  An application for a license must be in the form prescribed by the CBB and must contain, inter alia:

                  (a) A business plan specifying the type of business to be conducted;
                  (b) Application forms for all controllers;
                  (c) Application forms for all controlled functions; and
                  (d) For insurance brokers and insurance consultants, details of proposed professional indemnity coverage.
                  Amended: July 2007

                • AU-1.1.7

                  The CBB will review the application and duly advise the applicant in writing when it has:

                  (a) Granted the application without conditions;
                  (b) Granted the application subject to conditions specified by the CBB; or
                  (c) Refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.
                  Amended: July 2007

                • AU-1.1.8

                  Detailed Rules and Guidance regarding information requirements and processes for licenses can be found in Section AU-5.1. As specified in Paragraph AU-5.1.12 and in accordance with Article 44(e) of the CBB Law, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

                  Amended: July 2007

                • AU-1.1.8A

                  In granting new licenses, the CBB will specify the type of regulated insurance services for which a license has been granted, and include further conditions in relation to the license such as the class of business authorised, whether the insurance firm is operating on a conventional or takaful basis, limited to reinsurance or licensed as a captive insurer.

                  Added: July 2007

                • AU-1.1.9

                  All applicants seeking an insurance license must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed, insurance licensees must maintain these criteria on an ongoing basis.

                  Amended: July 2007

                • AU-1.1.10

                  An insurance licensee must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than insurance business and activities directly arising from or incidental to that business.

                • AU-1.1.11

                  In instances where an insurance licensee carries on a commercial business, at the time where the Insurance Rulebook becomes effective, the insurance licensee must notify the CBB to establish the transitional rules in relation to this prohibited activity (refer to Paragraph ES-2.2.1).

                  Amended: July 2007

                • AU-1.1.12

                  Activities 'directly arising from or incidental' to an insurance firm's business, for instance, will depend on the type of insurance provided by an insurer. By way of example, an insurance firm providing health insurance may show a connection with owning and managing hospitals, an insurer providing insurance that covers damage to motor vehicles may reasonably be able to own accident repairers or garages. Insurers should consult the CBB in relation to their own circumstances in determining if an activity directly arises from or is incidental to their insurance business.

                  Amended: July 2007

              • Insurance Firms

                • AU-1.1.13

                  For the purposes of Volume 3 (Insurance), insurance firms are defined as insurance licensees who undertake the regulated insurance service of carrying on insurance business, as defined in Paragraphs AU-1.4.7 to AU-1.4.9.

                  Amended: July 2007

                   

                   

                • AU-1.1.14

                  An insurance firm must satisfy the CBB as to its suitability for each type and class of insurance business for which it is seeking authorisation. With the exception of captive insurers and pure reinsurers, an insurance firm cannot undertake both general and long-term insurance business. Insurance firms (including captive insurers), must operate on either conventional insurance principles or on takaful principles: they cannot combine the two.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.1.15

                  In granting new licenses, the CBB will specify the classes of insurance for which authorisation has been granted, and on what basis (i.e. conventional insurance principles or takaful principles). For reinsurance companies, the license will restrict the insurance firm to undertaking reinsurance business only. For captive insurers, the license will also restrict the insurance firm to effecting insurance contracts with its own group members only. Grandfathering provisions apply for those insurance firms whose past license granted them the right to undertake both general and long-term insurance business (composite companies). In addition, composite companies are subject to the requirements of Paragraph GR-1.1.3 with respect to separate books and records for each kind of business. The grandfathering exemption will only apply to the licensee's classes of insurance business as at 1st April 2005, i.e. when Volume 3 (Insurance) was first issued. Should the insurance licensee wish to add additional classes of business, it will be required to separate its general and long-term business into separate licenses.

                  Amended: July 2007

              • Insurance Brokers

                • AU-1.1.16

                  For the purposes of Volume 3 (Insurance), insurance brokers are defined as insurance licensees who undertake the regulated insurance service of broking of insurance contracts, as defined in Paragraphs AU-1.4.10 to AU-1.4.15.

                  Amended: July 2007

                • AU-1.1.17

                  [This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]

                  Amended: July 2007

                • AU-1.1.18

                  An insurance broker may be licensed for one or more of the following types of business:

                  (a) General insurance (as defined in Paragraph AU-1.4.9);
                  (b) Unit-linked long-term insurance;
                  (c) Long-term insurance (as defined in Paragraph AU-1.4.8) other than unit-linked business;
                  (d) Reinsurance; and
                  (e) Takaful products.
                  Amended: July 2007
                  Amended: October 2007

              • Insurance Consultants

                • AU-1.1.19

                  For the purposes of Volume 3 (Insurance), insurance consultants are defined as insurance licensees who undertake the regulated insurance service of offering insurance advice, as defined in Paragraphs AU-1.4.16 to AU-1.4.18.

                  Amended: July 2007

                • AU-1.1.20

                  [This Paragraph was merged with Paragraph AU-1.1.24 in January 2007.]

                  Amended: July 2007

                • AU-1.1.21

                  An insurance consultant may be licensed for one or more of the following types of business:

                  (a) General insurance (as defined in Paragraph AU-1.4.9);
                  (b) Unit-linked long-term insurance;
                  (c) Long-term insurance (as defined in Paragraph AU-1.4.8) other than unit-linked business;
                  (d) Reinsurance; and
                  (e) Takaful products.
                  Amended: July 2007

              • Insurance Managers

                • AU-1.1.22

                  For the purpose of Volume 3 (Insurance), insurance managers are defined as insurance licensees who undertake the regulated insurance service of providing insurance management services, as defined in Paragraphs AU-1.4.20 to AU-1.4.23.

                  Amended: July 2007

              • Insurance Exchange Operators

                • AU-1.1.23

                  For the purpose of Volume 3 (Insurance), insurance exchange operators are defined as insurance licensees who undertake the regulated insurance service of operating an insurance exchange, as defined in Paragraphs AU-1.4.24 and AU-1.4.25.

                  Amended: July 2007

              • Suitability

                • AU-1.1.24

                  Those seeking authorisation must satisfy the CBB as to their suitability to carry out the regulated investment services for which they are seeking authorisation.

                  Added: July 2007

                • AU-1.1.25

                  In assessing applications for a license, the CBB will assess whether an applicant satisfies the licensing conditions (as specified in Chapter AU-2) with respect to all the regulated investment services that the applicant proposes undertaking.

                  Added: July 2007

            • AU-1.2 Approved Persons

              • General Requirement

                • AU-1.2.1

                  Insurance licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function in an insurance licensee. The approval from the CBB must be obtained prior to their appointment, subject to the variations contained in Paragraph AU-1.2.3.

                  Amended: January 2016
                  Amended: July 2007

                • AU-1.2.2

                  Controlled functions are those functions occupied by board members and persons in executive positions and include:

                  (a) Director (for Bahraini insurance licensee only);
                  (b) Chief Executive or General Manager;
                  (c) Head of function;
                  (d) Head of risk management;
                  (e) Compliance officer;
                  (f) Money Laundering Reporting Officer;
                  (g) Member of Shari'a Supervisory Board (where applicable);
                  (h) Internal Shari'a reviewer (where applicable);
                  (i) Unit-linked investment adviser (where applicable); and
                  (j) Signing Actuary(where the function is undertaken by a Director or an employee of the insurance firm).
                  Amended: January 2016
                  Amended: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.3

                  Controlled functions may be combined with any other functions, subject to the CBB's prior written approval and such combination must not result in any possible conflict of interest.

                  Amended: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.4

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: October 2007
                  Amended: July 2007

                • AU-1.2.5

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014

              • Basis for Approval

                • AU-1.2.6

                  Approval under Paragraph AU-1.2.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections AU-3.1 and AU-3.2 respectively.

                  Amended: July 2007

              • Definitions

                • AU-1.2.7

                  Director is any person who occupies the position of a Director, as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).

                  Amended: July 2007

                • AU-1.2.8

                  The fact that a person may have 'Director' in their job title does not of itself make them a Director within the meaning of the definition noted in Paragraph AU-1.2.7. For example, a 'Director of Marketing', is not necessarily a member of the Board of Directors and therefore may not fall under the definition of Paragraph AU-1.2.7.

                  Amended: July 2007

                • AU-1.2.9

                  The Chief Executive or General Manager means a person who is responsible for the conduct of the licensee (regardless of actual title). The Chief Executive or General Manager must be resident in Bahrain. This person is responsible, alone or jointly, for the conduct of the whole of the firm, or, in the case of an overseas insurance licensee, for all of the activities of the branch.

                • AU-1.2.9A

                  The Chairman of the Board may not act as the Chief Executive or General Manager. However, in the case of appointing a Director on the Board as the Managing Director of the insurance licensee, such person:

                  (a) Should be fully responsible for the executive management and performance of the insurance licensee, within the framework of delegated authorities set by the Board;
                  (b) Must devote full-time working hours to the insurance licensee; and
                  (c) Must not be employed at any other firm.
                  Added: April 2011

                • AU-1.2.10

                  Head of function means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.

                • AU-1.2.10A

                  The head of risk management is responsible for the management of all risk exposures arising from the activities of the insurance firm.

                  Added: April 2014

                • AU-1.2.11

                  Whether a person is a head of function will depend on the facts in each case and is not determined by the presence or absence of the word in their job title. Examples of head of function might include, depending on the scale, nature and complexity of the business, a deputy Chief Executive; heads of departments such as Underwriting, Claims, Risk Management, Compliance or Internal Audit; the Chief Financial Officer; or a Signing Actuary (where that person is a Director or employee of the insurance firm concerned).

                  Amended: July 2007

                • AU-1.2.11A

                  All insurance licensees must designate an employee, 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.
                  Added: April 2011

                • AU-1.2.11B

                  The internal Shari'a reviewer in a Takaful firm is responsible for the examination and evaluation of the adequacy and effectiveness of the Takaful firm's system of internal Shari'a control. The internal Shari'a review function must comply with AAOIFI Governance standard for Islamic Financial Institutions No. 3.

                  Added: April 2014

                • AU-1.2.12

                  Where a firm is in doubt as to whether a function should be considered a controlled function it must discuss the case with the CBB.

                  Amended: July 2007

                • AU-1.2.13

                  A unit-linked investment adviser refers to the function of advising clients on contracts that are, by their nature, investment products, including, but not limited to pension and retirement products. The unit-linked investment adviser function is a controlled function.

                  Amended: July 2007

            • AU-1.3 Registered Actuaries and Loss Adjusters

              • AU-1.3.1

                In accordance with Article 74 of the CBB Law, a person may not carry on the business of an actuary or a loss adjuster, without being registered as such with the CBB.

                Amended: July 2007

              • AU-1.3.2

                For the purposes of Paragraph AU-1.3.1 and in accordance with Article 1 of the CBB Law, actuaries are defined as persons who hold themselves out as able to give a professional opinion on the level of reserves that should be held in order to meet potential insurance liabilities and are accredited by an international recognised organisation.

                Amended: July 2007

              • AU-1.3.3

                For the purposes of Paragraph AU-1.3.1, loss adjusters are defined as persons who hold themselves out as being able to determine the extent of a firm's liability for loss when a claim is submitted. In doing so, loss adjusters may investigate and settle losses for an insurance firm by surveying or assessing the extent of damages being claimed for under an insurance contract, investigate the causes of such damage, and the extent to which those damages are covered by the contract of insurance.

                Amended: July 2007

            • AU-1.3A Registered Appointed Representatives

              • AU-1.3A.1

                In accordance with Resolution 11 issued under Article 74 of the CBB Law, a person may not be appointed by a licensed principal as an appointed representative, without being registered as such with the CBB.

                Adopted: October 2009

              • AU-1.3A.2

                For the purposes of Paragraph AU-1.3A.1, an appointed representative is defined as an agent, who is not licensed by the CBB as insurance firm, insurance broker or insurance consultant, appointed by an insurance firm (licensed principal) as its representative according to the rules in Chapter GR-9.

                Adopted: October 2009

            • AU-1.4 Definition of Regulated Insurance Services

              • AU-1.4.1

                For the purposes of Volume 3 (Insurance) and in accordance with Article 39 of the CBB Law, regulated insurance services are any of the activities specified in Section AU-1.4, carried on by way of business. However, upon application, the CBB may exclude one or more specific transactions from the definition of regulated insurance services.

                Amended: July 2007

              • AU-1.4.2

                The CBB will normally only consider granting such an exemption when a Bahrain resident is unable to obtain a specific product in Bahrain and it would be unreasonable to require the overseas provider of that product to be licensed for that particular transaction.

                Amended: July 2007

              • AU-1.4.3

                For the purposes of Volume 3 (Insurance), carrying on a regulated insurance service by way of business means:

                (a) Undertaking one or more of the activities specified in Section AU-1.4 for commercial gain;
                (b) Holding oneself out as willing and able to engage in that activity; or
                (c) Regularly soliciting other persons to engage in transactions constituting that activity.
                Amended: July 2007

              • General Exclusions

                • AU-1.4.4

                  With the exception of insurance firms licensed to carry on insurance business as a captive insurer, a person does not carry on an activity constituting a regulated insurance service if the person is a body corporate and carries on that activity solely with or for other bodies corporate, and they are all members of the same group.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.5

                  A person does not carry on an activity constituting a regulated insurance service if the activity:

                  (a) Is carried on in the course of a business which does not ordinarily constitute of the carrying on of financial services;
                  (b) May reasonably be regarded as a necessary part of any other services provided in the course of that business; and
                  (c) Is not remunerated separately from the other services.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.6

                  A person does not carry on an activity constituting a regulated insurance service if he carries on an activity with or for another person, and they are both members of the same family.

                  Amended: October 2007

              • Carrying on of Insurance Business (Insurance Firms)

                • AU-1.4.7

                  The carrying on of insurance business includes the carrying out and effecting of insurance contracts as principal, including with limitation contracts of long-term insurance or contracts of general insurance. Effecting contracts of insurance means assuming (as principal) insurance risk, by entering into a contract of insurance or contract of reinsurance. Carrying out contracts of insurance means performing (as principal) obligations under a contract of insurance or reinsurance.

                • AU-1.4.8

                  A contract of long-term insurance includes any insurance contract dealing with life insurance, personal accident with a term over 1 year and savings and fund accumulation insurance.

                • AU-1.4.9

                  A contract of general insurance includes any insurance contract dealing within one or more of the following categories:

                  (a) Fire and other property damage;
                  (b) Marine, aviation and transport;
                  (c) Accident and liability insurance;
                  (d) Motor insurance; or
                  (e) Such other activities as the CBB may specify from time to time.
                  Amended: July 2007

              • The Broking of Insurance Contracts (Insurance Brokers/Appointed Representatives)

                • AU-1.4.10

                  The broking of insurance contracts means:

                  (a) Acting as agent for another person in relation to the buying of insurance for that other person;
                  (b) Making arrangements with a view to another person, whether as principal or agent, buying insurance; or
                  (c) Advising on insurance.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.11

                  In Subparagraph AU-1.4.10 (c), 'advising' means giving advice to a person in his capacity as a policyholder or potential policyholder (or in his capacity as agent for a policyholder or potential policyholder), on the merits of entering into a contract of insurance whether as principal or agent.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.12

                  A person does not carry on the activities specified in Subparagraphs AU-1.4.10 (a) or (b) if he enters or is to enter into a transaction in respect of a contract of insurance as principal.

                  Amended: July 2007

                • AU-1.4.13

                  A person does not carry on the broking of insurance contracts if he falls under the definition of exempt introducer, defined as:

                  (a) A person selling an extended warranty insurance product where the product is sold as part of an exclusive arrangement originated by the product manufacturer and in conjunction with the purchase by the insured of the product;
                  (b) A person selling travel insurance as part of, or in conjunction with, a travel package, either directly or through a travel agent (where no advice is being provided other than that contained in the product literature);
                  (c) A person, approved or licensed as an insurance intermediary in its country of incorporation or residence, providing marine, aviation or transit insurance, general reinsurance or long-term reinsurance to clients in Bahrain;
                  (d) [This Subparagraph was deleted in October 2014]; and
                  (e) An insurer or reinsurance broker located outside Bahrain ('A') placing business on behalf of a CBB licensed insurance broker ('B'), where B is carrying on business in Bahrain and on behalf of Bahrain residents and A is acting on behalf of B.
                  Amended: October 2014
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.14

                  A person does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:

                  (a) That of giving advice of the kind mentioned in Paragraph AU-1.4.13; nor
                  (b) That of leading or enabling persons to buy insurance contracts.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.15

                  A person does not arrange insurance contracts merely by providing the means by which one party to a transaction is able to communicate with other such parties.

                  Amended: October 2007

              • The Offering of Insurance Advice (Insurance Consultants)

                • AU-1.4.16

                  The offering of insurance advice means advising on insurance to third parties, without also acting as agent or making arrangements with a view to another person buying insurance.

                  Amended: October 2007

                • AU-1.4.16A

                  For purposes of Paragraph AU-1.4.16, should the insurance consultant receive a fee for his services as agent from the party that provides the insurance or reinsurance to the third party, such services will be considered as broking of insurance and will be covered under Paragraph AU-1.4.10.

                  Added: April 2010

                • AU-1.4.17

                  In Paragraph AU-1.4.16, 'advising on insurance' means giving advice to a person in his capacity as a policyholder or potential policyholder (or in his capacity as agent for a policyholder or potential policyholder), on the merits of entering into a contract of insurance whether as principal or agent.

                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.18

                  A person does not give advice in relation to an insurance contract by giving advice in any newspaper, journal, magazine, broadcast services or similar service in any medium if the principal purpose of the publication or service, taken as a whole, is neither:

                  (a) That of giving advice of the kind mentioned in Paragraph AU-1.4.16; nor
                  (b) That of leading or enabling persons to buy insurance.
                  Amended: July 2007
                  Amended: October 2007

                • AU-1.4.19

                  Advice given by professionals may not constitute the activity of advising on insurance, even if the matter relates to insurance, providing it satisfies the general exclusion specified in Paragraph AU-1.4.5. These may include circumstances such as lawyers providing legal advice on the interpretation of insurance contracts; business consultancy advice on the establishment of a new business, which may include, in general terms, discussion of the classes of insurance that the business may need; and the interpretation of insurance contracts by loss adjusters.

                  Amended: July 2007

              • The Provision of Insurance Management Services (Insurance Managers)

                • AU-1.4.20

                  The provision of insurance management services means the provision of management services to, or the exercising of managerial functions on behalf of, an insurance firm.

                • AU-1.4.21

                  Management services and managerial functions include the administration and underwriting of insurance contracts.

                • AU-1.4.22

                  A person does not provide insurance management services to an insurance firm, if he is an employee or a Board member of that licensee.

                  Amended: October 2007

                • AU-1.4.23

                  An insurance manager may provide management services to undertakings other than insurance firms, providing that these activities do not compromise the manager's ability to provide a professional service to insurance firms and the manager can meet the licensing conditions specified in Chapter AU-2. It is possible for a group to include separate licensees, one an insurance broker and the other an insurance manager.

              • The Operating of an Insurance Exchange

                • AU-1.4.24

                  The operating of an insurance exchange means the maintenance, administration and management of an insurance exchange located within the Kingdom of Bahrain by, inter alia, determining its membership, operating rules or arranging the provision of shared services to users of the exchange.

                • AU-1.4.25

                  For the purposes of Paragraph AU-1.4.24, an insurance exchange means a distinct market place comprising as members insurance firms or insurance brokers, and undertaking insurance related activities. The fact that the exchange may undertake other non-insurance related activities does not preclude it from being an 'insurance exchange' within the meaning of Paragraph AU-1.4.24.

                  Amended: July 2007

          • AU-2 Licensing Conditions

            • AU-2.1 Condition 1: Legal Status

              • Insurance Firm

                • AU-2.1.1

                  Except for captive insurers, the legal status of an insurance firm 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 insurers, the legal status of an insurance firm must be:

                  (i) A Bahraini special purpose vehicle (SPV), specifically established to carry out the activities of a captive insurer; 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 insurers 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 licensee 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 licensee 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 shareholders, 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 broker 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 broker 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's 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 consultant, 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 manager, 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 manager is a professional provider of services to insurance firms, 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 manager 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 broker, although it is possible for a group to include both insurance broker and insurance manager activities, for instance, by an insurance broker establishing a subsidiary to act as an insurance manager (or vice versa).

                  Amended: July 2007

            • AU-2.2 Condition 2: Mind and Management

              • AU-2.2.1

                Insurance licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom. Overseas insurance licensees 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's 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 Officer — to be resident in Bahrain. In the case of overseas licensees, the CBB requires the branch or subsidiary 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 branch or subsidiary.

                Amended: July 2007

              • AU-2.2.3

                In the case of insurance licensees 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 licensee that is a captive (re)insurance company may maintain its Head Office or place of business at the offices of an insurance manager appointed to manage its affairs.

                Amended: July 2007

              • AU-2.2.5

                The CBB's overall approach to captive insurers is summarized in Module CI. The day-to-day operations of captive insurers 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 insurers 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 licensees must satisfy the CBB that their controllers are suitable and pose no undue risks to the licensee. Insurance licensees must also satisfy the CBB that their close links do not prevent the effective supervision of the insurance licensee 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 controllers and close links.

                Amended: July 2007

              • AU-2.3.3

                In summary, controllers are persons who directly or indirectly are significant shareholders in an insurance licensee, or who are otherwise able to exert significant influence on the insurance licensee. The CBB seeks to ensure that controllers pose no significant risks to the licensee. In general terms, controllers 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 licensee has close links with its subsidiaries, with its parent undertakings, and with subsidiaries of its parent undertakings. It also has close links with any entity in which the licensee, its subsidiaries, its parent undertakings, and the subsidiaries of its parent undertakings 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 group is such that it is subject to adequate scrutiny at group level.

                Amended: July 2007
                Amended: October 2007

              • AU-2.3.5

                In all cases, when judging applications from existing groups, the CBB will have regard to the reputation and financial standing of the group as a whole. Where relevant, the CBB will also take into account the extent and quality of supervision applied to overseas members of the group and take into account any information provided by other supervisors in relation to any member of the group.

                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 functions must satisfy the CBB's approved persons requirements.

                Amended: July 2007

              • AU-2.4.2

                The definition of controlled functions is contained in Section AU-1.2, whilst Chapter AU-3 sets out the CBB's approved persons requirements.

                Amended: July 2007

              • AU-2.4.3

                The insurance licensee's 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 licensees must ensure their employees 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 licensees 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 group meet solvency standards applied by its home supervisor.

                Amended: October 2007

              • AU-2.5.4

                Insurance firms and insurance brokers 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 brokers and insurance consultants must maintain professional indemnity coverage as specified in Chapter GR-10.

            • AU-2.6 Condition 6: Systems and Controls

              • AU-2.6.1

                Insurance licensees 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 licensees 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 licensees 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 brokers 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 licensees appoint external auditors, subject to prior CBB approval. The minimum requirements regarding auditors 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 firms authorised to undertake long-term business appoint an actuary, subject to prior CBB approval. The minimum requirements contained in Module AA (Auditors and Actuaries) regarding actuaries must be met at all times.

                Amended: July 2007
                Amended: October 2007

              • AU-2.7.3

                Applicants must submit details of their proposed external auditors and, where relevant, actuary, 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 licensees 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 licensees 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 Takaful and Retakaful 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 licensees act in an open and cooperative manner with the CBB. Insurance licensees 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 licensees must conduct their activities in a professional and orderly manner, in keeping with good market practice standards. Insurance licensees must comply with the general standards of business conduct contained in Module PB, as well as the standards relating to treatment of customers contained in Module BC.

                  Amended: July 2007

              • License and Registration Fees

                • AU-2.8.4

                  Insurance licensees 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 licensees and registered persons, effective for the year 2007.

                  Amended: July 2007

              • Additional Conditions

                • AU-2.8.6

                  Insurance licensees 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 service 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 services.

                  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

          • AU-3 Approved Persons Conditions

            • AU-3.1 Condition 1: 'Fit and Proper'

              • AU-3.1.1

                Licensees seeking an approved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled function in question.

                Amended: July 2007

              • AU-3.1.2

                The authorisation requirement for persons nominated to carry out controlled functions is contained in Section AU-1.2. The authorisation process is described in Section AU-5.2.

              • AU-3.1.3

                Each applicant applying for approved person status and those individuals occupying approved person positions must comply with the following conditions:

                (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
                (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
                (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
                (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
                (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
                (f) Must have personal integrity, good conduct and reputation;
                (g) Has appropriate professional and other qualifications for the controlled function in question; and
                (h) Has sufficient experience to perform the duties of the controlled function.
                Amended: January 2016
                Amended: July 2007

              • AU-3.1.4

                In assessing the conditions prescribed in Paragraph AU-3.1.3, the CBB will take into account the criteria contained in Paragraph AU-3.1.5. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled function in one insurance licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

                Amended: January 2016
                Amended: July 2007

              • AU-3.1.5

                In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

                (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
                (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
                (e) The contravention of any financial services legislation;
                (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
                (g) Dismissal or a request to resign from any office or employment;
                (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
                (i) The extent to which the person has been truthful and open with supervisors; and
                (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.

              • AU-3.1.6

                With respect to Paragraph AU-3.1.5, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

              • AU-3.1.7

                Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking a controlled function.

                Amended: January 2016
                Amended: July 2007

              • AU-3.1.8

                In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

                (a) A person has breached any fiduciary obligations to the company or terms of employment;
                (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensee; and
                (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licensee.
                Amended: January 2016
                Amended: July 2007

              • AU-3.1.9

                Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-8.

                Added: January 2016

            • AU-3.2 [This Section was deleted in January 2016]

              • AU-3.2.1

                [This Paragraph was deleted in January 2016.]

                Deleted: January 2016
                Amended: July 2007

              • AU-3.2.2

                [This Paragraph was deleted in January 2016.]

                Deleted: January 2016
                Amended: July 2007

              • AU-3.2.3

                [This Paragraph was moved to Paragraph AU-3.1.9 in January 2016.]

                Amended: January 2016
                Amended: July 2007

          • AU-4 Registration Conditions

            • AU-4.1 Condition 1: Relevant Expertise

              • AU-4.1.1

                Actuaries, loss adjusters and appointed representatives seeking registration must satisfy the CBB that they have relevant expertise and qualifications. They must hold appropriate professional qualifications from a relevant, recognised professional body.

                Amended: October 2009
                Amended: July 2007

              • AU-4.1.2

                For actuaries, all 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 AU-4.1.1.

                Amended: July 2007

              • AU-4.1.2A

                For loss adjusters, all Fellows (or members of equivalent status) in good standing of the Chartered Institute of Loss Adjusters (CILA), the European Federation of Loss Adjusting Experts (FUEDI), the National Association of Independent Insurance Adjusters (NAIIA) or the Canadian Independent Adjusters' Association (CIAA) or any other similar body with mutually reciprocal licensing arrangements with any of these bodies, will satisfy the requirements in Paragraph AU-4.1.1.

                Added: April 2010

              • AU-4.1.3

                In the case of corporate persons wishing to provide actuarial or loss adjuster services, the CBB expects management and other staff collectively to have sufficient appropriate professional qualifications to ensure a professional level of service.

                Amended: July 2007

              • AU-4.1.4

                The above requirement does not oblige actuaries or loss adjusters to be residents of the Kingdom of Bahrain, in order to be registered by the CBB. Non-resident actuaries and loss adjusters wishing to practice in Bahrain may seek registration on the same basis as resident actuaries and loss adjusters.

                Amended: July 2007

              • AU-4.1.5

                For purposes of Paragraph AU-4.1.1 and as outlined in Chapter GR-9, the minimum qualifications of appointed representatives recognised by the CBB are:

                (a) For general insurance, the Award in General Insurance from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF);and
                (b) For long-term insurance, the Award in Financial Planning from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF).
                Adopted: October 2009

              • AU-4.1.6

                For appointed representatives, upon written application to the CBB, equivalent or higher qualification from an internationally recognised insurance institute may be acceptable, provided it substantially covers the core syllabuses of the minimum qualifications outlined in Paragraph GR-9.1.5B.

                Adopted: October 2009

              • AU-4.1.7

                In the case of corporate persons, the appointed representative must designate the individuals that will act on their behalf. Such individuals must meet the minimum qualifications outlined in Paragraph GR-9.1.5B.

                Adopted: October 2009

            • AU-4.2 Condition 2: General Suitability

              • AU-4.2.1

                Actuaries, loss adjusters and appointed representatives seeking registration must satisfy the CBB that the proposed registrants are generally suitable to operate as such.

                Amended: October 2009
                Amended: July 2007

              • AU-4.2.2

                In the case of natural persons, the CBB will have regard to the fitness and propriety, of the proposed registrant using the Rules and Guidance contained in Section AU-3.1.

                Amended: January 2016
                Amended: October 2009
                Amended: October 2007
                Amended: July 2007

              • AU-4.2.3

                In the case of corporate persons, the CBB will have regard to the corporation's reputation, financial soundness, and business conduct. The CBB will also review closely linked entities against the same criteria, using the definition of close links contained in Module GR.

                Amended: July 2007

          • AU-5 Information Requirements and Processes

            • AU-5.1 Licensing

              • Application Form and Documents

                • AU-5.1.1

                  Applicants for a license must fill in the Application Form 1 (Application for a License) online, available on the CBB website under Eservices/online Forms. The applicant must upload scanned copies of supporting documents listed in Paragraph AU-5.1.5, unless otherwise directed by the CBB.

                  Amended: July 2019
                  Amended: April 2018
                  Amended: July 2007

                • AU-5.1.2

                  Articles 44 to 47 of the CBB Law govern the licensing process. This prescribes a single stage process, with the CBB required to take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and timelines.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.3

                  References to applicant mean the proposed licensee seeking authorisation. An applicant may appoint a representative — such as a law firm or professional consultancy – to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.4

                  This Paragraph was deleted in January 2016.]

                  Deleted: January 2016
                  Amended: July 2007

                • AU-5.1.5

                  Unless otherwise directed by the CBB, the following documents must be provided in support of a Form 1:

                  (a) A duly completed Form 2 (Application for Authorisation of Controller) for each controller of the proposed licensee;
                  (b) A duly completed Form 3 (Application for Approved Person status), for each individual applying to undertake controlled functions, (as defined under Paragraph AU-1.2.2) of the proposed licensee;
                  (c) A comprehensive business plan for the application, addressing the matters described in Paragraph AU-5.1.6;
                  (d) For overseas companies, a copy of the company's current commercial registration or equivalent documentation;
                  (e) Where the applicant is a Bahraini company, a copy of the applicant's commercial registration certificate;
                  (f) Where the applicant is a corporate body, a certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB insurance license;
                  (g) Details of the proposed licensee's close links, as specified under Chapter GR-6;
                  (h) In the case of applicants that are part of a regulated group, a letter of non-objection to the proposed license application from the applicant's home supervisor, together with confirmation that the group is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;
                  (i) In the case of branch applicants, a letter of non-objection to the proposed license application from the applicant's home supervisor, together with confirmation that the applicant is in good regulatory standing and the company concerned is in compliance with applicable supervisory requirements, including those relating to capital and solvency requirements;
                  (j) In the case of branch applicants, copies of the audited financial statements of the applicant (head office) for the three years immediately prior to the date of application;
                  (k) In the case of applicants that are part of a group, copies of the audited financial statements of the applicant's group, for the three years immediately prior to the date of application.
                  (l) In the case of applicants not falling under either (j) or (k) above, copies of the audited financial statements of the applicant's major shareholder, for the three years immediately prior to the date of application;
                  (m) In the case of applicants seeking to raise part of their capital through a private placement, a draft of the relevant private placement memorandum, together with a formal, independent legal opinion that the documents comply with all applicable capital markets laws and regulations;
                  (n) A draft copy of the applicant's memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;
                  (o) [Subparagraph deleted in January 2008];
                  (p) [Subparagraph deleted in January 2008];
                  (q) For insurance firms and insurance brokers, confirmation of the cash deposit required to be held with a retail bank (licensee) in Bahrain under Article 181 of the CBB Law (see Section GR-7.1); and
                  (r) [Subparagraph deleted in January 2008].
                  Amended: January 2011
                  Amended: January 2008
                  Amended: October 2007
                  Amended: July 2007

                • AU-5.1.5A

                  The CBB may require that an acceptably worded a letter of guarantee be provided in support of the application for a license. Where the application for the license is for an incorporated entity, the CBB may seek a letter of guarantee from the major shareholder. Where the application is for an overseas insurance licensee, the CBB may seek a letter of guarantee from the parent company.

                  Amended: January 2011
                  Added: January 2008

                • AU-5.1.6

                  The business plan submitted in support of an application must explain:

                  (a) An outline of the history of the applicant and its shareholders;
                  (b) The reasons for applying for a license, including the applicant's strategy and market objectives;
                  (c) The proposed type of activities to be carried on by the applicant in/from the Kingdom of Bahrain;
                  (d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;
                  (e) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions, including underwriting, claims and accounting; and
                  (f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital and solvency requirements.
                  Amended: July 2007

                • AU-5.1.7

                  In the case of applicants seeking to raise capital (refer to AU-5.1.5(m)), the CBB’s review is aimed at checking that the proposed private placement complies with applicable capital markets laws and regulations, and that the information contained in the private placement memorandum (‘PPM’) is consistent with the information provided in the license application. The CBB’s review does not in any way constitute an approval or endorsement as to any claims made in the PPM regarding the future value of the company concerned. Note also that the CBB will not license applicants without a core group of sponsoring shareholders (who can demonstrate a strong business track record with relevant expertise), and where failure of the private placement to raise its targeted amount would leave the institution unable to comply with the CBB’s minimum capital requirements. The CBB will normally expect core shareholders to account for at least 40% of the applicant’s proposed initial total capital.

                  Added: July 2007

                • AU-5.1.8

                  The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the licensed application, and must preclude the applicant from undertaking other regulated insurance services, or commercial activities, unless these arise out of its insurance activities or are incidental to those.

                  Amended: July 2007

                • AU-5.1.8 [Deleted]

                  Deleted July 2007

                • AU-5.1.9

                  All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.

                  Amended: July 2007

                • AU-5.1.10

                  Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs prior to authorisation must be reported to the CBB.

                  Amended: July 2007

                • AU-5.1.11

                  Failure to inform the CBB of the changes specified in Paragraph AU-5.1.10 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition AU-2.8.2.

                  Amended: July 2007

              • Licensing Process and Timelines

                • AU-5.1.12

                  By law, the 60-day time limit referred to in Paragraph AU-5.1.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule AU-5.1.5 have to be provided, before the CBB may issue a license.

                  Amended: July 2007

                • AU-5.1.12A

                  The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer AU-5.1.5(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license. Likewise, a Bahrain company proposing to undertake financial services activities would not be able to obtain a commercial registration from the Ministry of Commerce and Industry without such assurances (refer AU-5.1.5(e) above).

                  Added: July 2007

                • AU-5.1.12B

                  Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule 5.1.5. This draft application should contain at least items AU-5.1.5(a); AU-5.1.5(b), with respect to proposed Directors (but not necessarily senior management); AU-5.1.5(c); AU-5.1.5(d); and AU-5.1.5(g) to AU-5.1.5(m) inclusive.

                  Added: July 2007

                • AU-5.1.12C

                  On the basis of the information specified in Paragraph AU-5.1.12B, the CBB may provide an initial ‘in principle’ confirmation that the applicant appears likely to meet the CBB’s licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The ‘in principle’ confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                  Added: July 2007

                • AU-5.1.12D

                  An ‘in principle’ confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB’s ‘fit and proper’ requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule AU-5.1.5 and, once assessed as complete by the CBB, a signed and dated final version of Form 1.

                  Amended: July 2007
                  Amended: October 2007
                  Amended: April 2008

                • AU-5.1.12E

                  Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans, for guidance on the CBB's license categories and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final).

                  Amended: April 2018
                  Added: July 2007

                • AU-5.1.12F

                  Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The Central Bank can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.

                  Added: July 2007

                • AU-5.1.12G

                  At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule AU-5.1.12H below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).

                  Added: July 2007

              • Granting or Refusal of License

                • AU-5.1.12H

                  To be granted a license, an applicant must demonstrate compliance with the applicable requirements of the CBB Law and this Module. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.

                  Added: July 2007

                • AU-5.1.12I

                  The CBB may refuse to grant a license if in its opinion:

                  (a) The requirements of the CBB Law or this Module are not met;
                  (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
                  (c) The CBB believes it necessary in order to safeguard the interests of potential customers.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.1.12J

                  Where the CBB proposes to refuse an application for a license, it must give the applicant written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice; these procedures will comply with the provisions contained in Article 46 of the CBB Law.

                  Added: July 2007

              • Starting Operations

                • AU-5.1.13

                  Within 6 months of the license being issued, the new licensee must provide to the CBB (if not previously submitted):

                  (a) The registered office address and details of premises to be used to carry out the business of the proposed licensee;
                  (b) The address in the Kingdom of Bahrain where full business records will be kept;
                  (c) The licensee's contact details including telephone and fax number, e-mail address and website;
                  (d) A copy of its business continuity plan;
                  (e) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;
                  (f) A copy of the auditor's acceptance to act as auditor for the applicant;
                  (g) A copy of an auditor's opinion certifying that the licensee's capital — as specified in the business plan submitted under Rule AU-5.1.5 — has been paid in;
                  (h) For insurance brokers and insurance consultants, a copy of the licensee's professional indemnity insurance policy or confirmation that a deposit to an amount specified by the CBB has been placed in escrow in an account of a retail bank licensed in the Kingdom of Bahrain (see Chapter GR-10); and
                  (i) A copy of the applicant's notarised memorandum and articles of association, addressing the matters described in Paragraph AU-5.1.8;
                  (j) A copy of the Ministry of Industry and Commerce commercial registration certificate;
                  (k) An updated organisation chart showing the reporting lines, committees (if any) and including the names of the persons undertaking the controlled functions;
                  (l) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the insurance licensee is licensed by the CBB; and
                  (m) Any other information as may be specified by the CBB.
                  Amended: October 2011
                  Amended: July 2007
                  Amended: January 2008

                • AU-5.1.14

                  New licensees must start their operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.

                  Amended: July 2007

                • AU-5.1.15

                  The procedures for amending or cancelling licenses are contained in Sections AU-5.4 and AU-5.5 respectively.

                  Added: July 2007

                   

                   

            • AU-5.2 Approved Persons

              • Prior Approval Requirements and Process

                • AU-5.2.1

                  Insurance licensees must obtain CBB's prior written approval before a person is formally appointed to a controlled function. The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in Form 3, including previous experience, is accurate. Form 3 is available under Volume 3 Part B Authorisation Forms of the CBB Rulebook.

                  Amended: January 2016
                  Amended: July 2015
                  Amended: April 2010
                  Amended: July 2007

                • AU-5.2.2

                  When the request for approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled function is in relation to an existing insurance licensee, the Form 3, except if dealing with a MLRO, must be marked for the attention of the Director, Insurance Supervision Directorate. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

                  Amended: April 2018
                  Amended: July 2007
                  Amended: April 2008

                • AU-5.2.2A

                  When submitting the Forms 3, insurance licensees must ensure that the Form 3 is:

                  (a) Submitted to the CBB with a covering letter signed by an authorised representative of the insurance licensee, seeking approval for the proposed controlled function;
                  (b) Submitted in original form;
                  (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
                  (d) Signed by an authorised representative of the licensee and all pages stamped with the licensee's seal.
                  Amended: July 2015
                  Added: April 2010

                • AU-5.2.2B

                  Insurance licensees seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

                  Added: July 2015

                • AU-5.2.2C

                  For existing licensees applying for the appointment of a Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager.

                  Amended: July 2015
                  Added: April 2010

              • Assessment of Application

                • AU-5.2.3

                  The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph AU-3.1.3 and the criteria outlined in Paragraph AU-3.1.5.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.4

                  For purposes of Paragraph AU-5.2.3, insurance licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all regulatory requirements, including but not limited to receiving the application complete with all the required information and documents, as well as verifying references.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.4A

                  The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph AU-3.1.3 and does not satisfy the CBB criteria in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to the insurance licensee concerned, setting out the basis for the decision.

                  Amended: January 2016
                  Added: July 2015

                • AU-5.2.5

                  [This Paragraph was deleted in January 2016.]

                  Deleted: January 2016
                  Amended: July 2015
                  Amended: July 2008
                  Amended: July 2007

              • Appeal Process

                • AU-5.2.5A

                  Insurance licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the insurance licensee of its decision within 30 calendar days from submitting the appeal.

                  Added: July 2015

                • AU-5.2.5B

                  Where notification of the CBB's decision to grant a person approved person status is not issued within 15 business days from the date of meeting all regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, insurance licensees or the nominated approved persons may appeal to the the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the insurance licensee of its decision within 30 calendar days from the date of submitting the appeal.

                  Amended: January 2016
                  Added: July 2015

              • Notification Requirements and Process

                • AU-5.2.6

                  Insurance licensees must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why (see Paragraph AU-5.5.6). In such cases, their approved person status is automatically withdrawn by the CBB.

                  Amended: July 2008
                  Amended: April 2008
                  Amended: July 2007

                • AU-5.2.7

                  Insurance licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved person.

                  Added: April 2010

                • AU-5.2.8

                  Insurance licensees must immediately notify the CBB when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of their approved persons.

                  Added: April 2010

            • AU-5.3 Registration

              • AU-5.3.1

                Persons wishing to be registered as an actuary or loss adjuster must submit a duly completed Form 4 (Application for Registration). Persons wishing to be registered as appointed representative must submit Form 5 (Application for Appointed Representative). The form must be marked for the attention of the Director, Licensing Directorate.

                Amended: April 2018
                Amended: October 2009

              • AU-5.3.2

                The CBB aims to respond to applications for registration within 2 weeks of receipt of a Form 4 or Form 5, although in some cases, where referral to an overseas supervisor is required, the response time is likely to be longer.

                Amended: October 2009
                Amended: July 2007

              • AU-5.3.3

                All refusals by the CBB to grant a person registered person status have to be reviewed and approved by an Executive Director of the CBB. A notice of intent is issued to the applicant concerned, setting out the basis for the decision. The applicant has 30 calendar days from the date of the notice in which to appeal the decision. The CBB then has 30 calendar days from the date of the representation in which to make a final determination. See also Chapter EN-9.

                Amended: October 2009
                Amended: July 2007

            • AU-5.4 Amendment of Authorisation

              • Licenses

                • AU-5.4.1

                  Insurance licensees wishing to vary the scope of their license must obtain the CBB’s written approval, before effecting any such change. Insurance licensees must seek prior CBB approval before undertaking new activities (such as carrying out or broking new classes of business). Approval must be sought whenever a licensee wishes to add or cease undertaking a regulated insurance service, or to vary a condition imposed on their license.

                  Amended: July 2007

                • AU-5.4.2

                  Failure to secure the CBB approval prior to effecting such changes is likely to be viewed as a serious breach of a licensee's regulatory obligations and may constitute a breach of Article 40(a) of the CBB Law.

                  Amended: July 2007

                • AU-5.4.3

                  In addition to any other information requested by the CBB, and unless otherwise directed by the CBB, an insurance licensee requesting CBB approval to undertake new regulated insurance services must provide the following documentation:

                  (a) A summary of the rationale for undertaking the proposed new service;
                  (b) A description of how the new service will be managed and controlled;
                  (c) An analysis of the financial impact of the new service; and
                  (d) A summary of the due diligence undertaken by the Board and management of the insurance licensee on the proposed new service.
                  Amended: July 2007

                • AU-5.4.4

                  The CBB will only agree to amend a license if doing so poses, in its judgement, no unacceptable risks to customers. As provided for under Article 48 of the CBB Law, the CBB may itself move to amend a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires such a change. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances.

                  Amended: July 2007
                  Amended: October 2007

              • Approved Persons

                • AU-5.4.5

                  Insurance licensees must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                  Added: July 2007

                • AU-5.4.6

                  In such instances, a new Form 3 (Application for Approved Person status) should be completed and submitted to the CBB. Note that a person may be considered ‘fit and proper’ for one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensee, the first licensee should notify the CBB of that person’s departure (see Rule AU-5.5.6), and the new licensee should submit a request for approval under Rule AU-1.2.1.

                  Added: July 2007

            • AU-5.5 Cancellation of Authorisation

              • Voluntary Surrender of a License or Closure of a Branch

              • Cancellation of a License by the CBB

                • AU-5.5.1

                  In accordance with Article 50 of the CBB Law, insurance licensees wishing to cancel their license or cease activities for a branch must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Insurance Supervision Directorate, setting out in full the reasons for the request and how the business is to be wound up.

                  Amended: October 2011
                  Amended: July 2007

                • AU-5.5.2

                  Insurance licensees must satisfy the CBB that their customers' interests are to be safeguarded during and after the proposed cancellation. The requirements contained in Module GR regarding cessation of business must be satisfied.

                  Amended: July 2007
                  Amended: October 2007

                • AU-5.5.3

                  Failure to comply with Rule AU-5.5.1 may constitute a breach of Article 50(a) of the CBB Law. The CBB will only approve such requests where it has no outstanding regulatory concerns and any relevant customers' interests would not be prejudiced. A voluntary surrender will not be accepted where it is aimed at pre-empting supervisory actions by the CBB. A voluntary surrender will only take effect once the licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities to customers.

                  Amended: July 2007

                • AU-5.5.4

                  As provided for under Article 48(c) of the CBB Law, the CBB may itself move to cancel a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of customers or creditors of the licensee requires a cancellation. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances and the licensee's right to appeal the formal notice of cancellation issued by the CBB.

                  Amended: October 2011
                  Added: July 2007

                • AU-5.5.4A

                  Cancellation of a license requires the CBB to issue a formal notice of cancellation to the licensee concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.

                  Amended: October 2012
                  Added: October 2011

                • AU-5.5.4B

                  Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to clients. Until such time, the CBB will retain all its regulatory powers towards the licensee and will direct the licensee so that no new regulated insurance services may be undertaken whilst the licensee discharges its obligations to its clients.

                  Added: October 2011

                • AU-5.5.5

                  In the case of insurance brokers and insurance consultants, the requirements relating to professional indemnity coverage must be observed (see Paragraph GR-10.1.8)

                  Amended: July 2007
                  Amended: October 2007

              • Approved Persons

                • AU-5.5.5

                  Effective up to Jun 30 2007.

                  Cancellation of authorised status requires BMA to issue a formal notice of cancellation to the person concerned. The notice of cancellation must describe the BMA's rationale for the proposed cancellation.

                • AU-5.5.6

                  In accordance with Paragraph AU-5.2.6, insurance licensees must promptly notify the CBB in writing when a person undertaking a controlled function will no longer be carrying out that function. If a controlled function falls vacant, the insurance licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the insurance licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled function affected. These interim arrangements must be approved by the CBB.

                  Amended: July 2007
                  Amended: April 2008

                • AU-5.5.7

                  The explanation given for any such changes should simply identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.

                  Amended: July 2007

                • AU-5.5.8

                  The CBB may also move to declare someone as not ‘fit and proper’, in response to significant compliance failures or other improper behaviour by that person: see Chapter EN-8 regarding the cancellation of ‘fit and proper’ approval.

                  Added: July 2007

              • Registered Persons

                • AU-5.5.9

                  Registered actuaries, loss adjusters and appointed representatives wishing to cancel their registration status with the CBB must obtain the CBB's written approval. All such requests must be made in writing to the Director, Insurance Supervision Directorate.

                  Amended: October 2009
                  Added: July 2007

                • AU-5.5.10

                  The CBB may itself cancel the registered status of an actuary, loss adjuster or appointed representative should the registered person fail to comply with registration conditions outlined in Chapter AU-4: see Chapter EN-9 regarding the cancellation of registration.

                  Amended: October 2009
                  Added: July 2007

            • AU-5.6 Publication of the Decision to Grant, Cancel or Amend a License

              • AU-5.6.1

                In accordance with Articles 47 and 49 of the CBB Law, the CBB must publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.

                Added: July 2017

              • AU-5.6.2

                For the purposes of Paragraph AU-5.6.1, the cost of publication must be borne by the Licensee.

                Added: July 2017

              • AU-5.6.3

                The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

                Added: July 2017

          • AU-6 Licensing and Registration Fees

            • AU-6.1 Introduction

              • AU-6.1.1

                Insurance licensees and registered persons must comply with any fees levied by the CBB, pursuant to Article 180 of the CBB Law. The fees charged vary on the type of insurance license or registration granted by the CBB. Fees are levied at the time of application for licensing and on an annual basis for licensees and registered persons, thereafter.

                Added: July 2007

            • AU-6.2 License Application Fees

              • AU-6.2.1

                With immediate effect, applicants seeking an insurance license from the CBB must pay a non-refundable application fee of BD 100 at the time of submitting their application to the CBB.

                Added: July 2007

              • AU-6.2.2

                There are no application fees for those seeking approved person status.

                Added: July 2007

              • AU-6.2.3

                Actuaries, loss adjusters and appointed representatives seeking registration status are exempt from application fees but are subject to annual fees as outlined in Section AU-6.3.

                Amended: October 2009
                Added: July 2007

            • AU-6.3 Annual Fees

              • AU-6.3.1

                Insurance licensees or registered persons must pay to the CBB an annual licensing or registration fee, on 1st December of the preceding year for which fees are due.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.2

                The relevant fees are specified in Rules AU-6.3.3 to AU-6.3.6A below: different fees are specified for insurance firms (other than captive insurance firms), captive insurance firms, insurance brokers, insurance consultants, insurance managers, actuaries, loss adjusters and appointed representatives. The fees due on 1st December are those due for the following calendar year. Where applicable, variable fees are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example) based on a percentage, is calculated using the audited financial statements for 2012, assuming a 31st December year end.

                Amended: July 2013
                Amended: October 2009
                Added: July 2007

              • AU-6.3.3

                For insurance firms, other than captive insurance firms, the annual licensing fee is a fixed amount of BD 6,000. For captive insurance firms, the annual licensing fee is a fixed amount of BD 1,000.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.4

                Insurance brokers, other than Bahraini single person companies, all insurance consultants and all insurance managers must pay a variable annual licensing fee, based on 0.25% of their relevant operating expenses, subject to a minimum ('floor') of BD 500 and a maximum ('cap') of BD 3,000.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.5

                For insurance brokers that are Bahraini single person companies, the annual licensing fee is a fixed amount of BD 175.

                Amended: July 2013
                Added: July 2007

              • AU-6.3.6

                The annual registration fee for registered actuaries is a fixed amount of BD 25. For registered loss adjusters, unincorporated individuals must pay an annual registration fee of a fixed amount of BD 175 while incorporated loss adjusters must pay an annual registration fee of a fixed amount of BD 1,200.

                Amended: July 2013
                Amended: October 2007
                Added: July 2007

              • AU-6.3.6A

                For appointed representatives, the annual fee must be paid by the licensed principal. The fee for registered appointed representatives, that are unincorporated individuals is a fixed amount of BD 25. For incorporated appointed representatives, the fixed annual fee is based on the number of designated individuals within the corporate entity that are the representatives of the insurance firm. For incorporated appointed representatives that have:

                (a) 1 to 10 designated individuals, the fee is BD500;
                (b) 11 to 20 designated individuals, the fee is BD 1000; and
                (c) More than 20 designated individuals, the fee is BD1500.
                Amended: July 2013
                Adopted: October 2009

              • AU-6.3.6B

                For incorporated appointed representatives, the fee amount is based on the number of designated individuals at the prior year end.

                Adopted: October 2009

              • AU-6.3.6C

                As an example, for purposes of Paragraph AU-6.3.6B, if at 31st December 2012 an incorporated appointed representative had 8 designated individuals, the fee payable on 1st December 2013 for the 2014 year would be BD 500. If during the course of the year 2013, the number of designated individuals increased to 15 by year end 2013, the fee payable for the year 2015 would be BD 1000.

                Amended: July 2013
                Adopted: October 2009

              • AU-6.3.7

                For purposes of Paragraph AU-6.3.4, relevant operating expenses are defined as the total operating expenses of the licensee concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule AU-6.3.8.

                Added: July 2007

              • AU-6.3.8

                The adjustments to be made to relevant operating expenses are the exclusion of the following items from total operating expenses:

                (a) Training costs;
                (b) Charitable donations;
                (c) CBB fees paid; and
                (d) Non-executive Directors' remuneration.
                Added: July 2007

              • AU-6.3.9

                For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.

                Added: July 2007

              • AU-6.3.10

                The CBB would normally rely on the audited accounts of a licensee as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.

                Added: July 2007

              • AU-6.3.11

                Insurance licensees, subject to Paragraph AU-6.3.4 must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which fees are due.

                Amended: July 2013
                Amended: April 2009
                Added: July 2007

              • AU-6.3.11A

                Except for actuaries and loss adjustors, all annual license fees are collected by direct debit. For licensees subject to a variable fee, the fee levied will be based on form ALF that is provided in accordance with Paragraph AU-6.3.11.

                Added: July 2013

              • AU-6.3.11B

                All licensees subject to direct debit for the payment of the annual fee, must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September, available under Part B of Volume 3 (Insurance) CBB Rulebook on the CBB Website.

                Added: July 2013

              • AU-6.3.11C

                For actuaries and loss adjusters, the annual fixed fee must be remitted by direct deposit or wire transfer by 1st December of the previous year for which the fees are due. Payment instructions are outlined in Form ALF which must be completed when fees are remitted.

                Added: July 2013

              • AU-6.3.12

                For new insurance firm licensees, their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license has been granted, shall be prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

                Added: July 2007
                Amended: October 2007
                Amended: April 2008
                Amended: April 2009

              • AU-6.3.12A

                For those new licensees subject to a fee based on their relevant operating expenses (refer to Paragraph AU-6.3.4), the amount payable in relation to the first year in which the license has been granted is the floor amount of BD500.

                Added: April 2008
                Amended: October 2008
                Amended: April 2009

              • AU-6.3.13

                For newly registered actuaries, individual loss adjusters and appointed representatives, the full annual amount of the annual registration fee referred to in Paragraph AU-6.3.6 and AU-6.3.6A, shall be the fee required to be paid to the CBB for the first year in which the registration status has been granted.

                Amended: October 2009
                Amended: April 2008
                Added: July 2007

              • AU-6.3.14

                For newly registered incorporated loss adjusters, the annual registration fee referred to in Paragraph AU-6.3.6, shall be prorated for the year using the date of the official registration letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year, subject to a minimum fee of BD 250.

                Added: July 2007
                Amended: April 2008
                Amended: October 2008

              • AU-6.3.15

                [This Paragraph was deleted in July 2013]

                Deleted: July 2013
                Added: July 2007

              • AU-6.3.16

                [This Paragraph was deleted in April 2009]

                Deleted: April 2009

              • AU-6.3.17

                Where a license or registration is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

                Added: July 2007

              • AU-6.3.18

                Insurance licensees or registered persons failing to comply with this Section may be subject to financial penalties for date sensitive requirements as outlined in Section EN-5.3B or may have their license or registered status withdrawn by the CBB.

                Added: July 2013

        • PB Principles of Business

          • PB-A Introduction

            • PB-A.1 Purpose

              • Executive Summary

                • PB-A.1.1

                  The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain (‘CBB’) insurance licensees and approved persons. They serve as a basis for other material in Volume 3 (Insurance), and help address specific circumstances not covered elsewhere in the Rulebook.

                  Amended: January 2007

                • PB-A.1.2

                  The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 3 (Insurance). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.

              • Legal Basis

                • PB-A.1.3

                  This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business 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 licensees(including their approved persons).

                  Amended: January 2011
                  Added: January 2007

                • PB-A.1.4

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

                  Added: January 2007

            • PB-A.2 Module History

              • PB-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

              • PB-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

              • PB-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
                PB-A.1.3 01/2007 New Rule introduced, categorising this Module as a Directive.
                PB-1.1.1 01/2007 Small expansion of Principle 1 to refer to disclosure of all relevant information to customers, as required by CBB Regulations and Directives.
                PB-A.1.3 01/2011 Clarified legal basis

              • PB-A.2.3 [Deleted]

                Deleted: January 2007

              • PB-A.2.4

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

          • PB-B Scope of Application

            • PB-B.1 Scope of Application

              • PB-B.1.1

                The 10 Principles of Business apply to all CBB insurance licensees, in accordance with Paragraph PB-B.1.2. Principles 1–8 (Paragraphs PB-1.1 to PB-1.8 inclusive) also apply to all approved persons, in accordance with Paragraph PB-B.1.3.

                Amended: January 2007

              • PB-B.1.2

                Principles 1 to 10 apply to activities carried out by the licensee, including activities carried out through overseas branches (if any). Principles 9 and 10 also take into account any activities of other members of the group of which the licensee is a member.

                Amended: October 2007

              • PB-B.1.3

                Principles 1 to 8 apply to approved persons in respect of the controlled function for which they have been approved.

              • PB-B.1.4

                Principles 1 to 8 do not apply to behaviour by an approved person with respect to any other functions or activities they may undertake. However, behaviour unconnected to their controlled function duties may nonetheless be relevant to an assessment of that person's fitness and propriety.

              • PB-B.1.5

                The CBB's requirements regarding approved persons and controlled functions are located in Module AU (Authorisation).

                Amended: January 2007

            • PB-B.2 Non compliance

              • PB-B.2.1

                Breaching a Principle of Business makes the insurance licensee or approved person concerned liable to enforcement action. In the case of a licensee, this may call into question whether they continue to meet the licensing conditions (see Chapter AU-2). In the case of an approved person, this may call into question whether they continue to meet the 'fit and proper' requirements for the function for which they have been approved (see Chapter AU-3).

                Amended: October 2007

              • PB-B.2.2

                Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.

                Amended: January 2007

          • PB-1 The Principles

            • PB-1.1 Principle 1 — Integrity

              • PB-1.1.1

                Insurance licensees and approved persons must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings with customers, and disclose fully all relevant information to customers, as required by the CBB's Regulations and Directives.

                Amended: January 2007

            • PB-1.2 Principle 2 — Conflicts of Interest

              • PB-1.2.1

                Insurance licensees and approved persons must take all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of a customer.

            • PB-1.3 Principle 3 — Due Skill, Care and Diligence

              • PB-1.3.1

                Insurance licensees and approved persons must act with due skill, care and diligence.

            • PB-1.4 Principle 4 — Confidentiality

              • PB-1.4.1

                Insurance licensees and approved persons must observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures.

            • PB-1.5 Principle 5 — Market Conduct

              • PB-1.5.1

                Insurance licensees and approved persons must observe proper standards of market conduct, and avoid action that would generally be viewed as improper.

            • PB-1.6 Principle 6 — Customer Assets

              • PB-1.6.1

                Insurance licensees and approved persons must take reasonable care to safeguard the assets of customers for which they are responsible.

                Amended: January 2007

            • PB-1.7 Principle 7 — Customer Interests

              • PB-1.7.1

                Insurance licensees and approved persons must pay due regard to the legitimate interests and information needs of their customers and communicate with them in a fair and transparent manner. Insurance licensees and approved persons, when dealing with customers who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.

            • PB-1.8 Principle 8 — Relations with Regulators/Supervisors

              • PB-1.8.1

                Insurance licensees and approved persons must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies under whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.

                Amended: January 2007

            • PB-1.9 Principle 9 — Adequate Resources

              • PB-1.9.1

                Insurance licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

            • PB-1.10 Principle 10 — Management, Systems & Controls

              • PB-1.10.1

                Insurance licensees must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Insurance licensees' systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.

                Amended: January 2007

        • HC High-Level Controls

          • HC-A Introduction

            • HC-A.1 Purpose

              • Executive Summary

                • HC-A.1.1

                  This Module presents requirements that have to be met by insurance licensees with respect to:

                  (a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code;
                  (b) International best practice corporate governance standards set by bodies such as the International Association of Insurance Supervisors; and
                  (c) Related high-level controls and policies.
                  January 2011

                • HC-A.1.2

                  The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.

                  January 2011

                • HC-A.1.3

                  The purpose of the Module is to establish best practice corporate principles in Bahrain, and to provide protection for investors and other company stakeholders through compliance with those principles.

                  January 2011

                • HC-A.1.4

                  Whilst the Module follows best practice, it is nevertheless considered as the minimum standard to be applied. This Module also includes additional rules and guidance issued by the CBB prior to the publication of the Code and previously contained in Module HC.

                  January 2011

              • Structure of this Module

                • HC-A.1.5

                  This Module follows the structure of the Corporate Governance Code and each Chapter deals with one of the nine fundamental Principles of corporate governance. In addition, a Chapter has been added to deal specifically with requirements imposed on insurance consultants, insurance managers and captive insurance firms. The numbered directives included in the Code are Rules for purposes of Chapters HC-1 to HC-9. Recommendations under the Code have been included as guidance. However, where the previous version of Module HC had a similar recommendation as a Rule, the Module retains this Paragraph as a Rule.

                  January 2011

                • HC-A.1.6

                  The Module also incorporates other high-level controls and policies that apply in particular to insurance licensees.

                  January 2011

                • HC-A.1.7

                  All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

                  January 2011

              • The Comply or Explain Principle

                • HC-A.1.8

                  This Module is issued as a Directive (as amended from time to time) in accordance with Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). In common with other Rulebook Modules, this Module contains a mixture of Rules and Guidance (See Module UG-1.2 for detailed explanation of Rules and Guidance). All Rulebook content that is categorised as a Rule must be complied with by those to whom the content is addressed. Other parts of this Module are Guidance; nonetheless every insurance licensee to whom Module HC applies, is expected to comply with recommendations made as Guidance in Module HC or explain its noncompliance by way of an annual report to its shareholders and to the CBB (see Chapter HC-8).

                  January 2011

              • Monitoring and Enforcement of Module HC

                • HC-A.1.9

                  Disclosure and transparency are underlying principles of Module HC. Disclosure is crucial to allow outside monitoring to function effectively. This Module looks to a combined monitoring system relying on the Board, the insurance licensee's shareholders and the CBB.

                  January 2011

                • HC-A.1.10

                  It is the Board's responsibility to see to the accuracy and completeness of the insurance licensee's corporate governance guidelines and compliance with Module HC. Failure to comply with this Module is subject to enforcement measures as outlined in Module EN (Enforcement).

                  January 2011

              • Legal Basis

                • HC-A.1.11

                  This Module contains the CBB's Directive (as amended from time to time) relating to high-level controls 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 licensees (including their approved persons).

                  January 2011

                • HC-A.1.12

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

                  January 2011

              • Effective Date

                • HC-A.1.13

                  This updated Module issued is effective on 1st January 2011. All insurance licensees to which Module HC applies should be in full compliance by the financial year end 2011. At every insurance licensee's annual shareholder meeting held after 1st January 2011, corporate governance should be an item on the agenda for information and any questions from shareholders regarding the insurance licensee's governance. Where possible, the insurance licensee should also have corporate governance guidelines in place at that time and should have a "comply or explain" report as described in Paragraph HC-A.1.8.

                  January 2011

            • HC-A.2 Module History

              • HC-A.2.1

                This Module was first issued in April 2005 by the BMA and updated in January 2007 to reflect the switch to the CBB. Following the issuance of the Corporate Governance Code by the Ministry of Industry and Commerce in March 2010, the Module was amended in January 2011 to be in line with the new Code and to include previous requirements that were in place in the originally issued Module HC. 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.

                January 2011

              • HC-A.2.2

                A list of recent changes made to this Module is detailed in the table below:

                Module Ref. Change Date Description of Changes
                HC-1 to HC-10 01/2011 Amendments due to introduction of new MOIC Corporate Governance Code.
                HC-1.3.7 04/2011 Clarified the rules regarding the limitation on Directorships held by board members.
                HC-1.4 04/2011 Amendment made to reflect new Rules on attendance of Directors at Board of Directors meetings.
                HC-6.6.3 04/2011 Guidance added dealing with the compliance function.
                Appendix A 04/2011 Clarified membership of audit committee to be in line with Rule HC-3.2.1.
                HC-B.2.2 01/2012 Clarified language related to corporate governance.
                HC-1.2.5 and HC-1.6.3 01/2012 Clarified that the Chairman of the Board may delegate specific duties dealt with in these Paragraphs.
                HC-1.4.4B 01/2012 Corrected typo.
                HC-1.5.7, HC-1.5.7A and HC-1.5.7B 01/2012 Clarified rule and guidance on the chairman of the Board.
                HC-1.10.1 01/2012 Deleted last sentence.
                HC-5.6.6 01/2012 Amended Paragraph.
                Appendix D 01/2012 Disclosure to shareholders amended.
                HC-7.2.5 and HC-10.7.6 10/2012 Clarified Guidance on election of board members.
                Appendices A, B and C 10/2012 Amended requirement for written report on performance evaluation for various Board committees.
                Appendix A 10/2012 Included reference to compliance under Committee Duties and Responsibilities.
                HC-2.2.3 and HC-2.4.1 01/2013 Clarified scope of application for Rules.
                HC-1.3.4 and HC-10.1.8 10/2014 Minor corrections to be consistent with wording used in other Volumes of the CBB Rulebook.
                HC-1.11.2, HC-2.2.5, HC-6.5.1 and HC-8.2.1 10/2014 Removed reference to single person company as HC-B.1.1 clearly states that the contents of this Module do not apply to insurance licensees with this legal status.
                HC-2.3.3 and HC-10.2.5A 04/2016 Added a requirement (or guidance, based on type of insurance license) for the licensee to have in place a board approved policy on the employment of relatives of approved persons.
                HC-2.4.1A and HC-10.2.6A 04/2016 Added the requirement (or guidance, based on type of insurance license) to disclose to the board on annual basis relatives of any approved persons occupying controlled functions.
                HC-2.3, HC-2.4 and HC-10.2 07/2016 Clarified application of Rules (or guidance, based on the type of insurance license) for overseas licensees.

              • HC-A.2.3

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

                January 2011

          • HC-B Scope of Application

            • HC-B.1 Insurance Licensees

              • HC-B.1.1

                The contents of this Module - unless otherwise stated - apply to all Bahraini insurance licensees, incorporated under the Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Company Law'), except those companies operating as Bahraini single person company.

                January 2011

              • HC-B.1.2

                For insurance brokers, Sections HC-3.2 Audit Committee and HC-3.3 Audit Committee Charter are to be considered as Guidance and the Comply or Explain Principle (see Paragraph HC-A.1.8) applies. In addition references to the Nominating and Remuneration Committees do not apply for insurance brokers.

                January 2011

              • HC-B.1.3

                For insurance consultants, insurance managers and captive insurance firms the applicable Guidance Paragraphs are included in Chapter HC-10. The Comply or Explain Principle (see Paragraph HC-A.1.8) applies to the content of Chapter HC-10.

                January 2011

              • HC-B.1.4

                Overseas insurance licensees must satisfy the CBB that equivalent arrangements are in place at the parent entity level, and that these arrangements provide for effective high-level controls over activities conducted under the Bahrain license.

                January 2011

              • HC-B.1.5

                In assessing compliance with Paragraph HC-B.1.4, the CBB will take into account regulatory requirements applicable to the parent entity, as well as the governance and systems and controls arrangements actually implemented by the parent entity and applied to the Bahrain operation. With the exception of specific requirements that explicitly apply to overseas insurance licensees (i.e. Paragraph HC-B.1.4), overseas insurance licensees should consider the remaining contents of this Chapter as guidance, in judging whether high-level controls applied to the branch satisfy HC-B.1.4.

                January 2011

            • HC-B.2 Branches, Subsidiaries and Affiliates

              • HC-B.2.1

                Bahraini insurance licensees must ensure that, as a minimum, the same or equivalent provisions of this Module apply to their branches, whether located inside or outside the Kingdom of Bahrain, such that these are also subject to effective high-level controls. In instances where local jurisdictional requirements are more stringent than those applicable in this Module, the local requirements are to be applied.

                January 2011

              • HC-B.2.2

                Bahraini insurance licensees must satisfy the CBB that financial services activities conducted in subsidiaries and other group members are subject to the same or equivalent arrangements for ensuring effective corporate governance over their activities.

                Amended: January 2012
                January 2011

              • HC-B.2.3

                Where an insurance licensee is unable to satisfy the CBB that its subsidiaries and other group members are subject to the same or equivalent arrangements, the CBB will assess the potential impact of risks — both financial and reputational — to the licensee arising from inadequate high-level controls in the rest of the group of which it is a member. In such instances, the CBB may impose restrictions on dealings between the licensee and other group members. Where weaknesses in controls are assessed by the CBB to pose a major threat to the stability of the licensee, then its authorisation may be called into question.

                January 2011

          • HC-1 The Board

            • HC-1.1 Principle

              • HC-1.1.1

                All Bahraini insurance licensees must be headed by an effective, collegial and informed Board of Directors ('the Board').

                January 2011

            • HC-1.2 Role and Responsibilities

              • HC-1.2.1

                All directors must understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

                (a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
                (b) The Board's fiduciary duties of care and loyalty to the insurance licensee and the shareholders (see HC-2.1).
                January 2011

              • HC-1.2.2

                The Board's role and responsibilities include but are not limited to:

                (a) Approving and reviewing at least annually the overall business performance and strategy for the insurance licensee;
                (b) Reviewing regularly the implementation of the strategy and operational performance;
                (c) Causing financial statements to be prepared which accurately disclose the insurance licensee's financial position;
                (d) Monitoring management performance;
                (e) Reviewing regularly the level of risk;
                (f) Approving and reviewing at least annually systems and controls framework (including policies and procedures);
                (g) Convening and preparing the agenda for shareholder meetings;
                (h) Monitoring conflicts of interest and preventing abusive related party transactions;
                (i) Assuring equitable treatment of shareholders including minority shareholders; and
                (j) Setting out clearly and reviewing on a regular basis who has authority to enter the licensee into contractual obligations.
                January 2011

              • HC-1.2.3

                With respect to Subparagraph HC-1.2.2(j), the Board should set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board will consider the financial impact the contractual obligation may have in relation to its capital.

                January 2011

              • HC-1.2.4

                The directors are responsible both individually and collectively for performing these responsibilities and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the insurance licensee. Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members and senior management.

                January 2011

              • HC-1.2.5

                When a new director is inducted, the chairman of the Board, or the licensee's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also HC-4.5.1).

                Amended: January 2012
                January 2011

              • HC-1.2.6

                The insurance licensee should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                January 2011

              • HC-1.2.7

                The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

                January 2011

              • Additional Guidance

                • HC-1.2.8

                  In assessing the licensee's strategic plans (Paragraph HC-1.2.2), the CBB would expect the Board to address the licensee's current and future aspirations with respect to its position in the market place, its size, products, value and other key aspirations that would be considered important by investors. Furthermore, the Board should demonstrate that it is able to proactively identify and understand the significant risks that the licensee faces in achieving its business objectives. A description of the licensee's strategy should be included in the annual financial statements. See also Module PD (Public Disclosure).

                  January 2011

                • HC-1.2.9

                  In assessing the management framework (Paragraph HC-1.2.2), the CBB would expect the Board to have effective policies and processes in place for:

                  (a) Ensuring a formal and transparent Board nomination process;
                  (b) Appointing senior managers, and ensuring that they have the necessary integrity, technical and managerial competence, and experience;
                  (c) Overseeing succession planning, and minimizing undue reliance on key individuals;
                  (d) Reviewing key senior management and Board remuneration packages and ensuring such packages are consistent with the corporate values and strategy of the licensee and encourage prudent risk taking;
                  (e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and
                  (f) Approving budgets and reviewing performance against those budgets.
                  January 2011

                • HC-1.2.10

                  In assessing the systems and controls framework (Paragraph HC-1.2.2), the CBB would expect the Board to be able to demonstrate that its operations, individually and collectively:

                  (a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the licensee's activities. These should pro-actively identify as well as monitor risk. The systems should produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;
                  (b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and
                  (c) Make effective use of the work of internal and external auditors.
                  January 2011

            • HC-1.3 Composition

              • HC-1.3.1

                Captive insurance firms are exempt from the requirements of this Section, except for Paragraph HC-1.3.2, which apply to all Bahraini insurance licensees.

                January 2011

              • HC-1.3.2

                The Memorandum and Articles of Association of licensees must adequately set out procedures for the appointment, removal and retirement of Directors.

                January 2011

              • HC-1.3.3

                For insurance firms, the Board must comprise at least five Directors. For Bahraini insurance licensees, other than insurance firms, the Board must comprise at least three Directors. For all Bahraini insurance licensees, at least half the Board's members, including the Board's chairman, must be non-executive Directors.

                January 2011

              • HC-1.3.4

                The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the insurance licensee's Memorandum of Association.

                Amended: October 2014
                January 2011

              • HC-1.3.5

                Potential non-executive directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The Nominating Committee should regularly review the time commitment required from each non-executive director and should require each non-executive director to inform the Committee before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.

                January 2011

              • HC-1.3.6

                The Board must periodically assess its composition and size and, where appropriate, reconstitute itself and its committees by selecting new Directors to replace long-standing members or those whose contributions to the licensee or its committees is not adequate.

                January 2011

              • HC-1.3.7

                A Board member may have a maximum of two Directorships of financial institutions inside Bahrain. However, two Directorships of licensees within the same category of licensees would not be permitted. For purposes of this Rule only, insurance firms and reinsurance firms are considered as different categories. Insurance firms may approach the CBB for exemption from this limit where the Directorships concern financial institutions within the same group.

                Amended: April 2011
                January 2011

              • HC-1.3.8

                A non-executive Director is a Director who is not involved in the day-to-day management of the licensee and is not an employee of the licensee. The Chairman of the Board cannot, therefore, also perform the role of Chief Executive.

                January 2011

              • HC-1.3.9

                The Board's non-executive Directors must comprise a sufficient number of independent Directors to apply independent judgement to, amongst other things, tasks where there is a potential for conflict of interest or there is a need for impartiality.

                January 2011

              • HC-1.3.10

                The appointment of Board members is conditional on the approval of the CBB (See Section AU-1.2).

                January 2011

            • HC-1.4 Decision Making Process

              • HC-1.4.1

                The Board must be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

                January 2011

              • HC-1.4.2

                The chairman must take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

                January 2011

              • HC-1.4.3

                The Board must meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

                January 2011

              • HC-1.4.4

                Individual board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively (see table below). Voting and attendance proxies for board meetings are prohibited at all times.

                Meetings per year 75% Attendance requirement
                4 3
                5 4
                6 5
                7 5
                8 6
                9 7
                10 8
                Amended: April 2011
                January 2011

              • HC-1.4.4A

                The absence of Board members at Board and committee meetings must be noted in the meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when Board members stand for re-election (e.g. Board member XYZ attended 95% of scheduled meetings this year).

                Added: April 2011

              • HC-1.4.4B

                In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the insurance licensee must immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance. The CBB shall then consider the matter and determine whether disciplinary action, including disqualification of that Board member pursuant to Article 65 of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.

                Amended: January 2012
                Added: April 2011

              • HC-1.4.5

                To meet its obligations under Rule HC-1.4.3 above, the Board should meet preferably no less than four times per year. The CBB recommends that meetings should take place once every quarter to address the Board's responsibilities for management oversight and performance monitoring. Furthermore, Board rules should require members to step down if they are not actively participating in Board meetings. Board members are reminded that non attendance at board meetings does not absolve them of their responsibilities as directors. It is important that each individual director should allocate adequate time and effort to discharge his responsibilities. All Directors are expected to contribute actively to the work of the Board in order to discharge their responsibilities and should make every effort to attend board meetings where major issues are to be discussed. Insurance licensees are encouraged to amend their Articles of Association to provide for telephonic and videoconference meetings. Participation in board meetings by means of video or telephone conferencing is regarded as attendance and may be recorded as such.

                Amended: April 2011
                January 2011

              • HC-1.4.6

                At least half the Board meetings of Bahraini insurance licensees in any twelve-month period must be held in the Kingdom of Bahrain.

                January 2011

              • HC-1.4.7

                The chairman must ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors must receive the same Board information. At the same time, directors have a legal duty to inform themselves and they must ensure that they receive adequate and timely information and must study it carefully.

                January 2011

              • HC-1.4.8

                The Board must also maintain adequate records of its meetings, such that key decisions and how they are arrived at can be traced.

                January 2011

            • HC-1.5 Independence of Judgment

              • HC-1.5.1

                The CBB requires Boards of insurance firms to include at least two independent non-executive members. For Bahraini insurance licensees, other than insurance firms, Boards must include at least one independent non-executive member.

                January 2011

              • HC-1.5.2

                In the case of a Bahraini insurance licensee, which is part of an overseas group, where there is sufficient independent scrutiny of the operations of the firm on a group wide basis, the CBB will consider exempting the licensee from the requirements of Paragraph HC-1.5.1.

                January 2011

              • HC-1.5.3

                Every director must bring independent judgment to bear in decision-making. No individual or group of directors must dominate the Board's decision-making and no one individual should have unfettered powers of decision.

                January 2011

              • HC-1.5.4

                Executive directors must provide the Board with all relevant business and financial information within their cognizance, and must recognise that their role as a director is different from their role as an officer.

                January 2011

              • HC-1.5.5

                Non-executive directors must be fully independent of management and must constructively scrutinise and challenge management including the management performance of executive directors.

                January 2011

              • HC-1.5.6

                At least half of an insurance licensee's Board should be non-executive directors and at least three of those persons should be independent directors. (Note the exception for controlled companies in Paragraph HC-1.6.2 and for possible exemption under Paragraph HC-1.5.2.)

                January 2011

              • HC-1.5.7

                The chairman of the Board should be an independent director, so that there will be an appropriate balance of power and greater capacity of the Board for independent decision making.

                Amended: January 2012
                January 2011

              • HC-1.5.7A

                The chairman and/or deputy chairman must not be the same person as the CEO.

                Added: January 2012

              • HC-1.5.7B

                The chairman must not be an executive director.

                Added: January 2012

              • HC-1.5.8

                The Board should review the independence of each director at least annually in light of interests disclosed by them and their conduct. Each independent director shall provide the Board with all necessary and updated information for this purpose.

                January 2011

              • HC-1.5.9

                To facilitate free and open communication among independent directors, each Board meeting should be preceded or followed with a session at which only independent directors are present, except as may otherwise be determined by the independent directors themselves.

                January 2011

            • HC-1.6 Representation of all Shareholders

              • HC-1.6.1

                Each director must consider himself as representing all shareholders and must act accordingly. The Board must avoid having representatives of specific groups or interests within its membership and must not allow itself to become a battleground of vested interests. If the company has a controller (or a group of controllers acting in concert), the latter must recognise its or their specific responsibility to the other shareholders, which is direct and is separate from that of the Board of directors.

                January 2011

              • HC-1.6.2

                In insurance licensees with a controller, at least one-third of the Board must be independent directors. Minority shareholders must generally look to independent directors' diligent regard for their interests, in preference to seeking specific representation on the Board.

                January 2011

              • HC-1.6.3

                In insurance licensees with a controller, both controllers and other shareholders should be aware of controllers specific responsibilities regarding their duty of loyalty to the insurance licensee and conflicts of interest (see Chapter HC-2) and also of rights that minority shareholders may have to elect specific directors under the Company Law or if the insurance licensee has adopted cumulative voting for directors. The chairman of the board or other individual delegated by the chairman of the board should take the lead in explaining this with the help of company lawyers.

                Amended: January 2012
                January 2011

            • HC-1.7 Directors' Access to Independent Advice

              • HC-1.7.1

                The Board must ensure that there are agreed-upon procedures for individual directors to have access to independent legal or other professional advice at the insurance licensee's expense whenever they judge this necessary to discharge their responsibilities as directors and this must be in accordance with the insurance licensee's policy approved by the Board.

                January 2011

              • HC-1.7.2

                Individual directors must also have access to the insurance licensee's corporate secretary, who must have responsibility for reporting to the Board on Board procedures. Both the appointment and removal of the corporate secretary must be a matter for the Board as a whole, not for the CEO or any other officer.

                January 2011

              • HC-1.7.3

                Whenever a director has serious concerns which cannot be resolved concerning the running of the insurance licensee or a proposed action, he should consider seeking independent advice and should ensure that the concerns are recorded in the Board minutes and that any dissent from a Board action is noted or delivered in writing.

                January 2011

              • HC-1.7.4

                Upon resignation, a non-executive director should provide a written statement to the chairman, for circulation to the Board, if he has any concerns such as those in Paragraph HC-1.7.3.

                January 2011

            • HC-1.8 Directors' Communication with Management

              • HC-1.8.1

                The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

                January 2011

              • HC-1.8.2

                Non-executive directors should have free access to the insurance licensee's management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

                January 2011

            • HC-1.9 Committees of the Board

              • HC-1.9.1

                For insurance firms, the Board must create specialised committees when and as such committees are needed. In addition to the Audit, Remuneration and Nominating Committees described elsewhere in this Module, these may include an Executive Committee to review and make recommendations to the whole Board on the insurance firm's actions, or a Risk Committee to identify and minimize specific risks of the insurance licensee's business.

                January 2011

              • HC-1.9.2

                Insurance brokers should consider the Rules in this Section as guidance.

                January 2011

              • HC-1.9.3

                For insurance firms, the Board should establish a corporate governance committee of at least three independent members which should be responsible for developing and recommending changes from time to time in the insurance licensee's corporate governance policy framework.

                Amended: January 2012
                January 2011

              • HC-1.9.4

                The Board or a committee may invite non-directors to participate in, but not vote at committee meetings so that the committee may gain the benefit of their advice and expertise in financial or other areas.

                January 2011

              • HC-1.9.5

                Board Committees must have:

                (a) Written terms of reference, which are reviewed annually;
                (b) Adequate records of their meetings, such that key decisions and how they are arrived at can be traced; and
                (c) Appropriate membership, which addresses potential conflicts of interest.
                January 2011

              • HC-1.9.6

                Committees must act only within their mandates and therefore the Board must not allow any committee to dominate or effectively replace the whole Board in its decision-making responsibility.

                January 2011

              • HC-1.9.7

                Committees may be combined provided that no conflict of interest might arise between the duties of such committees, subject to CBB prior approval.

                January 2011

              • HC-1.9.8

                Every committee should have a formal written charter similar in form to the model charters which are set forth in Appendices A, B and C of this Module for the Audit, Nominating and Remuneration Committees.

                January 2011

            • HC-1.10 Evaluation of the Board and of Each Committee

              • HC-1.10.1

                At least annually the Board must conduct an evaluation of its performance and the performance of each committee and each individual director.

                Amended: January 2012
                January 2011

              • HC-1.10.2

                Insurance brokers should consider the Rules in this Section as guidance.

                January 2011

              • HC-1.10.3

                The evaluation process must include:

                (a) Assessing how the Board operates, especially in light of Chapter HC-1;
                (b) Evaluating the performance of each committee in light of its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;
                (c) Reviewing each director's work, his attendance at Board and committee meetings, and his constructive involvement in discussions and decision-making; and
                (d) Reviewing the Board's current composition against its desired composition with a view toward maintaining an appropriate balance of skills and experience and a view toward planned and progressive refreshing of the Board.
                January 2011

              • HC-1.10.4

                While the evaluation is a responsibility of the entire Board, it should be organised and assisted by an internal Board committee and, when appropriate, with the help of external experts.

                January 2011

              • HC-1.10.5

                The Board should report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.

                January 2011

            • HC-1.11 Annual Board Review and Certification

              • HC-1.11.1

                The Board must assess and document each year 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.

                January 2011

              • HC-1.11.2

                The requirements in Section HC-1.11 do not apply to captive insurance firms, but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-1.11.3

                The results of the review referred to in Paragraph HC-1.11.1 must be summarised in a written certification, to be signed by all Board members, and sent to the CBB within 3 months of the financial year-end of the licensee. The Board must report any material deficiencies identified during the review, along with an action plan and timescales for their correction.

                January 2011

              • HC-1.11.4

                The Board certification comprises a prescribed standard statement, to be signed by all Board members, attached to which should be a summary of the steps the Board has taken in carrying out the review; a summary of the results of that review, and a summary action plan (with timescales) for addressing any identified material deficiencies. The prescribed standard statement is included in Part B of Volume 3 (Insurance), under 'CBB Reporting Forms': see 'Directors' High-Level Controls Certification' contained in the Insurance Firm Return (Form IFR) and the Insurance Intermediaries and Managers Return (Form IMR).

                January 2011

              • HC-1.11.5

                The Board's review should cover the following specific matters:

                (a) That the Board has reassessed the licensee's objectives and plans, and has reviewed the licensee's corporate strategy document;
                (b) That the Board has reassessed the licensee's overall risk profile, and its mapping of risks and the control environment put in place to meet those risks (see Paragraph HC-6.3.4). The Board must comment whether the control environment remains effective and appropriate;
                (c) That the Board has assessed the licensee's internal controls, to confirm that these are based on established policies and procedures approved by the Board and provide reasonable assurance of the integrity and reliability of its financial records;
                (d) That the Board has assessed whether adherence to established internal limits and controls was continuously monitored;
                (e) That the Board has assessed that all new (or material changes to) significant policies, procedures and products introduced by the licensee since the last Board certification were appropriately reviewed and approved at the time;
                (f) That the Board has assessed that management and staff have complied with the licensee's corporate code of conduct (see Section HC-2.2); and
                (g) That in the period under review, the Board had received and reviewed the external auditor's management letter within six months of the (previous) financial year end, together with the licensee's audit committee and senior management comments on the letter and any proposed actions.
                January 2011

              • HC-1.11.6

                With respect to HC-1.11.5 (g), a Director's certificate received (for example) no later than 31 March 2004, covering the year ending 31 December 2003, would need to certify that the management letter for the year ending 31 December 2002 was received and reviewed by the Board by 30 June 2003.

                January 2011

          • HC-2 Approved Persons Loyalty

            • HC-2.1 Principle

              • HC-2.1.1

                The approved persons must have full loyalty to the insurance licensee.

                January 2011

            • HC-2.2 Personal Accountability

              • HC-2.2.1

                The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licensee, its shareholders and policyholders.

                January 2011

              • HC-2.2.2

                In assessing compliance with Paragraph HC-2.2.1, the CBB will take into account all actions of the Board and its members. The interest of the licensee includes the licensee's continued compliance with all relevant Rules and Regulations, and the interests of employees, customers and other stakeholders. The interest of shareholders includes the current and future value of the licensee, its status as a going concern, transparency and disclosure of information to the market. The interest of policyholders includes ensuring that the licensee fulfils its obligations under its policies and treats all policyholders fairly and pays equal regard to the interests of all policyholders and groups of policyholders.

                January 2011

              • HC-2.2.3

                Each member of the board must understand that under the Company Law he is personally accountable to the insurance licensee and the shareholders if he violates his legal duty of loyalty to the insurance licensee, and that he can be personally sued by the insurance licensee or the shareholders for such violations.

                Amended: January 2013
                January 2011

              • HC-2.2.4

                An insurance licensee's Board must establish and disseminate to all employees and appointed representatives of the licensee a corporate code of conduct.

                January 2011

              • HC-2.2.5

                The requirements of Paragraph HC-2.2.4 do not apply to captive insurance firms, but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-2.2.6

                The code of conduct must establish standards by giving examples or expectations of:

                (a) Honesty;
                (b) Integrity;
                (c) Leadership;
                (d) Reliability; and
                (e) Professionalism.
                January 2011

              • HC-2.2.7

                The Board must establish and disseminate to employees and appointed representatives policies and processes for the identification, reporting and prevention or management of potential conflicts of interest, including matters such as:

                (a) Related party transactions;
                (b) The misuse of the licensee's assets; and
                (c) The use of privileged information for personal advantage ('insider trading').
                January 2011

              • HC-2.2.8

                Any transaction in which Board members or any member of management have potential conflicts of interest should either be proscribed or require formal documented approval by the Board, with measures taken to manage those conflicts (See also Paragraph HC-2.4.1).

                January 2011

              • HC-2.2.9

                The Board must ensure that policies and procedures are in place to ensure that necessary customer confidentiality is maintained.

                January 2011

              • HC-2.2.10

                The duty of loyalty includes a duty not to use property of the insurance licensee for his personal needs as though it was his own property, not to disclose confidential information of the insurance licensee or use it for his personal profit, not to take business opportunities of the insurance licensee for himself, not to compete in business with the insurance licensee, and to serve the insurance licensee's interest in any transactions with a company in which he has a personal interest, such as in related party transactions.

                January 2011

              • HC-2.2.11

                For purposes of Paragraph HC-2.2.10, an approved person should be considered to have a "personal interest" in a transaction with a company if:

                (a) He himself; or
                (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
                (c) Another company of which he is a director or controller,

                is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

                January 2011

            • HC-2.3 Avoidance of Conflicts of Interest

              • HC-2.3.1

                Each approved person must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the insurance licensee.

                January 2011

              • HC-2.3.2

                Any Board member should absent himself from any discussion or decision-making that involves a subject where he is incapable of providing objective advice, or which involves a subject, transaction or proposed transaction where there is a potential conflict of interest.

                January 2011

              • HC-2.3.3

                Bahraini insurance licensees must have in place a board approved policy on the employment of relatives of approved persons and a summary of such policy must be disclosed in the annual report of the Bahraini insurance licensee.

                Amended: July 2016
                April 2016

              • HC-2.3.4

                Overseas insurance licensees must have in place a policy on the employment of relatives of approved persons pertaining to their Bahrain operations.

                Added: July 2016

            • HC-2.4 Disclosure of Conflicts of Interest

              • HC-2.4.1

                On an annual basis, each approved person must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving the approved person. The approved persons must understand that any approval of a conflicted transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

                Amended: January 2013
                January 2011

              • HC-2.4.1A

                The chief executive/general manager of the Bahraini insurance licensee must disclose to the board of directors on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the Bahraini insurance licensee.

                Amended: July 2016
                April 2016

              • HC-2.4.1B

                The chief executive/general manager of the overseas insurance licensees must disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the overseas insurance licensee.

                Added: July 2016

              • HC-2.4.2

                The Board of the Bahraini insurance licensee should establish formal procedures for:

                (a) Periodic disclosure and updating of information by each approved person on his actual and potential conflicts of interest; and
                (b) Advance approval by directors or shareholders who do not have an interest in the transactions in which an insurance licensee's approved person has a personal interest. The Board should require such advance approval in every case.
                Amended: July 2016
                January 2011

            • HC-2.5 Disclosure of Conflicts of Interest to Shareholders

              • HC-2.5.1

                The insurance licensee must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

                January 2011

          • HC-3 Audit Committee and Financial Statements Certification

            • HC-3.1 Principle

              • HC-3.1.1

                The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.

                January 2011

            • HC-3.2 Audit Committee

              • HC-3.2.1

                The Board must establish an audit committee of at least three directors of which the majority should be independent including the Chairman. The committee must:

                (a) Review the company's accounting and financial practices;
                (b) Review the integrity of the insurance licensee's financial and internal controls and financial statements;
                (c) Review the insurance licensee's compliance with legal requirements;
                (d) Recommend the appointment, compensation and oversight of the insurance licensee's external auditor; and
                (e) Recommend the appointment of the internal auditor.
                January 2011

              • HC-3.2.2

                The Audit Committee should ensure that the external auditor firm and its partners are truly independent of the licensee and have no financial or other relationship with the licensee. Audit findings should be used as an independent check on the information received from management about the licensee's operations and performance and the effectiveness of internal controls.

                January 2011

            • HC-3.3 Audit Committee Charter

              • HC-3.3.1

                The audit committee must adopt a written charter which shall, at a minimum, state the duties outlined in Paragraph HC-3.2.1 and the other matters included in Appendix A to this Module.

                January 2011

              • HC-3.3.2

                A majority of the audit committee should have the financial literacy qualifications stated in Appendix A.

                January 2011

              • HC-3.3.3

                The Board should adopt a "whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the program, concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.

                January 2011

            • HC-3.4 CEO and CFO Certification of Financial Statements

              • HC-3.4.1

                To encourage management accountability for the financial statements required by the directors, the insurance licensee's CEO and chief financial officer must state in writing to the audit committee and the Board as a whole that the insurance licensee's interim and annual financial statements present a true and fair view, in all material respects, of the insurance licensee's financial condition and results of operations in accordance with applicable accounting standards.

                January 2011

          • HC-4 Appointment, Training and Evaluation of the Board

            • HC-4.1 Principle

              • HC-4.1.1

                The insurance licensee must have rigorous procedures for appointment, training and evaluation of the Board.

                January 2011

            • HC-4.2 Nominating Committee

              • HC-4.2.1

                The Board must establish a Nominating Committee of at least three directors which must:

                (a) Identify persons qualified to become members of the Board of directors or Chief Executive Officer, Chief Financial Officer, Corporate Secretary and any other approved persons of the insurance licensee considered appropriate by the Board, with the exception of the appointment of the internal auditor which shall be the responsibility of the Audit Committee in accordance with Paragraph HC-3.2.1 above; and
                (b) Make recommendations to the whole Board of directors including recommendations of candidates for Board membership to be included by the Board of directors on the agenda for the next annual shareholder meeting.
                January 2011

              • HC-4.2.2

                The committee must include only independent directors or, alternatively, only non-executive directors of whom a majority is independent directors and the chairman is an independent director. This is consistent with international best practice and it recognises that the Nominating Committee must exercise judgment free from personal career conflicts of interest.

                January 2011

            • HC-4.3 Nominating Committee Charter

              • HC-4.3.1

                The Nominating Committee must adopt a formal written charter which must, at a minimum, state the duties outlined in Paragraph HC-4.2.1 and the other matters included in Appendix B to this Module.

                January 2011

            • HC-4.4 Board Nominations to Shareholders

              • HC-4.4.1

                Each proposal by the Board to the shareholders for election or reelection of a director must be accompanied by a recommendation from the Board, a summary of the advice of the Nominating Committee, and the following specific information:

                (a) The term to be served, which may not exceed three years (but there need not be a limit on reelection for further terms);
                (b) Biographical details and professional qualifications;
                (c) In the case of an independent director, a statement that the Board has determined that the criteria of independent director have been met;
                (d) Any other directorships held;
                (e) Particulars of other positions which involve significant time commitments, and
                (f) Details of relationships between:
                (i) The candidate and the insurance licensee, and
                (ii) The candidate and other directors of the insurance licensee.

              • HC-4.4.2

                The chairman of the Board should confirm to shareholders when proposing re-election of a director that, following a formal performance evaluation, the person's performance continues to be effective and continues to demonstrate commitment to the role. Any term beyond six years (e.g. two three-year terms) for a director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the Board. Serving more than six years is relevant to the determination of a non-executive director's independence.

                January 2011

            • HC-4.5 Induction and Training of Directors

              • HC-4.5.1

                The chairman of the Board must ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction must include meetings with senior management, visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.

                January 2011

              • HC-4.5.2

                All continuing directors must be invited to attend orientation meetings and all directors must continually educate themselves as to the insurance licensee's business and corporate governance.

                January 2011

              • HC-4.5.3

                Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the insurance licensee's business and industry, which may include periodic attendance at conferences and management meetings. The Nominating Committee shall oversee directors' corporate governance educational activities.

                January 2011

          • HC-5 Remuneration of Approved Persons

            • HC-5.1 Principle

              • HC-5.1.1

                The insurance licensee must remunerate approved persons fairly and responsibly.

                January 2011

            • HC-5.2 Remuneration Committee

              • HC-5.2.1

                The Board must establish a remuneration committee of at least three directors which must:

                (a) Review the insurance licensee's remuneration policies for the approved persons, which must be approved by the shareholders;
                (b) Make recommendations regarding remuneration policies and amounts for approved persons to the whole Board, taking account of total remuneration including salaries, fees, expenses and employee benefits; and
                (c) Recommend Board member remuneration based on their attendance and performance.
                January 2011

              • HC-5.2.2

                The committee may be merged with the nominating committee.

                January 2011

            • HC-5.3 Remuneration Committee Charter

              • HC-5.3.1

                The committee must adopt a written charter which must, at a minimum, state the duties in Paragraph HC-5.2.1 and other matters in Appendix C of this Module.

                January 2011

              • HC-5.3.2

                The committee should include only independent directors or, alternatively, only non-executive directors of whom a majority are independent directors and the chairman is an independent director. This is consistent with international best practice and it recognises that the remuneration committee must exercise judgment free from personal career conflicts of interest.

                January 2011

            • HC-5.4 Standard for all Remuneration

              • HC-5.4.1

                Remuneration (including incentives, bonuses and other rewards) of approved persons must be sufficient enough to attract, retain and motivate persons of the quality needed to run the insurance licensee successfully, but the insurance licensee must avoid paying more than is necessary for that purpose.

                January 2011

              • HC-5.4.2

                Where remuneration is structured so as to link rewards to corporate and individual performance, criteria should avoid excessive focus on short-term profitability measures.

                January 2011

            • HC-5.5 Directors' Remuneration

              • HC-5.5.1

                The review of Directors' remuneration must be a standing item on the insurance licensee's Annual General Meeting agenda, and must be considered by shareholders at every Annual General Meeting. Policies in respect of Directors' remuneration (including pension and severance arrangements) and bonuses must be clearly disclosed in the annual financial statements.

                January 2011

              • HC-5.5.2

                Directors' remuneration must comply with all applicable laws and Regulations, including the provisions contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law, capping Directors' remuneration as a percentage of net profits.

                January 2011

              • HC-5.5.3

                Remuneration of non-executive directors must not include performance-related elements such as grants of shares, share options or other deferred stock-related incentive schemes, bonuses, or pension benefits.

                January 2011

            • HC-5.6 Senior Management Remuneration

              • HC-5.6.1

                Remuneration of senior management must be structured so that a portion of the total is linked to the insurance licensee's and individual's performance and aligns their interests with the interests of the shareholders.

                January 2011

              • HC-5.6.2

                Such rewards may include grants of shares, share options and other deferred stock-related incentive schemes, bonuses, and pension benefits which are not based on salary.

                January 2011

              • HC-5.6.3

                If a senior manager is also a director, his remuneration as a senior manager must take into account compensation received in his capacity as a director.

                January 2011

              • HC-5.6.4

                All share incentive plans must be approved by the shareholders.

                January 2011

              • HC-5.6.5

                All performance-based incentives should be awarded under written objective performance standards which have been approved by the Board and are designed to enhance shareholder and the insurance licensee's value, and under which shares should not vest and options should not be exercisable within less than two years of the date of award of the incentive.

                January 2011

              • HC-5.6.6

                All policies for performance-based incentives should be approved by the shareholders, but the approval should be only of the plan itself and not of the grant to specific individuals of benefits under the plan.

                Amended: January 2012
                January 2011

          • HC-6 Management Structure

            • HC-6.1 Principle

              • HC-6.1.1

                The Board must establish a clear and efficient management structure.

                January 2011

            • HC-6.2 Establishment of Management Structure

              • HC-6.2.1

                The Board must approve and review at least annually the insurance licensee's management structure and responsibilities.

                January 2011

              • HC-6.2.2

                The Board must appoint senior management whose authority must include management and operation of current activities of the insurance licensee, reporting to and under the direction of the Board. The senior management must include at a minimum:

                (a) A CEO;
                (b) A chief financial officer;
                (c) A corporate secretary;
                (d) An internal auditor (see HC-6.5 and AU-1.2); and
                (e) A compliance officer (see HC-6.6 and AU-1.2)

                and must also include such other approved persons as the Board considers appropriate and as a minimum must include persons occupying controlled functions as outlined in Paragraph AU-1.2.2.

                January 2011

            • HC-6.3 Titles, Authorities, Duties and Reporting Responsibilities

              • HC-6.3.1

                The Board must adopt by-laws prescribing each senior manager's title, authorities, duties and internal reporting responsibilities. This must be done with the advice of the Nominating Committee and in consultation with the CEO, to whom the other senior managers should normally report.

                January 2011

              • HC-6.3.2

                These provisions must include but should not be limited to the following:

                (a) The CEO must have authority to act generally in the insurance licensee's name, representing the insurance licensee's interests in concluding transactions on the insurance licensee's behalf and giving instructions to other senior managers and insurance licensee employees;
                (b) The chief financial officer must be responsible and accountable for:
                (i) The complete, timely, reliable and accurate preparation of the insurance licensee's financial statements, in accordance with the accounting standards and policies of the insurance licensee (see also HC-3.4.1); and
                (ii) Presenting the Board with a balanced and understandable assessment of the insurance licensee's financial situation;
                (c) The corporate secretary's duties must include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and
                (d) The internal auditor's (see HC-6.5) duties must include providing an independent and objective review of the efficiency of the insurance licensee's operations. This would include a review of the accuracy and reliability of the insurance licensee's accounting records and financial reports as well as a review of the adequacy and effectiveness of the insurance licensee's risk management, control, and governance processes.
                January 2011

              • HC-6.3.3

                The Board should also specify any limits which it wishes to set on the authority of the CEO or other senior managers, such as monetary maximums which they authorise without separate Board approval.

                January 2011

              • HC-6.3.4

                In conjunction with the Board, the Chief Executive Officer/General Manager must maintain a clear mapping of the risks faced by the business and document the organisational and other controls maintained to meet those risks.

                January 2011

              • HC-6.3.5

                In conjunction with the Board, the Chief Executive Officer/General Manager must maintain a clear and appropriate apportionment of significant responsibilities amongst senior management.

                January 2011

              • HC-6.3.6

                The apportionment must be clear as to who has which responsibility, and must permit the business and affairs of the licensee to be adequately monitored and controlled by the Board, the Chief Executive Officer/General Manager, and relevant heads of function.

                January 2011

              • HC-6.3.7

                The apportionment must also ensure appropriate segregation of duties where these are required for effective controls.

                January 2011

              • HC-6.3.8

                The corporate secretary should be given general responsibility for reviewing the insurance licensee's procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training.

                January 2011

              • HC-6.3.9

                At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.

                January 2011

            • HC-6.4 Executive Management Committee

              • HC-6.4.1

                Bahraini insurance firms must consider the need to establish an Executive Management Committee to support the Chief Executive Officer/General Manager.

                January 2011

              • HC-6.4.2

                Insurance intermediaries and insurance managers, unlike other insurance licensees, are not required to consider the need to operate an Executive Management Committee.

                January 2011

              • HC-6.4.3

                Executive Management Committees can facilitate proper corporate governance by ensuring that senior management discuss key issues affecting the licensee openly and collectively. Where an insurance firm does not consider it necessary to create an Executive Management Committee, it must be prepared to give reasons for its decision to the CBB, and to explain what checks and balances will apply to executive management.

                January 2011

              • HC-6.4.4

                The Committee should comprise the Chief Executive Officer/General Manager and appropriate heads of functions, such as the head of risk management, the Chief Finance Officer, the Chief Operations Officer, the head of underwriting and other key business divisions.

                January 2011

              • HC-6.4.5

                The Committee's responsibilities should include the oversight of day-to-day implementation of strategy, limits and procedures. It should also monitor the day-to-day performance of individual business lines and departments relative to targets, limits, and policies (in conjunction with other committees and functions, such as the Risk Committee or the Risk Management or Compliance functions).

                January 2011

              • HC-6.4.6

                The Board is responsible for ensuring that there is a clear framework of delegated authorities and a clear demarcation of duties between the Board, the Executive Committee, the Chief Executive Officer and other members of senior management.

                January 2011

            • HC-6.5 Internal Audit

              • HC-6.5.1

                Bahraini insurance licensees must establish an internal audit function to monitor the adequacy of their systems and controls.

                Amended: October 2014
                January 2011

              • HC-6.5.2

                The internal audit function should be independent of the senior management, reporting to the Audit committee.

                January 2011

              • HC-6.5.3

                The CBB considers it best practice for captive insurers to fall within the remit of the internal audit functions of their groups and be subject to periodic review, although no formal arrangements for internal audit cover captive insurers.

                January 2011

              • HC-6.5.4

                Part or all of the internal audit function may be outsourced, or provided at group level, subject to the requirements of Section RM-7.6. Amongst other things, these require licensees to retain responsibility for their internal audit programme, and that appropriate safeguards are built into the outsourcing contract. Furthermore, a licensee cannot outsource its internal audit function to its external auditor (with limited exceptions). Prior approval from the CBB is required for significant outsourcing arrangements, including all outsourcing of internal audit. A licensee's head of internal audit is a controlled function and requires CBB approval prior to being appointed (see Section AU-1.2).

                January 2011

              • HC-6.5.5

                Internal audit functions must have terms of reference that clearly indicate:

                (a) The scope and frequency of audits;
                (b) Reporting lines; and
                (c) The review and approval process applied to audits.
                January 2011

              • HC-6.5.6

                Paragraph HC-6.5.5 applies irrespective of whether the internal audit function is outsourced. Where it is outsourced, the CBB would expect to see these matters addressed in the contract with the outsourcing provider.

                January 2011

              • HC-6.5.7

                Internal audit functions must report directly to the Audit committee or, where none exists, to the Board. They must have unrestricted access to all the appropriate records of the insurance licensee. They must have open and regular access to the Audit Committee, the Board, the Chief Executive, and the licensee's external auditor.

                January 2011

              • HC-6.5.8

                Internal audit functions must have adequate staff levels with appropriate skills and knowledge, such that they can act as an effective challenge to the business. Where the function is not outsourced, the head of the function should be a senior and experienced employee. Internal audit functions must not perform other activities that compromise their independence.

                January 2011

              • HC-6.5.9

                The CBB would expect to see in place a formal audit plan that:

                (a) Is reviewed and approved at least annually by the Audit Committee or, where none exists, the Board;
                (b) Is risk-based, with an appropriate scoring system; and
                (c) Covers all material areas of a licensee's operations over a reasonable timescale, including (where relevant) the process by which a licensee obtains professional actuarial expertise to develop and verify its pricing and reserving policies.
                January 2011

              • HC-6.5.10

                Internal Audit reports should also be:

                (a) Clear and prioritised, with action points directed towards identified individuals;
                (b) Timely; and
                (c) Distributed to the Audit Committee or Board and appropriate senior management.
                January 2011

              • HC-6.5.11

                Insurance licensees should also have processes in place to deal with recommendations raised by internal audit to ensure that they are:

                (a) Dealt with in a timely fashion;
                (b) Monitored until they are settled; and
                (c) Raised with senior management if they have not been adequately dealt with.
                January 2011

              • HC-6.5.12

                The internal auditor is considered as a head of function (see Paragraph AU-1.2.11) and is subject to CBB prior approval for the approved person occupying this controlled function as outlined in Section AU-1.2.

                January 2011

            • HC-6.6 Compliance

              • HC-6.6.1

                Insurance licensees must take reasonable care to establish and maintain effective systems and controls for compliance with applicable requirements in the Kingdom's legislation and those set by the CBB, and those established under any other statute or regulator to which the insurance licensee is subject.

                January 2011

              • HC-6.6.2

                Depending on the nature, scale and complexity of its business, an insurance licensee should consider having a separate compliance function. A compliance function should:

                (a) Document its organisation and responsibilities;
                (b) Be appropriately staffed with competent individuals;
                (c) Have unrestricted access to the licensee's relevant records; and
                (d) Have ultimate recourse to the Board.
                January 2011

              • HC-6.6.3

                The compliance function may not be combined with the internal audit function or any other operational function as such combination may lead to a conflict of interest.

                Added: April 2011

          • HC-7 Communication between Board and Shareholders

            • HC-7.1 Principle

              • HC-7.1.1

                The insurance licensee must communicate with shareholders, encourage their participation, and respect their rights.

                January 2011

            • HC-7.2 Conduct of Shareholders' Meetings

              • HC-7.2.1

                The Board must observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:

                (a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;
                (b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;
                (c) Notices of meetings must encourage shareholders to attend shareholder meetings and, if not possible, to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");
                (d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;
                (e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;
                (f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;
                (g) The chairman of the meeting must encourage questions from shareholders, including questions regarding the insurance licensee's corporate governance guidelines;
                (h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and
                (i) Disclosure of all material facts must be made to the shareholders by the Chairman prior to any vote by the shareholders.
                January 2011

              • HC-7.2.2

                The insurance licensee should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).

                January 2011

              • HC-7.2.3

                The insurance licensee should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.

                January 2011

              • HC-7.2.4

                An insurance licensee should maintain a company website (see HC-8.2.1 for website disclosures). The insurance licensee should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The insurance licensee may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, the insurance licensee should grant a controlled access to such information to its shareholders.

                January 2011

              • HC-7.2.5

                In notices of meetings at which directors are to be elected or removed the insurance licensee should ensure that:

                (a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
                (b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.
                Amended: October 2012
                January 2011

            • HC-7.3 Direct Shareholder Communication

              • HC-7.3.1

                The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy with controllers. Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating the insurance licensee's corporate governance (see also HC-1.4 for other duties of the chairman).

                January 2011

            • HC-7.4 Controllers

              • HC-7.4.1

                In insurance licensees with one or more controllers, the chairman and other directors must actively encourage the controllers to make a considered use of their position and to fully respect the rights of minority shareholders (see also HC-1.3 for other duties of the chairman).

                January 2011

          • HC-8 Corporate Governance Disclosure

            • HC-8.1 Principle

              • HC-8.1.1

                The insurance licensee must disclose its corporate governance.

                January 2011

            • HC-8.2 Disclosure under the Company Law and CBB Requirements

              • HC-8.2.1

                The requirements in this Section do not apply to captive insurance firms, but should be considered as guidance.

                Amended: October 2014
                January 2011

              • HC-8.2.2

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

                January 2011

              • HC-8.2.3

                In each insurance licensee:

                (a) The Board must adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;
                (b) The insurance licensee must publish the guidelines on its website, if it has a website (see HC-7.2.4);
                (c) At each annual shareholders' meeting the Board must report on the insurance licensee's compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and
                (d) At each annual shareholders' meeting the Board must also report on further items listed in Appendix D. Such information should be maintained on the insurance licensee's website or held at the insurance licensee's premises on behalf of the shareholders.
                January 2011

              • HC-8.2.4

                The CBB may issue a template as a guide for an insurance licensee's annual meeting corporate governance discussion.

                January 2011

              • HC-8.2.5

                The Board must outline in its annual report its criteria and materiality thresholds for the definition of 'independence'. The Directors must be identified in the annual report as executive, non-executive, or independent non-executive.

                January 2011

              • HC-8.2.6

                Licensees should refer to Module PD (Public Disclosure) regarding all specific disclosures required.

                January 2011

          • HC-9 Takaful and Retakaful Companies

            • HC-9.1 Principle

              • HC-9.1.1

                Companies which refer to themselves as "Takaful or Retakaful" must follow the principles of Islamic Shari'a.

                January 2011

            • HC-9.2 Shari'a Supervisory Board

              • HC-9.2.1

                Takaful and Retakaful companies which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. In ensuring compliance with Shari'a principles, each Takaful or Retakaful insurance licensee must establish a Shari'a Supervisory Board ('SSB') consisting of at least three Shari'a scholars and must comply with AAOIFI Governance Standard for Islamic Financial Institutions No.1 ('Shari's Supervisory Board: Appointment, Composition and Report').

                January 2011

              • HC-9.2.2

                The function of the Shari'a Supervisory Board is to review the operations of the takaful company and ensure that these are compliant with the principles of the Shari'a. In doing so, the Shari'a Supervisory Board is likely to provide guidance and advice to the takaful company's Board and management on all aspects of a takaful operation, with a particular focus on product design, the handling of claims and surpluses, the calculation and allocation of the operator's costs, the approval of investments and accounting issues.

                January 2011

              • HC-9.2.3

                In the case of overseas insurance firms operating according to takaful principles, the requirement to appoint a Shari'a Supervisory Board in Paragraph HC-9.2.1 may be waived by CBB, if the firm has appointed an equivalent Shari'a Supervisory Board at the parent entity level, of sufficient expertise and credibility.

                January 2011

              • HC-9.2.4

                An insurance firm licensed to conduct insurance business according to takaful principles must comply with all other AAOIFI governance standards for Islamic Financial Institutions.

                January 2011

              • HC-9.2.5

                For takaful firms, full compliance with AAOIFI Governance Standard No.1 is required. The CBB would actively encourage full compliance with all the AAOIFI governance standards but in so doing accepts that these standards themselves include not only standards but also guidance.

                January 2011

              • HC-9.2.6

                The office of Shari'a Board Member is a controlled function: see Module AU (Authorisation).

                January 2011

              • HC-9.2.7

                The Shari'a Board requirements contained in Section HC-9.2 are additional to the other high-level control requirements contained in this Module.

                January 2011

            • HC-9.3 Governance and Disclosure per Shari'a Principles

              • HC-9.3.1

                Insurance firms which refer to themselves as "Takaful" or "Retakaful" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles.

                January 2011

              • HC-9.3.2

                In addition to its duties outlined in Chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the insurance licensee's Corporate Governance Committee and the Shari'a Supervisory Board (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.

                January 2011

              • HC-9.3.3

                The Board shall set up a Corporate Governance Committee (see also Chapter HC-8). In this case, the Committee shall comprise at least three members to co-ordinate and integrate the implementation of the governance policy framework.

                January 2011

              • HC-9.3.4

                The Corporate Governance Committee established under Chapter HC-9 shall comprise at a minimum of:

                (a) An independent director to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;
                (b) A Shari'a scholar who is a SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues (if any), and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and
                (c) An independent director who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the Board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.
                January 2011

              • HC-9.3.5

                The Corporate Governance Committee shall be empowered to:

                (a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and
                (b) Provide the Board of directors with reports and recommendations based on its findings in the exercise of its functions.
                January 2011

          • HC-10 Insurance Consultants, Insurance Managers and Captive Insurance Firms

            • HC-10.1 The Board

              • HC-10.1.1

                All insurance consultants, insurance managers and captive insurance firms should be headed by an effective, collegial and informed Board of Directors ('the Board').

                January 2011

              • Role and Responsibilities

                • HC-10.1.2

                  All directors should understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

                  (a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
                  (b) The Board's fiduciary duties of care and loyalty to the insurance consultants, insurance managers and captive insurance firms and the shareholders (see HC-10.2).
                  January 2011

                • HC-10.1.3

                  The Board's role and responsibilities include but are not limited to:

                  (a) The overall business performance and strategy for the insurance consultants, insurance managers or captive insurance firms;
                  (b) Causing financial statements to be prepared which accurately disclose the insurance consultants, insurance managers or captive insurance firms' financial position;
                  (c) Monitoring management performance;
                  (d) Convening and preparing the agenda for shareholder meetings;
                  (e) Monitoring conflicts of interest and preventing abusive related party transactions; and
                  (f) Assuring equitable treatment of shareholders including minority shareholders.
                  January 2011

                • HC-10.1.4

                  The directors are responsible both individually and collectively for performing these responsibilities. Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.

                  January 2011

                • HC-10.1.5

                  When a new director is inducted, the chairman of the Board, assisted by company legal counsel or compliance officer, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC.

                  January 2011

                • HC-10.1.6

                  The insurance consultants, insurance managers and captive insurance firms should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                  January 2011

                • HC-10.1.7

                  The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

                  January 2011

              • Composition

                • HC-10.1.8

                  The Board should have no more than 15 members, and should regularly review its size and composition to ensure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the insurance consultants, insurance managers or captive insurance firms' Memorandum of Association.

                  Amended: October 2014
                  January 2011

                • HC-10.1.9

                  Potential non-executive directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The Board should regularly review the time commitment required from each non-executive director and should require each non-executive director to inform the Board before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.

                  January 2011

              • Decision Making Process

                • HC-10.1.10

                  The Board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

                  January 2011

                • HC-10.1.11

                  The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

                  January 2011

                • HC-10.1.12

                  The Board should meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

                  January 2011

                • HC-10.1.13

                  The chairman should ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors should receive the same Board information. At the same time, directors have a legal duty to inform themselves and they should ensure that they receive adequate and timely information and should study it carefully.

                  January 2011

              • Directors' Communication with Management

                • HC-10.1.14

                  The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

                  January 2011

                • HC-10.1.15

                  Non-executive directors should have free access to the insurance consultants, insurance managers and captive insurance firms' management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

                  January 2011

            • HC-10.2 Approved Persons Loyalty

              • HC-10.2.1

                The approved persons shall have full loyalty to the insurance consultants, insurance managers or captive insurance firms.

                January 2011

              • Personal Accountability

                • HC-10.2.2

                  Each approved person should understand that under the Company Law he is personally accountable to the insurance consultants, insurance managers or captive insurance firms and the shareholders if he violates his legal duty of loyalty to the insurance consultants, insurance managers or captive insurance firms, and that he can be personally sued by the insurance consultants, insurance managers or captive insurance firms or the shareholders for such violations.

                  January 2011

                • HC-10.2.3

                  The duty of loyalty includes a duty not to use property of the insurance consultants, insurance managers or captive insurance firms for his personal needs as though it was his own property, not to disclose confidential information of the insurance consultants, insurance managers or captive insurance firms or use it for his personal profit, not to take business opportunities of the insurance consultants, insurance managers or captive insurance firms for himself, not to compete in business with the insurance consultants, insurance managers or captive insurance firms, and to serve the insurance consultants, insurance managers or captive insurance firms' interest in any transactions with the company in which he has a personal interest.

                  January 2011

                • HC-10.2.4

                  For purposes of Paragraph HC-10.2.3, an approved person should be considered to have a "personal interest" in a transaction with the company if:

                  (a) He himself;
                  (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
                  (c) Another company of which he is a director or controller,

                  is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

                  January 2011

              • Avoidance of Conflicts of Interest

                • HC-10.2.5

                  Each approved person should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the insurance consultants, insurance managers or captive insurance firms.

                  January 2011

                • HC-10.2.5A

                  Bahraini insurance consultants, Bahraini insurance managers or Bahraini captive insurance firms should have in place a board approved policy on the employment of relatives of approved persons and a summary of such policy must be disclosed in the annual report of the insurance consultant, insurance manager or captive insurance firm.

                  Amended: July 2016
                  April 2016

                • HC-10.2.5B

                  Overseas insurance managers or overseas captive insurance firms should have in place a policy on the employment of relatives of approved persons pertaining to their Bahrain operations.

                  Added: July 2016

              • Disclosure of Conflicts of Interest

                • HC-10.2.6

                  Each approved person should inform the entire Board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure should include all material facts in the case of a contract or transaction involving the approved person. The approved persons should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

                  January 2011

                • HC-10.2.6A

                  The chief executive/general manager of the Bahraini insurance consultants, Bahraini insurance managers or Bahraini captive insurance firms should disclose to the board of directors on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons occupying controlled functions within the insurance consultant, insurance manager or captive insurance firm.

                  Amended: July 2016
                  April 2016

                • HC-10.2.6B

                  The chief executive/general manager of the overseas insurance managers or overseas captive insurance firms should disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the overseas insurance licensee.

                  Added: July 2016

                • HC-10.2.7

                  The Board of the Bahraini insurance consultants, Bahraini insurance managers or Bahraini captive insurance firms should establish formal procedures for:

                  (a) Periodic disclosure and updating of information by each approved person on his actual and potential conflicts of interest; and
                  (b) Advance approval by directors or shareholders who do not have an interest in the transactions in which an insurance consultants, insurance managers and captive insurance firms' approved person has a personal interest. The Board should require such advance approval in every case.
                  Amended: July 2016
                  January 2011

              • Disclosure of Conflicts of Interests to Shareholders

                • HC-10.2.8

                  The insurance consultants, insurance managers and captive insurance firms should disclose to their shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and should disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

                  January 2011

            • HC-10.3 Financial Statements Certification

              • HC-10.3.1

                The Board shall have rigorous controls for financial audit and reporting, internal control, and compliance with law.

                January 2011

              • CEO and CFO Certification of Financial Statements

                • HC-10.3.2

                  To encourage management accountability for the financial statements required by the directors, the insurance consultants, insurance managers and captive insurance firms' CEO and chief financial officer should state in writing to the audit committee and the Board as a whole that the insurance consultants, insurance managers and captive insurance firms' interim and annual financial statements present a true and fair view, in all material respects, of the insurance consultants, insurance managers and captive insurance firms' financial condition and results of operations in accordance with applicable accounting standards.

                  January 2011

            • HC-10.4 Appointment, Training and Evaluation of the Board

              • HC-10.4.1

                The insurance consultants, insurance managers and captive insurance firms should have rigorous procedures for appointment, training and evaluation of the Board.

                January 2011

              • Induction and Training of Directors

                • HC-10.4.2

                  The chairman of the Board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction should include meetings with senior management, visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.

                  January 2011

                • HC-10.4.3

                  All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the insurance consultants, insurance managers and captive insurance firms' business and corporate governance.

                  January 2011

                • HC-10.4.4

                  Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the insurance consultants, insurance managers and captive insurance firms' business and industry, which may include periodic attendance at conferences and management meetings. The Board shall oversee directors' corporate governance educational activities.

                  January 2011

            • HC-10.5 Remuneration of Approved Persons

              • HC-10.5.1

                The insurance consultants, insurance managers and captive insurance firms should remunerate approved persons fairly and responsibly.

                January 2011

              • HC-10.5.2

                Remuneration of approved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run the insurance consultants, insurance managers and captive insurance firms successfully, but the insurance consultants, insurance managers and captive insurance firms should avoid paying more than is necessary for that purpose.

                January 2011

            • HC-10.6 Management Structure

              • HC-10.6.1

                The Board should establish a clear and efficient management structure.

                January 2011

              • Establishment of Management Structure

                • HC-10.6.2

                  The Board should appoint senior management whose authority must include management and operation of current activities of the insurance consultants, insurance managers and captive insurance firms, reporting to and under the direction of the Board. The senior managers should include at a minimum:

                  (a) A CEO;
                  (b) A chief financial officer;
                  (c) A corporate secretary; and
                  (d) An internal auditor (see AU-1.2)

                  and should also include such other approved persons as the Board considers appropriate and as a minimum must include persons occupying controlled functions as outlined in Paragraph AU-1.2.2.

                  January 2011

              • Titles, Authorities, Duties and Reporting Responsibilities

                • HC-10.6.3

                  The Board should adopt by-laws prescribing each senior manager's title, authorities, duties and internal reporting responsibilities. This should be done with the advice of the Nominating Committee, where applicable, and in consultation with the CEO, to whom the other senior managers should normally report.

                  January 2011

                • HC-10.6.4

                  These provisions should include but should not be limited to the following:

                  (a) The CEO should have authority to act generally in the insurance consultants, insurance managers or captive insurance firms' name, representing the insurance consultants, insurance managers or captive insurance firms' interests in concluding transactions on the insurance consultants, insurance managers or captive insurance firms' behalf and giving instructions to other senior managers and insurance consultants, insurance managers or captive insurance firms employees;
                  (b) The chief financial officer should be responsible and accountable for:
                  (i) The complete, timely, reliable and accurate preparation of the insurance consultants, insurance managers or captive insurance firms' financial statements, in accordance with the accounting standards and policies of the insurance consultants, insurance managers or captive insurance firms (see HC-10.3.2); and
                  (ii) Presenting the Board with a balanced and understandable assessment of the insurance consultants, insurance managers or captive insurance firms' financial situation;
                  (c) The corporate secretary's duties should include arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and
                  (d) The internal auditor's duties should include providing an independent and objective review of the efficiency of the insurance consultants, insurance managers or captive insurance firms' operations. This would include a review of the accuracy and reliability of the insurance consultants, insurance managers or captive insurance firms' accounting records and financial reports as well as a review of the adequacy and effectiveness of the insurance consultants, insurance managers or captive insurance firms' risk management, control, and governance processes.
                  January 2011

                • HC-10.6.5

                  The Board should also specify any limits which it wishes to set on the authority of the CEO or other senior managers, such as monetary maximums for transactions which they may authorise without separate Board approval.

                  January 2011

                • HC-10.6.6

                  The corporate secretary should be given general responsibility for reviewing the insurance consultants, insurance managers or captive insurance firms' procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training

                  January 2011

                • HC-10.6.7

                  At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.

                  January 2011

            • HC-10.7 Communication between Board and Shareholders

              • HC-10.7.1

                The insurance consultants, insurance managers and captive insurance firms should communicate with shareholders, encourage their participation, and respect their rights.

                January 2011

              • Conduct of Shareholders' Meetings

                • HC-10.7.2

                  The Board should observe both the letter and the intent of the Company Law's requirements for shareholder meetings. Among other things:

                  (a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;
                  (b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;
                  (c) Notices of meetings must encourage shareholders to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");
                  (d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;
                  (e) The Board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;
                  (f) In meetings where directors are to be elected or removed the Board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;
                  (g) The chairman of the meeting must encourage questions from shareholders, including questions regarding the insurance consultants, insurance managers or captive insurance firms' corporate governance guidelines;
                  (h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible but not later than 30 days after the meeting; and
                  (i) Disclosure of all material facts must be made to the shareholders.
                  January 2011

                • HC-10.7.3

                  The insurance consultants, insurance managers and captive insurance firms should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).

                  January 2011

                • HC-10.7.4

                  The insurance consultants, insurance managers and captive insurance firms should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.

                  January 2011

                • HC-10.7.5

                  An insurance consultants, insurance managers and captive insurance firms should maintain a company website. The insurance consultants, insurance managers and captive insurance firms should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders' meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The insurance consultants, insurance managers and captive insurance firms may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, the insurance consultants, insurance managers and captive insurance firms should grant a controlled access to such information to its shareholders.

                  January 2011

                • HC-10.7.6

                  In notices of meetings at which directors are to be elected or removed the insurance consultants, insurance managers and captive insurance firms should ensure that:

                  (a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
                  (b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.
                  Amended: October 2012
                  January 2011

              • Direct Shareholder Communication

                • HC-10.7.7

                  The chairman of the Board (and other directors as appropriate) must maintain continuing personal contact with controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the Board as a whole. The chairman must discuss governance and strategy with controllers. Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the Board should encourage investors, particularly institutional investors, to help in evaluating the insurance consultants, insurance managers or captive insurance firms' corporate governance.

                  January 2011

              • Controllers

                • HC-10.7.8

                  In companies with one or more controllers, the chairman and other directors should actively encourage the controllers to make a considered use of their position and to fully respect the rights of minority shareholders.

                  January 2011

            • HC-10.8 Corporate Governance Disclosure

              • HC-10.8.1

                The insurance consultants, insurance managers and captive insurance firms should disclose its corporate governance.

                January 2011

              • Disclosure under the Company Law

                • HC-10.8.2

                  In each insurance consultants, insurance managers or captive insurance firms:

                  (a) The Board should adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the Board. Such guidelines must include or refer to the principles and rules of Module HC;
                  (b) The insurance consultants, insurance managers or captive insurance firms should publish the guidelines on its website, if it has a website (see HC-10.7.5);
                  (c) At each annual shareholders' meeting the Board should report on the insurance consultants, insurance managers or captive insurance firms' compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or noncompliance was justified; and
                  (d) At each annual shareholders' meeting the Board should also report on further items listed in Appendix D. Such information should be maintained on the insurance consultants, insurance managers or captive insurance firms' website or held at the insurance consultants, insurance managers or captive insurance firms' premises on behalf of the shareholders.
                  January 2011

                • HC-10.8.3

                  The CBB may issue a template as a guide for insurance consultants, insurance managers and captive insurance firms' annual meeting corporate governance discussion.

                  January 2011

            • HC-10.9 Captive Takaful Firms

              • HC-10.9.1

                Companies which refer to themselves as "Islamic" should follow the principles of Islamic Shari'a.

                January 2011

              • Governance and Disclosure per Shari'a Principles

                • HC-10.9.2

                  Captive Takaful firms which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. Captive Takaful firms which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a principles, each captive Takaful firm should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.

                  January 2011

          • Appendix A Audit Committee

            • Committee Duties

              The Committee's duties shall include those stated in Paragraph HC-3.2.1.

              January 2011

            • Committee Membership and Qualifications

              The Committee shall have at least three members. Such members must have no conflict of interest with any other duties they have for the insurance licensee.

              A majority of the members of the committee including the Chairman shall be independent directors.

              The Board must satisfy itself that at least a majority of the committee has recent and relevant financial ability and experience, which includes:

              (a) An ability to read and understand corporate financial statements including an insurance licensee's balance sheet, income statement and cash flow statement and changes in shareholders' equity;
              (b) An understanding of the accounting principles which are applicable to the insurance licensee's financial statements;
              (c) Experience in evaluating financial statements that have a level of accounting complexity comparable to that which can be expected in the insurance licensee's business;
              (d) An understanding of internal controls and procedures for financial reporting; and
              (e) An understanding of the audit committee's controls and procedures for financial reporting.
              Amended: April 2011
              January 2011

            • Committee Duties and Responsibilities

              In serving those duties, the Committee shall:

              (a) Be responsible for the selection, appointment, remuneration, oversight and termination where appropriate of the external auditor, subject to ratification by the insurance licensee's Board and shareholders. The external auditor shall report directly to the committee;
              (b) Make a determination at least once each year of the external auditor's independence, including:
              (i) Determining whether its performance of any non-audit services compromised its independence (the committee may establish a formal policy specifying the types of non-audit services which are permissible) and;
              (ii) Obtaining from the external auditor a written report listing any relationships between the external auditor and the insurance licensee or with any other person or entity that may compromise the auditor's independence;
              (c) Review and discuss with the external auditor the scope and results of its audit, any difficulties the auditor encountered including any restrictions on its access to requested information and any disagreements or difficulties encountered with management;
              (d) Review and discuss with management and the external auditor each annual and each quarterly financial statements of the insurance licensee including judgments made in connection with the financial statements;
              (e) Review and discuss and make recommendations regarding the selection, appointment and termination where appropriate of the head of internal audit and head of compliance and the budget allocated to the internal audit and compliance function, and monitor the responsiveness of management to the committee's recommendations and findings;
              (f) Review and discuss the adequacy of the insurance licensee's internal auditing and compliance personnel and procedures and its internal controls and compliance procedures, and any risk management systems, and any changes in those;
              (g) Oversee the insurance licensee's compliance with legal and regulatory requirements; and
              (h) Review and discuss possible improprieties in financial reporting or other matters, and ensure that arrangements are in place for independent investigation and follow-up regarding such matters.
              Amended: October 2012
              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least four times a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              The committee may meet without any other director or any officer of the insurance licensee present. Only the committee may decide if a non-member of the committee should attend a particular meeting or a particular agenda item. Non-members who are not directors of the insurance licensee may attend to provide their expertise, but may not vote. It is expected that the external auditor's lead representative will be invited to attend regularly but that this shall always be subject to the committee's decision.

              The committee shall report regularly to the full Board on its activities.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, accounting or other advisors as it deems necessary or appropriate, without seeking the approval of the Board or management. The insurance licensee shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Committee Performance Evaluation

              The committee shall prepare and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix B Nominating Committee

            • Committee Duties

              The committee's duties shall include those stated in Paragraph HC-4.2.1.

              January 2011

            • Committee Duties and Responsibilities

              In serving those duties with respect to Board membership:

              (a) The committee shall make recommendations to the Board from time to time as to changes the committee believes to be desirable to the size of the Board or any committee of the Board;
              (b) Whenever a vacancy arises (including a vacancy resulting from an increase in Board size), the committee shall recommend to the Board a person to fill the vacancy either through appointment by the Board or through shareholder election;
              (c) In performing the above responsibilities, the committee shall consider any criteria approved by the Board and such other factors as it deems appropriate. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate's experience with that of other Board members, and other factors;
              (d) The committee shall also consider all candidates for Board membership recommended by the shareholders and any candidates proposed by management;
              (e) The committee shall identify Board members qualified to fill vacancies on any committee of the Board and recommend to the Board that such person appoint the identified person(s) to such committee; and
              (f) Assuring that plans are in place for orderly succession of senior management.

              In serving those purposes with respect to officers the committee shall:

              (a) Make recommendations to the Board from time to time as to changes the committee believes to be desirable in the structure and job descriptions of the officers including the CEO, and prepare terms of reference for each vacancy stating the job responsibilities, qualifications needed and other relevant matters;
              (b) Recommend persons to fill specific officer vacancies including CEO considering criteria such as those referred to above;
              (c) Design a plan for succession and replacement of officers including replacement in the event of an emergency or other unforeseeable vacancy; and
              (d) If charged with responsibility with respect to insurance licensee's corporate governance guidelines, the committee shall develop and recommend to the Board corporate governance guidelines, and review those guidelines at least once a year.
              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or search firms used to identify candidates, without seeking the approval of the Board or management. The insurance licensee shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Performance Evaluation

              The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix C Remuneration Committee

            • Committee Duties

              The committee's duties shall include those stated in Paragraph HC-5.1.1.

              January 2011

            • Committee Duties and Responsibilities

              In serving those duties the committee shall consider, and make specific recommendations to the Board on, both remuneration policy and individual remuneration packages for the CEO and other senior officers. This remuneration policy should cover at least:

              (a) The following components:
              (i) Salary;
              (ii) The specific terms of performance-related plans including any stock compensation, stock options, or other deferred-benefit compensation;
              (iii) Pension plans;
              (iv) Fringe benefits such as non-salary perks; and
              (v) Termination policies including any severance payment policies; and
              (b) Policy guidelines to be used for determining remuneration in individual cases, including on:
              (i) The relative importance of each component noted in a) above;
              (ii) Specific criteria to be used in evaluating an officer's performance.

              The committee shall evaluate the CEO's performance in light of corporate goals and objectives and may consider the insurance licensee's performance and shareholder return relative to comparable insurance licensees, the value of awards to CEOs at comparable insurance licensees, and awards to the CEO in past years.

              The committee should also be responsible for retaining and overseeing outside consultants or firms for the purpose of determining director or officer remuneration, administering remuneration plans, or related matters.

              January 2011

            • Committee Structure and Operations

              The committee shall elect one member as its chair.

              The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire Board.

              January 2011

            • Committee Resources and Authority

              The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or compensation firms used to evaluate the compensation of directors, the CEO or other officers, without seeking the approval of the Board or management. The insurance licensee's shall provide appropriate funding for the compensation of any such persons.

              January 2011

            • Performance Evaluation

              The committee shall preview and review with the Board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the Board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of a written report provided at any regularly scheduled Board meeting.

              Amended: October 2012
              January 2011

          • Appendix D Corporate Governance Disclosure to Shareholders

            The insurance licensee shall disclose the following items to the shareholders, in addition to any disclosures required as per Module PD:

            Ownership of Shares

            1. Distribution of ownership by nationality
            2. Distribution of ownership by size of shareholder
            3. Ownership by Government
            4. Names of shareholders owning 5% or more and, if they act in concert, a description of the voting, shareholders' or other agreements among them relating to acting in concert, and of any other direct and indirect relationships among them or with the insurance licensee or other shareholders

            Board, Board Members and Management

            1. Board's functions — rather than a general statement (which could be disclosed simply as the Board's legal obligations under the law) the 'mandate' of the Board should be set out
            2. The types of material transactions that require Board approval
            3. Names, their capacity of representation and detailed information about the directors, including directorships of other Boards, positions, qualifications and experience (should describe each director as executive or non-executive)
            4. Number and names of independent members
            5. Board terms and the start date of each term
            6. What the Board does to induct/educate/orient new directors
            7. Director's ownership of shares
            8. Election system of directors and any termination arrangements
            9. Director's trading of insurance licensee's shares during the year
            10. Meeting dates (number of meetings during the year)
            11. Attendance of directors at each meeting
            12. Aggregate remuneration to board members
            12A. The remuneration policy of the insurance licensee for board members and senior management
            13. List of senior managers and profile of each
            14. Shareholding by senior managers
            15. Aggregate remuneration paid to senior management
            16. Details of stock options and performance-linked incentives available to executives
            17. Whether the Board has adopted a written code of ethical business conduct, and if so the text of that code and a statement of how the Board monitors compliance.

            Committees

            1. Names of the Board committees
            2. Functions of each committee
            3. Members of each committee divided into independent and non-independent
            4. Minimum number of meetings per year
            5. Actual number of meetings
            6. Attendance of committees' members
            7. [This item was deleted in January 2012]
            8. Work of committees and any significant issues arising during the period

            Corporate Governance

            1. Separate section in the Annual Report
            2. Reference to Module HC and its principles
            3. Changes in Module HC that took place during the year

            Auditors

            1. The charters and a list of members of the Audit (including external and internal; financial and non-financial experts), Nominating and Remuneration Committees of the Board.
            2. Audit fees
            3. Non-Audit services provided by the external auditor and fees
            4. Reasons for any switching of auditors and reappointing of auditors

            Other

            1. Related party transactions
            2. Approval process for related party transactions
            3. Means of communication with shareholders and investors
            4. Separate report on Management Discussion and Analysis is included in the Annual Report — in particular, this should identify and comment on the management of principal risks and uncertainties faced by the business.
            5. Review of internal control processes and procedures
            6. Announcements of the results in the press should include at least the followings:
            (a) Balance sheet, income statement, cash flow statement, statement of comprehensive income and changes in shareholders' equity
            (b) Auditor
            (c) Auditor's signature date
            (d) Board approval date

            Set out directors responsibility with regard to the preparation of financial statements

            Conflict of Interest — any issues arising must be reported, in addition describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.

            Board of Directors — whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution.

            Amended: January 2012
            Amended: April 2011
            January 2011

        • 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 licensees with respect to the appointment of external auditors and actuaries (the requirement for actuaries is only applicable to insurance firms). This Module also sets out certain obligations that external auditors and actuaries have to comply with, by virtue of their appointment by insurance licensees.

                  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 licensees to appoint an external auditor acceptable to the CBB and Articles 72 to 74 dealing with actuaries.

                  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 auditors and actuaries 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 licensees.

                  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 Actuary and Signing Actuary
                AA-2.3 01/2008 Corrected reference to Registered Actuary.
                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 licensees.

              • AA-B.1.2

                The requirements relating to actuaries (Chapter AA-4), apply only to insurance firms, and differentiate between insurance firms undertaking long-term insurance and those undertaking general insurance.

                Amended: January 2007

            • AA-B.2 Auditors and Actuaries

              • AA-B.2.1

                Certain requirements in this Module extend to auditors and actuaries, by virtue of their appointment by insurance licensees. Auditors and actuaries appointed by insurance licensees must be independent (cf. Sections AA-1.4, AA-1.5and Paragraphs AA-4.2.3 and AA-4.2.4). Auditors and actuaries 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 (Auditor 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 licensees must obtain prior written approval from the CBB before appointing or re-appointing their auditor.

                Amended: January 2007
                Amended: October 2007

              • AA-1.1.2

                As the appointment of the auditor normally takes place during the course of the firm's annual general meeting, insurance licensees should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated to shareholders. The CBB's approval of the proposed auditor does not limit in any way shareholders' 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 auditor, 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 licensees 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 licensees, the CBB will also take into account who acts as the auditor of the parent firm. As a general rule, the CBB does not favour different parts of an insurance group having different auditors.

                Amended: January 2007
                Amended: October 2007

            • AA-1.2 Removal or Resignation of Auditor

              • AA-1.2.1

                Insurance licensees must notify the CBB as soon as they intend to remove their auditor, with an explanation of their decision, or as soon as their auditor resigns.

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

              • AA-1.2.2

                Insurance licensees must ensure that a replacement auditor 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, auditors of insurance licensees 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 licensees 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 licensees 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 licensees 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 licensee appoints an auditor, it must take reasonable steps to ensure that the auditor 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 auditor 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 licensee becomes aware at any time that its auditor 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 auditor.

                Amended: January 2007
                Amended: October 2007

            • AA-1.5 Licensee/Auditor Restrictions

              • Financial Transactions with Auditors

                • AA-1.5.1

                  Insurance licensees must not provide regulated insurance services to their auditors, including entering into any contracts of professional indemnity insurance with their auditors.

                  Amended: January 2007

              • Outsourcing to Auditors

                • AA-1.5.2

                  Insurance licensees 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 licensees and their auditors 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 auditor from (i) being the chairman or a member of the Board of Directors 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 auditor 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 auditor from (i) being the chairman or a member of the Board of Directors 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 auditor 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 licensees as well as Bahraini insurance licensees.

                  Amended: January 2007

                • AA-1.5.7

                  A partner, Director or manager on the engagement team of auditing an insurance licensee may not serve on the Board or in a controlled function 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 functions' 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 licensee.

                  Amended: January 2007

          • AA-2 Access

            • AA-2.1 CBB Access to Auditors

              • AA-2.1.1

                Insurance licensees must waive any duty of confidentiality on the part of their auditor, such that their auditor may report to the CBB any concerns held regarding material failures by the insurance licensee 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 licensees, request meetings with a licensee's auditor. If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management or Directors.

                Amended: January 2007
                Amended: October 2007

            • AA-2.2 Auditor Access to Outsourcing Providers

              • AA-2.2.1

                Paragraph RM-7.4.12 on outsourcing agreements between insurance licensees and outsourcing providers requires licensees to ensure that their internal and external auditors 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 provider, if required.

                Amended: January 2007

            • AA-2.3 CBB Access to Actuaries

              • AA-2.3.1

                Insurance licensees that appoint a Registered Actuary or Signing Actuary in compliance with the requirements in Section AA-4.1 must waive any duty of confidentiality on the part of the actuary, such that he may report to the CBB any concerns held regarding material failures by the insurance licensee 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 licensees, request meetings with a licensee's Registered Actuary/Signing Actuary. If necessary, the CBB may direct that the meeting be held without the presence of the licensee's management or Directors.

                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 licensees must arrange for their auditor to review the licensee's annual return to the CBB. The auditor 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 licensee within four months of the financial year end of the insurance licensee.

                Amended: January 2007
                Amended: October 2007

              • AA-3.1.2

                Insurance firms are required to submit an Insurance Firm Return (Form IFR). Insurance intermediaries and insurance managers 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's 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 licensees must arrange for their external auditor 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's 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 licensees 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 licensees that do not, at the parent 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 firms planning to undertake long-term insurance business must, no later than the date on which they start to carry out such business, appoint a Registered Actuary or Signing Actuary, subject to CBB approval.

                  Amended: January 2007
                  Amended: October 2007

                • AA-4.1.2

                  For insurance firms whose long-term insurance business is restricted to group life policies, having a term of less than or equal to 1 year, and where this long-term insurance business represents less than 5% of the insurance firm's total gross premiums written, this business will be treated as general insurance business 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 actuary must satisfy the CBB's criteria for Registered Actuary or Signing Actuary, contained in Paragraphs AA-4.2.1 to AA-4.2.12. The actuary of an insurance firm undertaking long-term insurance business, 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 firm that carries on general insurance business must commission an actuarial opinion, once every two years, from a Registered Actuary or Signing Actuary. The actuary 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 Actuaries as per Article 74 of the CBB Law; and
                (b) Signing Actuaries that are Directors or employees of the insurance firm for which an actuarial report is prepared.
                Added: October 2007

              • AA-4.2.2

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

                Added: October 2007

              • AA-4.2.3

                A Signing Actuary is a controlled function and is subject to the CBB’s approval, as per Section AU-1.2, as an approved person.

                Added: October 2007

              • AA-4.2.4

                All actuaries 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 Actuary must not be a Director or employee of the insurance firm 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 actuary within the Kingdom of Bahrain.

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

                • AA-4.2.2

                  Effective from Jul 1 2007 - Sep 30 2007.

                  The CBB's authorisation requirements for Reporting Actuaries are contained in Module AU (Authorisation).

                  Amended: January 2007

                • AA-4.2.7

                  The Registered Actuary must be independent of the insurance firm.

                  Amended: October 2007

                • AA-4.2.8

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

                  Amended: January 2007
                  Amended: October 2007

                • AA-4.2.9

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

                  (a) A controller of the insurance firm as defined in Section GR-5.2;
                  (b) A close link of the insurance firm as defined in Section GR-6.2;
                  (c) An associate of a controller as defined in Paragraph GR-5.2.2;
                  (d) The extended family of a controller 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 Director or would be considered a controller were the definition of controller set out in Paragraph GR-5.2.1 applied to that corporate entity; and
                  (f) An employee of an insurance firm that is related to the insurance firm 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 Actuary may be a Director or employee of the licensee concerned.

                    Added: October 2007

                  • AA-4.2.11

                    Where the Signing Actuary is a Director or employee of the licensee concerned, he occupies a controlled function, and is subject to CBB approval as per Section AU-1.2.

                    Added: October 2007

                  • AA-4.2.12

                    The Signing Actuary must act independently of the insurance firm in providing the FCR.

                    Amended: April 2014
                    Added: October 2007

              • Removal or Resignation of a Reporting Actuary

                Effective up to Sep 30 2007.

                • AA-4.2.5

                  Effective from Jul 1 2007 - Sep 30 2007.

                  Insurance firms must notify the CBB as soon as it intends to remove its Reporting Actuary, together with an explanation of its decision, or as soon as its Reporting Actuary resigns.

                  Amended: January 2007

                • AA-4.2.6

                  Effective from Jul 1 2007 - Sep 30 2007.

                  Insurance firms must ensure that a replacement Reporting Actuary 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.

                  Amended: January 2007

                • AA-4.2.7

                  Effective from Jul 1 2007 - Sep 30 2007.

                  If an insurance firm fails to make a fresh appointment of a Reporting Actuary in accordance with the provisions of Paragraph AA-4.2.6, the insurance firm must not — until such an appointment is made — effect any new contract which constitutes long-term business without the written permission of the CBB.

                  Amended: January 2007

                • AA-4.2.8

                  Effective from Jul 1 2007 - Sep 30 2007.

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

                  Amended: January 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 firm. 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 firm'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 firm;
                (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 firms. 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 firm's investment strategy;
                (f) An assessment of current and future capital adequacy and a discussion of the insurance firm'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 firm, the report must include recommendations on how to address any shortcomings and eliminate any negative trends; and
                (j) For overseas insurance firms, 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 expert 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 firm attributable to its long-term insurance business;
                (b)The establishment of the surplus, if any, on any long-term insurance funds that it is proposed be transferred to shareholders' funds and available for distribution; and
                (c) The establishment of the deficit, if any, on any long-term insurance funds established by the insurance firm.
                Amended: January 2007
                Amended: October 2007

              • AA-4.3.4

                Where the Registered Actuary's or Signing Actuary's investigation establishes a deficit on any fund or part of any fund, the insurance firm 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' 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

              • Signing Actuary Criteria

                Effective up to Sep 30 2007.

                • AA-4.3.1

                  Effective from Jul 1 2007 - Sep 30 2007.

                  The Signing Actuary may be a Director or employee of the licensee concerned, an independent party, or an employee of a firm providing actuarial consulting services.

                  Amended: January 2007

                • AA-4.3.2

                  Effective from Jul 1 2007 - Sep 30 2007.

                  Where the Signing Actuary is a Director or employee of the licensee concerned, he must hold appropriate professional qualifications from a relevant, recognised professional body and is subject to approval by the CBB (ref AU-1.3.1). Where the Signing Actuary is an independent party or employee of a firm providing actuarial consulting services, he or his firm must be registered to carry on the business of an actuary in the Kingdom of Bahrain, in accordance with the requirements of Article 74 of the CBB Law.

                  Amended: January 2007

                • AA-4.3.3

                  Effective up to Sep 30 2007.

                  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-4.3.2.

              • 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 actuary 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 actuary is unable to give an unqualified report, he must inform the CBB as soon as possible.

                  Amended: January 2007
                  Amended: October 2007

                • AA-4.3.6

                  Effective up to Sep 30 2007.

                  The Directors of the insurance firm must provide the Signing Actuary with the data and information required for the preparation of the actuarial evaluation and report. The insurance firm must advise the Signing Actuary of all known changes in internal methods or procedures that could materially affect the determination of reserves.

                • AA-4.3.7

                  Effective up to Sep 30 2007.

                  Claims development data provided to the Signing Actuary must be reconciled to the accounting information forming the basis of the statutory accounts.

              • Duties of the Insurance Firm

                • AA-4.3.11

                  The Directors of the insurance firm must provide the Registered Actuary or Signing Actuary with the data and information required for the preparation of the FCR. The insurance firm must advise the Registered Actuary or Signing Actuary 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 business, claims development data provided to the Registered Actuary or Signing Actuary 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 firms must submit to the CBB an annual FCR and all General Takaful firms 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 firms 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 firm actuary must provide an explanation which outlines the reasons for such loss and the remedial steps being taken by the Takaful firm 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 firm'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 assets are an integral component of the solvency and liquidity requirements of a Takaful firm. A separate amount of earmarked assets 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 assets for each participants' fund are allocated to the insurance business amount 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 amount is used in the calculation of the participants' fund available capital to meet the solvency requirements.

                  Added: April 2014

                • AA-4.3A.8

                  Earmarked assets, 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 assets in assessing solvency and addressing any liquidity shortfall in a Takaful firm, 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 firm maintains a sufficient level of earmarked assets 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 assets meets the solvency and liquidity requirements and recommend to the Takaful firm any increase needed to the earmarked assets to comply with these requirements. The actuary's recommendation must also be approved by the Takaful firm's board of directors.

                  Added: April 2014

            • AA-4.4 Removal or Resignation of an Actuary

              • AA-4.4.1

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

                Added: October 2007

              • AA-4.4.2

                Insurance firms must ensure that a replacement actuary 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 firm fails to make a fresh appointment of an actuary in accordance with the provisions of Paragraph AA-4.4.2, the insurance firm must not – until such an appointment is made – effect any new contract which constitutes long-term insurance business without the written permission of the CBB.

                Added: October 2007

              • AA-4.4.4

                An actuary who resigns or is otherwise removed from the office of actuary 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

        • GR General Requirements

          • GR-A Introduction

            • GR-A.1 Purpose

              • Executive Summary

                • GR-A.1.1

                  The General Requirements Module presents a variety of different requirements that are not extensive enough to warrant their own stand-alone Module, but for the most part are of general applicability. These include requirements on books and records; on the use of corporate and trade names; and on controllers and close links. Each set of requirements is contained in its own Chapter: a table listing these and their application to licensees is given in Chapter GR-B.

              • Legal Basis

                • GR-A.1.2

                  This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding general requirements applicable to insurance licensees, 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'). This Module contains the requirements governing control in insurance licensees under Resolution No (27) of 2015. Requirements regarding transfer of business (see Chapter GR-4) are also included in this Module in line with Resolution No (15) of 2009. It also contains the minimum qualifications and fit and proper requirements for appointed representatives issued in 2009 under Resolution 11 in accordance with Article 74 of the CBB Law.

                  Amended: October 2015
                  Amended: January 2011
                  Amended: October 2009
                  Added: January 2007

                • GR-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

            • GR-A.2 Module History

              • GR-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

              • GR-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

              • GR-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
                GR-B.1 01/07/05 Clarified that GR-7 also applies to insurance brokers.
                GR-7.1 01/07/05 Corrected that cash deposit requirements also apply to insurance brokers and simplified the calculation of cash deposit required for insurance firms.
                GR-1.2 01/10/05 Clarified that transaction records must be maintained in Bahrain.
                GR-4.4 01/10/05 Corrected cross-reference.
                GR-6.1 01/10/05 Corrected references to Forms.
                GR-10.1 01/10/05 Clarified when evidence of professional indemnity coverage is to be provided and corrected cross-reference.
                GR-7.1 01/01/06 Clarified that insurance licensees originally licensed as exempt companies can opt to have their cash deposit maintained with the CBB.
                GR-7.1.2 01/04/06 Clarified that the requirement to maintain a cash deposit does not apply to insurance firms that are in run-off and whose license is restricted from entering into new contracts of insurance.
                GR-10.1.7 01/04/06 Clarified the meaning of the clause required dealing with an automatic extended reporting period.
                GR-A.1.2 01/2007 New Rule introduced, categorising this Module as a Directive.
                GR-B.1.1 01/2007 Clarified that Chapters GR-4 and GR-8 apply to all insurance licensees.
                GR-1.1 01/2007 Rule amended and Guidance added with respect to translation and archiving of books and records.
                GR-2.1.1 01/2007 Clarified the vetting of names for subsidiaries.
                GR-4 01/2007 This Chapter applies to all insurance licensees and was amended to be aligned with the requirements of the CBB Law.
                GR-5.1 01/2007 Minor changes to align controller requirements with the CBB Law.
                GR-5.2 01/2007 Clarification of definition of controller.
                GR-5.3 01/2007 Clarification of criteria for assessing suitability of controllers.
                GR-5.4 01/2007 Alignment of procedures for approving controllers with CBB Law.
                GR-7.1.1 01/2007 Reference to CBB Law on requirement for a cash deposit..
                GR-7.1.3 01/2007 Paragraph deleted as now redundant since captive insurers are exempted from a cash deposit requirement as per GR-7.1.2.
                GR-7.2.1 01/2007 Rule deleted.
                GR-8 01/2007 This Chapter applies to all insurance licensees and was amended to be aligned with the requirements of the CBB Law.
                GR-10.1.13 01/2007 Clarified the format of the notice related to the professional indemnity coverage.
                GR-1.2.1 and 1.2.5 10/2007 Clarified the record retention period for customer and transaction records in line with Article 60 of the CBB Law.
                GR-10.1.1A 04/2008 Added Guidance concerning limitations on indemnification coverage.
                GR-3.1 04/2009 Clarified the rules governing the request for CBB no-objection on any dividend proposed.
                GR-A.1.2 10/2009 Added the legal requirements as per Article 74 of the CBB Law.
                GR-5.4.2 10/2009 Guidance amended to be consistent with wording under Article 53(a) of the CBB Law.
                GR-9 10/2009 Incorporated the requirements of Resolution 11 as per Article 74 of the CBB Law.
                GR-A.1.2 01/2011 Clarified legal basis
                GR-5.3 10/2011 Amended to be in line with other Volumes of the CBB Rulebook and to reflect the issuance of Resolution No.(43) of 2011.
                GR-8.1 10/2011 Clarified language on cessation of business to be in line with other Volumes of the CBB Rulebook.
                GR-B.1.1 04/2012 Amended to reflect the deletion of certain Paragraphs in Section GR-1.2.
                GR-1.2 04/2012 Amendments made to reflect the issuance of Module CL (Client Money).
                GR-6.1 04/2012 Clarified that the reporting requirements for close links are only applicable to insurance firms and insurance brokers.
                GR-2.2 10/2014 New Section added regarding publication of documents by the licensee.
                GR-A.1.2, GR-B.1.2 and GR-5 10/2015 Updated to reflect issuance of Resolution No. (27) of 2015 governing control in insurance licensees.
                GR-7.1 07/2016 Amended requirements for cash deposit.
                GR-8.1.14 10/2016 Added additional requirements for cessation of business to be in line with all Volumes.
                GR-5.1.5 01/2017 Consistency of notification timeline rule on controllers with other Volumes of the CBB Rulebook.
                GR-1.2.5 07/2017 Amended paragraph according to the Legislative Decree No. (28) of 2002.
                GR-1.2.6 07/2017 Deleted paragraph.
                GR-3.1.1A 10/2017 Added additional requirement to submit when requesting no-objection letter for proposed dividend.
                GR-1.1.2 10/2018 Amended Paragraph to be consistent with other Volumes.
                GR-5.1.1A 04/2019 Added a new Paragraph on exposure to controllers.
                GR-5.1.1B 04/2019 Added a new Paragraph on exposure to controllers.

              • GR-A.2.3

                Effective up to Dec 31 2006.

                This Module supersedes various articles contained in Ministerial Order No. 6 of 1990 regarding the issue of regulations for implementing legislative decree No. 17 of 1987 with respect to insurance companies and organisations. The specific articles in the Ministerial Order that have been cancelled by this Module are listed below:

                Order No. 6 Article Ref. Module Ref. Subject
                16, 29 GR-1 Books and Records
                20 GR-4 Portfolio Transfers
                12–15 GR-7 Statutory Deposits
                20 GR-8 Suspension of business
                     

              • GR-A.2.4

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

                Amended: January 2007

          • GR-B Scope of Application

            • GR-B.1 Insurance Licensees

              • GR-B.1.1

                The requirements in Module GR (General Requirements) apply to insurance licensees, as follows:

                Chapter Application to license categories Application to activities of overseas insurance licensees
                GR-1 Applies to all insurance licensees; but GR-1.2.9 to GR-1.2.12 apply to insurance brokers only. Applies to Bahrain branch business only.
                GR-2 Applies to all insurance licensees. Applies to Bahrain branch business only.
                GR-3 Applies to Bahraini insurance licensees except captives, who are exempted. Exempted.
                GR-4 Applies to all insurance licensees; conditional exemptions for captives and reinsurers apply (cf. GR-4.2.2 and GR-4.4.4). Applies to Bahrain branch business only.
                GR-5 GR-5.1 to GR-5.4 apply to the whole firm. Only GR-5.5 applies.
                GR-6 Applies to all insurance licensees. Applies to the whole corporate entity.
                GR-7 Applies to insurance firms and insurance brokers. Applies to Bahrain branch business only.
                GR-8 Applies to all insurance licensees; captives may seek exemption from GR-8.1.5 and GR-8.1.6. Applies to Bahrain branch business only.
                GR-9 Applies to insurance firms only. Applies to Bahrain branch business only.
                GR-10 Applies to insurance brokers and insurance consultants only. Applies to Bahrain branch business only.
                Amended: October 2015
                Amended: April 2012
                Amended: October 2007
                Amended: January 2007

          • GR-1 Books and Records

            • GR-1.1 General Requirements

              • GR-1.1.1

                The requirements in Chapter GR-1 apply in full to Bahraini insurance licensees. The requirements in Chapter GR-1 also apply to overseas insurance licensees, but only with respect to the business booked in their branch in Bahrain and the records of that branch.

              • GR-1.1.2

                All insurance licensees must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licensee, including records sufficient to verify the identity of customers. These records must be retained for at least 10 years according to Article 60 of the CBB Law.

                Amended: October 2018
                Amended: January 2007

              • GR-1.1.3

                For those insurance firms granted grandfathering provisions as per Paragraph AU-1.1.15, separate books and records must be maintained in respect of both general and long-term insurance business. The transactions relating to each kind of business must be maintained separately. The insurance firm must maintain such accounting and other records as necessary to identify all assets and liabilities in respect of each kind of business.

                Amended: January 2007

              • GR-1.1.4

                Unless otherwise agreed to with the CBB in writing, records must be kept in either English or Arabic. Any records kept in other languages must be accompanied by a certified English or Arabic translation. Records must be kept current. The records must be sufficient to allow an audit of the licensee's business or an on-site examination of the licensee by the CBB.

                Amended: January 2007

              • GR-1.1.4A

                Translations produced in compliance with Rule GR-1.1.4 may be undertaken in-house, by an employee or contractor of the licensee, providing they are certified by an appropriate officer of the licensee.

                Added: January 2007

              • GR-1.1.5

                For captive insurers, the maintenance of books and records may be carried out by an insurance manager. Should this be the case, the captive insurer must ensure that the CBB has access to these records at any time. In addition, these records must be sufficient to allow an audit or an on-site examination by the CBB of the captive insurer.

                Amended: January 2007

              • GR-1.1.6

                Records must be accessible at any time from within the Kingdom of Bahrain, or as otherwise agreed with the CBB in writing.

                Amended: January 2007

              • GR-1.1.7

                Where older records have been archived, or in the case of records relating to overseas branches of Bahraini insurance licensees, the CBB may accept that records be accessible within a reasonably short time frame (e.g. within 5 business days), instead of immediately. The CBB may also agree similar arrangements for overseas insurance licensees, as well as Bahraini insurance licensees, where elements of record retention and management have been centralised in another group company, whether inside or outside of Bahrain.

                Added: January 2007

            • GR-1.2 Customer and Transaction Records

              • Customer Records

                • GR-1.2.1

                  Insurance licensees must keep records with respect to all customer relationships that remain active or potentially active. These records must be in hard copy or in original form, and retained for at least ten years after a customer relationship has terminated.

                  Amended: October 2007

                • GR-1.2.2

                  Customer records include original account opening and due diligence documentation including identification information, sufficient to confirm compliance with all statutory and regulatory Know Your Customer requirements (see Module FC).

                • GR-1.2.3

                  The requirement in Paragraph GR-1.2.1 applies to all customer facilities booked in Bahrain by the licensee or where a customer relationship is administered from Bahrain. Licensees may not use record-keeping systems outside Bahrain for customer business booked in Bahrain, except for back-up purposes only.

                • GR-1.2.4

                  For captive insurance, where the customers are limited to related companies, the due diligence requirement does not apply.

                  Amended: January 2007

              • Transaction Records

                • GR-1.2.5

                  Insurance licensees must keep completed transaction records for as long as they are relevant for the purposes for which they were made (with a minimum period in all cases of five years from the date when the transaction was completed) – see Module Section FC-7.1). Records of completed transactions must be kept whether in hard copy or electronic format as per the Legislative Decree No. (28) of 2002 with respect to Electronic Transactions "The Electronic Transaction Law" and its amendments.

                  Amended: July 2017
                  Amended: October 2007
                  Amended: January 2007

                • GR-1.2.6

                  [This Paragraph has been deleted in July 2017].

                  Deleted: July 2017

                • GR-1.2.7

                  In the case of Bahraini insurance licensees, the requirement in Paragraph GR-1.2.5 applies only to transactions relating to business booked in Bahrain by the licensee. It does not relate to transactions relating to business booked in overseas branches or subsidiaries of the licensee.

                  Amended: January 2007

                • GR-1.2.8

                  In the case of overseas insurance licensees, all the requirements of Chapter GR-1 are limited to the business booked in their branch in Bahrain and the records of that branch (see GR-1.1.1).

              • Keeping of Separate Client Accounts

                • GR-1.2.9

                  An insurance broker must, in connection with any premiums received in the course of its business, establish and maintain separate client accounts separate from those used for its own funds.

                • GR-1.2.9A

                  Specific Rules and guidance dealing with the holding of client money are contained in Module CL (Client Money).

                  Added: April 2012

                • GR-1.2.10

                  An insurance broker must not make withdrawals from its client accounts for any purposes other than those of the client.

                • GR-1.2.11

                  Payment of premiums to insurance firms, or commissions (brokerage) to the insurance broker's own accounts shall not be effected until the premiums to which these payments relate have been duly received from that client and credited to the client account.

                • GR-1.2.12

                  In respect of premiums booked in Bahrain, in relation to residents and non-residents of Bahrain, these accounts are to be maintained with a retail bank licensed to operate in the Kingdom of Bahrain.

                  Amended: January 2007

                • GR-1.2.13

                  [This Paragraph was deleted in April 2012].

                  Deleted: April 2012

                • GR-1.2.14

                  [This Paragraph was deleted in April 2012 and new guidance is now contained in Paragraph CL-1.1.9].

                  Deleted: April 2012

                • GR-1.2.15

                  [This Paragraph was deleted in April 2012 and new guidance is now contained in Paragraph CL-1.1.10].

                  Deleted: April 2012

                • GR-1.2.16

                  [This Paragraph was deleted in April 2012].

                  Deleted: April 2012

            • GR-1.3 Other Records

              • GR-1.3.1

                Insurance licensees must maintain the following records in original form or in hard copy at their premises in Bahrain:

                (a) Internal policies, procedures and operating manuals;
                (b) Corporate records, including minutes of shareholders', Directors' and management meetings;
                (c) Accounts, books, files and other records that adequately record all the business affairs of the insurance licensee, and any other records that substantiate the value of the assets, liabilities and off-balance sheet activities of the licensee;
                (d) Correspondence with the CBB and records relevant to monitoring compliance with CBB requirements;
                (e) Reports prepared by the insurance licensee's internal and external auditors; and
                (f) Employee training manuals and records.
                Amended: January 2007

              • GR-1.3.2

                In the case of Bahraini insurance licensees, these requirements apply to the licensee as a whole, including any overseas branches. In the case of overseas insurance licensees, all the requirements of Chapter GR-1 are limited to the business booked in their branch in Bahrain and the records of that branch (see GR-1.1.1). Overseas insurance licensees are thus not required to hold copies of shareholders' and Directors' meetings, except where relevant to the branch's operations.

                Amended: January 2007

          • GR-2 Corporate and Trade Names

            • GR-2.1 Vetting of Names

              • GR-2.1.1

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

                Amended: January 2007

              • GR-2.1.2

                GR-2.1.1 applies to overseas insurance licensees only with respect to their Bahrain branch.

                Amended: January 2007

              • GR-2.1.3

                In approving a corporate or trade name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector. The CBB also seeks to ensure that names used by unregulated subsidiaries do not suggest those subsidiaries are in fact regulated.

                Amended: January 2007

            • GR-2.2 Publication of Documents by the Licensee

              • GR-2.2.1

                Any written communication, including stationery, business cards or other business documentation published by the licensee, or used by its employees (agents, representatives, financial advisers or introducers) must include a statement that the licensee is regulated by the Central Bank of Bahrain, the type and category of license and the legal status. Additionally, written communication (stationery) should state the authorised and paid up capital of the licensee. All licensees should comply with this requirement by 31st December 2014 at the latest.

                Added: October 2014

          • GR-3 Dividends

            • GR-3.1 CBB Non-Objection

              • GR-3.1.1

                Bahraini insurance licensees, other than captive insurers, must obtain a letter of no-objection from the CBB to any dividend proposed, before announcing the proposed dividend by way of press announcement or any other means of communication and prior to submitting a proposal for a distribution of profits to a shareholder vote.

                Amended: January 2007
                Amended: April 2009

              • GR-3.1.1A

                When submitting a request for a letter of no-objection for proposed dividend, the request made by the insurance licensee must:

                (a) Be made at a minimum 3 working days before the proposed announcement;
                (b) Include a copy of the draft audited financial statements for the year to which the request for the proposed dividend pertains to; and
                (c) Include a detailed analysis of the impact of the proposed dividend on the capital adequacy and solvency margin requirements as outlined in Module CA (Capital Adequacy) of Volume 3 CBB Rulebook and the liquidity position of the licensee.
                Amended: October 2017
                Added: April 2009

              • GR-3.1.1B

                To comply with the requirements of Subparagraph GR-3.1.1A (c), the insurance licensee should complete and submit to the CBB those pages of the Insurance Firm Return (Form IFR) pertaining to the capital adequacy and solvency margin requirements.

                Added: April 2009

              • GR-3.1.2

                Upon receiving the request in accordance with all the requirements in Paragraph GR-3.1.1A, the CBB will provide a reply to the insurance licensee before the scheduled annual general meeting of the shareholders.The CBB will grant a no-objection letter where it is satisfied that the level of dividend proposed is unlikely to leave the licensee vulnerable — for the foreseeable future — to breaching the CBB's financial resources requirements, taking into account (as appropriate) trends in the licensee's business volumes, expenses, claims experience and investment environment. Where there are major concerns about the potential impact of a proposed dividend, the CBB may require an actuarial report to be provided.

                Amended: January 2007
                Amended: April 2009

              • GR-3.1.3

                Insurance licensees, subject to Paragraph GR-3.1.1, should provide the CBB with a copy of the proposed agenda for the annual general meeting or other special meeting, noting the licensee's intended declared dividends for the coming year.

                Amended: January 2007
                Amended: April 2009

          • GR-4 Business Transfers

            • GR-4.1 CBB Approval

              • GR-4.1.1

                In accordance with Article 66 of the CBB Law, an insurance licensee must seek prior written approval from the CBB before transferring any of its business to a third party.

                Amended: January 2007

              • GR-4.1.2

                Rule GR-4.1.1 is intended to apply to circumstances where an insurance licensee wishes to transfer all or part of its business to a third party. A business transfer is not the same as an insurance firm ceding (reinsuring) some or all of its policyholder liabilities to a reinsurer. Reinsurance creates an additional set of rights and obligations between the insurance firm and the reinsurer but does not change the insurance firm's obligations to its policyholders nor does it create any direct obligations (to each other) between the insurance firm's policyholders and the insurance firm's reinsurer.

                Added: January 2007

              • GR-4.1.3

                In the case of a Bahraini insurance licensee, Chapter GR-4 applies both to business booked in Bahrain and in the licensee’s overseas branches. In the case of an overseas insurance licensee, Chapter GR-4 applies only to business booked in the firm's Bahrain branch.

                Amended: January 2007

              • GR-4.1.4

                In all cases, CBB approval to transfer business will only be given where:

                (a) The transfer of business will not damage or otherwise prejudice the legitimate interests of the licensee’s customers;
                (b) The transferee is duly licensed to undertake the business which it is to receive; and
                (c) The CBB is satisfied that the transfer will not breach any applicable Laws and regulations, and would not create any supervisory concerns.
                Added: January 2007
                Amended: October 2007

              • GR-4.1.5

                For purposes of Paragraph GR-4.1.1, a business transfer refers to a transfer of all the rights and obligations of one insurance licensee to another insurance licensee, so that the policyholders and reinsurers continue to be subject to the same terms and conditions as those originally agreed. Business transfers may enable licensees that have ceased writing certain lines of business to manage their affairs more effectively and be beneficial both to the insurance licensee and the policyholders, particularly if the insurance licensee that is assuming the business is financially stronger than the insurance licensee transferring the business.

                Amended: January 2007

              • GR-4.1.4

                Effective up to Dec 31 2006.

                A portfolio transfer is not the same as an insurance firm ceding (reinsuring) some or all of its policyholder liabilities to a reinsurer. Reinsurance creates an additional set of rights and obligations between the insurance firm and the reinsurer but does not change the insurance firm's obligations to its policyholders nor does it create any direct obligations (to each other) between the insurance firm's policyholders and the insurance firm's reinsurer.

              • GR-4.1.5

                Effective up to Dec 31 2006.

                Where the proposed transfer involves a transfer of obligations under contracts of insurance in respect of risks situated inside the Kingdom of Bahrain, the transferee must be licensed to carry on insurance business in Bahrain.

              • GR-4.1.6

                In assessing the criteria outlined in Paragraph GR-4.1.4, the CBB will, amongst other factors, take into account the financial strength of the transferee; its capacity to manage the business being transferred; its track record in complying with applicable regulatory requirements; and (where applicable) its track record in treating customers fairly. The CBB will also take into account the impact of the transfer on the transferor, and any consequences this may have for the transferor’s remaining customers.

                Amended: January 2007

            • GR-4.2 Procedure with Respect to Applications

              • GR-4.2.1

                Insurance licensees seeking to obtain the CBB’s permission to transfer business must apply to the CBB in writing, in the form of a covering letter, together with supporting attachments. Unless otherwise directed by the CBB, the application must provide:

                (a) Full details of the business to be transferred including a detailed list of all liabilities that will be transferred, including the name of the individual policyholder, where applicable, related outstanding liabilities and the jurisdiction where the insurance risk is situated;
                (b) The rationale for the proposed transfer;
                (c) If applicable, an assessment of the impact of the transfer on any customers directly affected by the transfer, and any mitigating factors or measures;
                (d) If applicable, an assessment of the impact of the transfer on the transferor’s remaining business and customers, and any mitigating factors or measures; and
                (e) Evidence that the proposed transfer has been duly authorised by the transferor (such as a certified copy of a Board resolution approving the transfer).
                Amended: January 2007

              • GR-4.2.2

                Subject to the CBB's review, the requirements of Paragraph GR-4.2.1 do not apply to the transfer of the portfolio from a captive insurer or to a business transfer entirely comprising reinsurance business, where all of the policyholders affected by the transfer have given their consent.

                Amended: January 2007

              • GR-4.2.3

                Insurance licensees intending to apply for a transfer of business are advised to contact the CBB at the earliest possible opportunity, in order that the CBB may determine the nature and level of documentation to be provided and the need for actuarial or other expert opinion to be provided to support the application. Transfers of long-term business will in all cases require an actuarial evaluation to be provided to the CBB. An affected policyholder is a policyholder whose policy is included in the transfer, or his policy is with the transferor and the CBB has ruled, after consulting the transferor, that the policyholder's rights and obligations under the policy will or may be materially affected by the transfer.

                Amended: January 2007

              • GR-4.2.4

                The CBB will consider an application under Paragraph GR-4.1.1 if it is satisfied that:

                (a) Any objections received to the application to transfer the business following its publication in the Official Gazette and in two daily newspapers in the Kingdom of Bahrain (one in Arabic and one in English) as required under Article 66(b) have been reviewed and resolved by the CBB;
                (b) Except in so far as the CBB has otherwise directed, a copy of the notice that has been sent to every affected policyholder and every other person who claims an interest in a policy included in the proposed transfer (and has given written notice of his claim to the transferor);
                (c) Copies of a statement setting out particulars of the transfer, approved by the CBB, have been available for inspection at one or more places in Bahrain for at least 30 days, from the date of publication of the notice specified in GR-4.2.4(a); and
                (d) Where the proposed transfer includes any contract of direct insurance and the risk is situated in a jurisdiction other than Bahrain, a statement setting out particulars of the transfer, approved by the CBB, has been available for inspection at one or more places in that jurisdiction for at least 30 days, starting with the date of publication of the notice specified in sub- Paragraph GR-4.2.4 (a).
                Added: January 2007

              • GR-4.2.5

                The CBB notice referred to in Paragraph GR-4.2.4 (a) will include a statement that written representations concerning the transfer may be sent to the CBB within three months from the date of publication. The notice shall specify the period during which the policyholder may exercise any right to cancel the policy. The CBB will not decide on the application until after considering any representations made to the CBB within the prescribed time period. In all cases, the costs of publication of this notice must be met by the transferor.

                Amended: January 2007

              • GR-4.2.6

                Where the risk is situated in a jurisdiction other than Bahrain, the law of the jurisdiction in which the risk is situated shall determine whether the policyholder has a right to cancel the policy, and the conditions applicable to any such right.

                Added: January 2007

              • GR-4.2.7

                The CBB reserves the right to impose additional requirements if, in the opinion of the CBB, additional requirements are necessary to protect policyholder interests. In all cases where requirements are imposed, the CBB shall state the reasons for doing so.

                Amended: January 2007

            • GR-4.3 Determination of Applications

              • GR-4.3.1

                The CBB will not approve the transfer, under the terms of Paragraph GR-4.2.1, unless it is satisfied that:

                (a) The transferee is authorised to carry on regulated insurance services in Bahrain or (where relevant) is authorised or otherwise permitted to carry on regulated insurance services in the jurisdiction where any overseas risks are situated;
                (b) Every policy included in the transfer evidences a contract which was entered into before the date of the application;
                (c) The transferee possesses the necessary margin of solvency, required by the regulatory authorities to which he is subject to, after taking the proposed transfer into account;
                (d) Where policies are being transferred from an overseas branch of the insurance licensee, or the transferee is an overseas insurance licensee, the relevant overseas regulatory authority has been consulted about the proposed transfer, the law of that jurisdiction provides for the possibility of such a transfer, and the relevant supervisory authority in that jurisdiction has agreed to the transfer; and
                (e) There are no material adverse consequences from the transfer on the transferee or the security of policyholders.
                Amended: January 2007

            • GR-4.4 CBB Decision

              • GR-4.4.1

                In accordance with Article 67 (d), the CBB’s decision regarding the application for transfer made under Section GR-4.3, will be published as a notice in the Official Gazette and in two local news papers (one in Arabic and one in English). If the liabilities are located in a jurisdiction outside Bahrain, the CBB may also publish such notice in the jurisdiction in which the risk is situated. In all cases, the costs of publication of this notice must be met by the transferor.

                Amended: January 2007

              • GR-4.4.2

                [This Paragraph was deleted in January 2007].

                Amended: January 2007

              • GR-4.4.3

                [This Paragraph was moved to Section GR-4.2 in January 2007].

                Amended: January 2007

              • GR-4.4.4

                The requirement in Paragraph GR-4.4.1 does not have to be met in respect of a transfer of business where the transferor is a Category C1 captive insurance firm.

              • GR-4.4.5

                Article 67(e) notes that where the application for business transfer has been turned down by the CBB or includes restrictions, the applicant may appeal to a competent court within 30 calendar days from the date of publication referred to in Paragraph GR-4.4.1.

                Added: January 2007

          • GR-5 Controllers

            • GR-5.1 Key Provisions for Bahraini Insurance Licensees

              • GR-5.1.1

                Bahraini insurance licensees must obtain prior approval from the CBB for any of the following changes to their controllers (as defined in Section GR-5.2):

                (a) A new controller;
                (b) An existing controller increasing its holding from 10% to 20%;
                (c) An existing controller increasing its holding from below 20% to 30%;
                (d) An existing controller increasing its holding from below 30% to 40%;
                (e) An existing controller increasing its holding to above 40% for licensees not listed on any exchange in Bahrain or abroad; and
                (f) An existing controller reducing its holding to below 10%.
                Amended: October 2015
                Amended: January 2007

              • GR-5.1.1A

                Licensees must not incur or otherwise have an exposure (either directly or indirectly) to their controllers, including subsidiaries and associated companies of such controllers.

                Added: April 2019

              • GR-5.1.1B

                For the purpose of Paragraph GR-5.1.1A, licensees that already have an exposure to controllers must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.

                Added: April 2019

              • GR-5.1.2

                Articles 52 to 56 of the CBB Law require notification to the CBB of all controllers of licensees and of listed companies; it further gives the CBB the right to refuse approval of controllers if deemed damaging to the interests of the market, customers, or in contravention of the criteria set by the CBB.

                Amended: January 2007
                Amended: October 2007

              • GR-5.1.3

                [This Paragraph was deleted in October 2015.]

                Deleted: October 2015
                Amended: January 2007

              • GR-5.1.4

                Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB.

                Amended: October 2015
                Amended: January 2007

              • GR-5.1.4A

                Where the direct controller of a Bahraini insurance licensee is not the ultimate parent undertaking of the licensee, the CBB will require that Form 2 be completed by the ultimate parent undertaking and that the details be provided of the structure of the group, clearly detailing the relationship between the licensee and the ultimate parent undertaking (e.g. by providing an organisational structure of the group).

                Added: October 2015

              • GR-5.1.4B

                Bahraini insurance licensees must immediately notify the CBB in case of any material change to the information provided in a Form 2 submitted for a controller.

                Added: October 2015

              • GR-5.1.4C

                Where a controller is a legal person, any change in its shareholding must be notified to the CBB as the earlier of:

                (a) When the change takes effect; and
                (b) When the controller becomes aware of the proposed change.
                Added: October 2015

              • GR-5.1.5

                If, as a result of circumstances outside the Bahraini insurance licensee's knowledge and/or control, one of the changes specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, the insurance licensee must notify the CBB no later than 15 calendar days from the date on which those changes have occurred.

                Amended: January 2017
                Amended: October 2015
                Amended: January 2007

              • GR-5.1.5A

                For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in controller poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria for controllers, contained under Section GR-5.3.

                Added: October 2015

              • GR-5.1.6

                An approval of controller is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.

                Amended: January 2007

              • GR-5.1.7

                Bahraini insurance licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the licensee, as defined in Section GR-5.2. This report is included as part of the CBB annual reporting requirements in Forms IFR or IBR (depending on the type of license issued).

                Amended: October 2015
                Amended: January 2007

            • GR-5.2 Definition of Controller of a Bahraini Insurance Licensee

              • GR-5.2.1

                A controller of a Bahraini insurance licensee is a natural or legal person who, either alone or with his associates:

                (a) Holds 10% or more of the issued and paid up capital in the licensee or parent undertaking; or
                (b) Is able to exercise more than 10% of the voting power over the licensee or the parent undertaking.
                Amended: October 2015
                Amended: January 2007

              • GR-5.2.2

                For the purposes of Paragraph GR-5.2.1, 'associate' includes:

                (a) In the case of natural persons, a member of the controller's family;
                (b) An undertaking of which controller is a Director;
                (c) A person who is an employee or partner of a controller;
                (d) If the controller is a legal person, a Director of the controller, a subsidiary of the controller, or a Director of any subsidiary of the controller.
                (e) Any other person or undertaking with which the controller has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the insurance licensee, or under which they undertake to act together in exercising their voting power in relation to the insurance licensee.
                Amended: October 2015
                Amended: January 2007
                Amended: October 2007

              • GR-5.2.3

                In addition to the provisions of this Chapter, listed companies and their controllers shall be bound by the CBB's regulatory requirements for capital markets stipulated in the CBB's Rulebook related to changes in the ownership of shares in listed companies. For overseas insurance licensees, Section GR-5.5 shall apply.

                Amended: October 2015
                Amended: January 2007

              • GR-5.2.4

                For the avoidance of doubt, the management company of a captive insurer is not automatically a controller of the firm.

                Amended: January 2007

              • GR-5.2.5

                The restrictions set forth in this Chapter shall apply to any changes in the legality of the shares' ownership of the controllers in the licensees, or to the voting powers the controllers are entitled to in the licensees. Failure to comply with such restrictions shall result in the imposition of penalties as indicated in Module EN (Enforcement) of the CBB Rulebook. The imposition of such penalties shall not affect the CBB's right to impose other penalties and to take any other administrative measures against the controller in accordance with the provisions of the Law including preventing the controller from exercising his voting right or transferring of shares.

                Added: October 2015

            • GR-5.3 Suitability of Controllers for Bahraini Insurance Licensees

              • GR-5.3.1

                Bahraini insurance licensees must satisfy the CBB of the suitability of their proposed controllers.

                Amended: October 2015
                Amended: October 2011
                Amended: January 2007

              • GR-5.3.1A

                [This Paragraph was deleted in October 2015.]

                Deleted: October 2015
                Adopted: October 2011

              • Natural Persons

                • GR-5.3.2

                  The percentage of direct or indirect control of a natural person in a Bahraini insurance licensee must not exceed 30% of the issued and paid up capital. This limit does not apply to insurance consultants nor to insurance managers.

                  Added: October 2015

                • GR-5.3.3

                  In assessing the suitability of controllers who are natural persons, the CBB will consider the following:

                  (a) Whether the approval or refusal of a controller is or could be detrimental to the licensee, Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
                  (b) The legitimate interests of clients, creditors, non-controlling interests, and all other stakeholders of the licensee;
                  (c) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                  (d) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                  (e) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
                  (f) The contravention of any financial services legislation or regulation;
                  (g) Whether the person has ever been refused an authorisation as controller, a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
                  (h) Dismissal or a request to resign from any office or employment;
                  (i) Disqualification by a court, regulator or other competent body, as a Director or as a manager of a corporation;
                  (j) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or declared bankrupt or one or more of its partners or managers have been declared bankrupt;
                  (k) The extent to which the person has been truthful and open with regulators;
                  (l) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
                  (m) The track record as a controller in another company or investor in a financial institution, whether in the Kingdom of Bahrain or abroad;
                  (n) The financial resources of the person and the stability of their shareholding;
                  (o) Existing Directorships or ownership of more than 20% of the issued or paid up capital in any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interests that such Directorships or ownership may imply;
                  (p) The ability of the person to deal with existing shareholders and the Board in a constructive and co-operative manner; and
                  (q) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings.
                  Amended: October 2015
                  Amended: July 2007
                  Amended: October 2007

              • Unregulated Legal Persons

                • GR-5.3.3A

                  The percentage of direct or indirect control of an unregulated legal person in a Bahraini insurance licensee must not exceed 30% of the issued and paid up capital.

                  Added: October 2015

                • GR-5.3.4

                  In assessing the suitability of controllers who are unregulated legal persons, the CBB will consider the following:

                  (a) Whether their approval or refusal of a controller is or could be detrimental to the licensee, Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
                  (b) The legitimate interests of investors, creditors, non-controlling interests and all other stakeholders of the licensee
                  (c) The financial strength of the controller, its parent(s) and its subsidiaries, its implications for the insurance licensee and the likely stability of the controller's shareholding in the insurance licensee;
                  (d) Whether the unregulated legal person or any of its subsidiaries or any of its shareholders have ever been adjudged bankrupt, or failed to satisfy a judgement debt under a court order, or have defaulted on any debts, or entered into any arrangement with creditors in relation to the inability to pay due debts;
                  (e) The controller's jurisdiction of incorporation, location of Head Office, group structure and close links, and the implications for the insurance licensee as regards effective supervision of the insurance licensee and potential conflicts of interest;
                  (f) The controller's (and other subsidiaries') propriety and general standards of business conduct, including the contravention of any laws or regulations related to financial services, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
                  (g) Any conviction related to fraud, misfeasance or other misconduct;
                  (h) Whether the unregulated legal person or any of its subsidiaries has been subject to any disciplinary proceeding whether by court order any proceeding by a specialised body, and whether the unregulated legal person is sued in any court;
                  (i) The extent to which the controller or its subsidiaries have been truthful and open with regulators and supervisors;
                  (j) Whether the unregulated legal person has ever been refused an authorisation as controller, a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
                  (k) The track record as a controller or investor in financial institutions;
                  (l) The ability of the unregulated legal person to deal with existing shareholders and the Board in a constructive and co-operative manner;
                  (m) Directorships in the Kingdom of Bahrain or elsewhere or ownership of more than 20% of the capital or voting rights of any financial institution, and the potential for conflicts of interest that such directorships or ownership may imply; and
                  (n) Whether the unregulated legal person or any of its subsidiaries have ever entered into any arrangement with creditors in relation to the inability to pay due debts.
                  Amended: October 2015
                  Amended: July 2007

              • Regulated Legal Persons

                • GR-5.3.5

                  The percentage of direct or indirect control of a regulated legal person in a Bahraini insurance licensee must not exceed 40% of the issued and paid up capital.

                  Added: October 2015

                • GR-5.3.6

                  The 40% limit referred to in Paragraph GR-5.3.5 does not apply to Bahraini insurance licensees not listed on a licensed exchange or an exchange abroad, or to mergers or acquisitions which have been approved by the CBB.

                  Added: October 2015

                • GR-5.3.7

                  Subject to the discretion of the CBB, regulated financial institutions may be allowed to own or control holdings of voting capital of listed licensees in excess of the abovementioned 40% level, if such control is not detrimental to the licensee, Bahrain's financial sector and the national interest of the Kingdom of Bahrain.

                  Added: October 2015

                • GR-5.3.8

                  Regulated financial institutions wishing to acquire more than 40% of the voting capital of a Bahraini insurance licensee must observe the criteria set forth in Guidance GR-5.3.4 related to unregulated legal persons, in addition to the conditions set forth under Guidance GR-5.3.9.

                  Added: October 2015

                • GR-5.3.9

                  In assessing the suitability of controllers who are regulated legal persons, the CBB will consider the following:

                  (a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Committee on Banking Supervision Core Principles, or the IOSCO Core Principles or the IAIS Core Principles as well as the FATF Recommendations on Money Laundering and the financing of terrorism & proliferation;
                  (b) The home supervisor of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of the Bahraini insurance licensee;
                  (c) The home supervisor of the person must confirm to the CBB that it will require the person to consolidate the activities of the concerned Bahraini insurance licensee for regulatory and accounting purposes if the case so requires;
                  (d) The home supervisor of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for Large Exposures monitoring purposes;
                  (e) The home supervisor of the person and the CBB must conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits; and
                  (f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support the licensee, should such letter be requested.
                  Added: October 2015

            • GR-5.4 Approval Process for Bahraini Insurance Licensees

              • GR-5.4.1

                Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, with the complete documentation requirements to the satisfaction of the CBB, the CBB will issue a written notice of approval or of refusal by registered mail, to the Bahraini insurance licensee and the applicant. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

                Amended: October 2015
                Amended: July 2007

              • GR-5.4.1A

                The CBB may refuse an application for approval if the applicant does not meet the criteria set forth in Section GR-5.3. The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal.

                Added: October 2015

              • GR-5.4.2

                Article 53 of the CBB Law allows the CBB up to 3 months in which to respond to an application, although the CBB aims to respond within 30 calendar days. Notices of refusal have to be approved by the concerned Executive Director of the CBB.

                Amended: October 2015
                Amended: October 2009
                Amended: July 2007

              • Appeal Process

                • GR-5.4.2A

                  The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination.

                  Added: October 2015

                • GR-5.4.3

                  Where a person has become a controller by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.

                  Amended: July 2007

                • GR-5.4.4

                  If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.

                  Adopted: July 2007

                • GR-5.4.5

                  [This Paragraph was deleted in October 2015.]

                  Deleted: October 2015
                  Adopted: July 2007
                  Amended: October 2007

                • GR-5.4.6

                  Bahraini insurance licensees are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to changes in their controllers, both through new controllers coming in or existing controllers ceasing to have control.

                  Amended: October 2015
                  Amended: October 2007
                  Adopted: July 2007

                • GR-5.4.7

                  The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controller. The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

                  Added: October 2015

                • GR-5.4.8

                  In accordance with Paragraph EN-8.2.6, and where a controller is a natural person, the CBB may, depending on the seriousness of a situation, impose enforcement measures, which may include disqualification from being a controller of any licensed firm.

                  Added: October 2015

            • GR-5.5 Key Provisions for Overseas Insurance Licensees

              • GR-5.5.1

                In the case of overseas insurance licensees, the branch must notify the CBB of any new significant ownership in excess of 50% of the issued and paid up capital of the concerned licensee's direct parent undertaking as soon as the branch becomes aware. The overseas insurance firm licensee must provide a copy of the relevant approval by the home supervisor of the parent. The CBB will take the appropriate action in such case.

                Added: October 2015

              • GR-5.5.2

                In assessing the suitability of a controller of the parent of an overseas insurance licensee, the CBB will take into regard that the change in control poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market.

                Added: October 2015

              • GR-5.5.3

                Overseas insurance licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the branch, and details of the type of control.

                Added: October 2015

              • GR-5.5.4

                For overseas insurance licensees, the controller is the direct parent undertaking. Any material changes as outlined in Paragraph GR-5.5.1, to the control of the direct parent undertaking must be filed through submission of an updated Form 2 to the CBB.

                Added: October 2015

          • GR-6 Close Links

            • GR-6.1 Key Provisions

              • GR-6.1.1

                Condition 3 of the CBB's licensing conditions specifies, amongst other things, that insurance licensees must satisfy the CBB that their close links do not prevent the effective supervision of the licensee and otherwise pose no undue risks to the licensee. (See Paragraph AU-2.3.1).

                Amended: July 2007

              • GR-6.1.2

                Applicants for an insurance license must provide details of their close links, as provided for under Form 1 (Application for a License). (See Paragraph AU-5.1.5).

                Amended: October 2007

              • GR-6.1.3

                Insurance firms and insurance brokers must submit to the CBB, attached to their annual return and within 3 months of their financial year-end, a report on their close links. The report must identify all undertakings closely linked to the licensee, as defined in Section GR-6.2.

                Amended: April 2012
                Amended: July 2007

              • GR-6.1.4

                Insurance licensees may satisfy the requirement in Paragraph GR-6.1.3 by submitting a corporate structure chart, identifying all undertakings closely linked to the licensee. In the case of insurance firms, the report is included as part of the Insurance Firm Return (Form IFR (C) or IFR (T)). In the case of insurance brokers, the report is included as part of the the Insurance Broker Return (Form IBR).

                Amended: April 2012
                Amended: July 2007

              • GR-6.1.5

                Insurance licensees must provide information on undertakings with which they are closely linked, as requested by the CBB.

                Amended: July 2007

            • GR-6.2 Definition of Close Links

              • GR-6.2.1

                An insurance licensee ('A') has close links with another undertaking ('C'), if:

                (a) C is a parent undertaking of A;
                (b) C is a subsidiary of A;
                (c) C is a parent undertaking of a subsidiary of A;
                (d) C is a subsidiary of a parent undertaking of A;
                (e) C owns or controls 20% or more of the voting rights or capital of A; or
                (f) A, any of its parent or subsidiaries, or any of the subsidiaries of its parent, owns or controls 20% or more of the voting rights or capital of C.
                Amended: July 2007
                Amended: October 2007

            • GR-6.3 Assessment Criteria

              • GR-6.3.1

                In assessing whether an insurance licensee's close links may prevent the effective supervision of the firm, or otherwise poses no undue risks to the insurance licensee, the CBB takes into account the following:

                (a) Whether the CBB will receive adequate information from the insurance licensee, and those with whom the licensee has close links, to enable it to determine whether the licensee is complying with CBB requirements;
                (b) The structure and geographical spread of the licensee, its group and other undertakings with which it has close links, and whether this might hinder the provision of adequate and reliable flows of information to the CBB, for instance because of operations in territories which restrict the free flow of information for supervisory purposes;
                (c) In the case of an overseas insurance licensee, whether the insurance licensee and its group will be subject to supervision on a consolidated basis (for example, if a financial resources requirement is determined for the group as a whole); and
                (d) Whether it is possible to assess with confidence the overall financial position of the group at any particular time, and whether there are factors that might hinder this, such as group members having different financial year ends or auditors, or the corporate structure being unnecessarily complex and opaque.
                Amended: July 2007

          • GR-7 Statutory Deposits and Compulsory Reserve

            • GR-7.1 Requirement for a Cash Deposit

              • GR-7.1.1

                Article 181 of the CBB Law governs the deposits required by insurance licensees.

                Amended: July 2007
                Amended: October 2007

              • GR-7.1.2

                Insurance firms, except for captive insurers and insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.3, must maintain a cash deposit with a retail bank licensed to do business in Bahrain, for the following amounts:

                (a) BD 50,000 for life insurance and/or savings and fund accumulation categories;
                (b) BD 75,000 for any insurance category of general insurance for all insurance categories; and
                (c) BD 150,000 for firms solely effecting reinsurance contracts.
                Amended: July 2007

              • GR-7.1.3 [This Paragraph was deleted in January 2007].

                Deleted: July 2007

              • GR-7.1.4

                Insurance brokers must maintain a cash deposit with a retail bank licensed to do business in Bahrain for the following amounts:

                (a) BD 2,500 for life insurance and savings and fund accumulation categories; and
                (b) BD 5,000 for general insurance for all insurance categories.
                Amended: July 2007

              • GR-7.1.5

                The cash deposit must be in the name of the insurance firm or insurance broker and for the order of the CBB. The cash deposit and accumulated interest (or profit) thereon may not be disposed of except by written permission of the CBB.

                Amended: July 2016
                Amended: July 2007

              • GR-7.1.6

                The deposit and any of its accumulated interest (if any) may be moved to another retail bank licensed to do business in Bahrain, providing that prior written approval has been obtained from the CBB. When seeking CBB approval, the insurance licensee must provide a valid reason for requesting the move to another retail bank.

                Amended: July 2016
                Amended: July 2007

              • GR-7.1.7

                In the case of insurance licensees originally licensed as exempt companies, insurance licensees may opt to have the cash deposit required as per Paragraphs GR-7.1.2 and GR-7.1.4 maintained with the CBB.

                Amended: July 2007

            • GR-7.2 Compulsory Reserve

              • GR-7.2.1 [This Paragraph was deleted in January 2007].

                Deleted: July 2007

              • GR-7.2.2

                In accordance with the Bahrain Commercial Companies Law, Bahraini insurance licensees must comply with the statutory requirements of this law requiring that 10% of annual profits be set aside as a statutory reserve. The requirements of the Bahrain Commercial Companies Law note that the balance of such reserve is to equal 50% of the paid-up capital of the company.

                Amended: July 2007

          • GR-8 Cessation of Business

            • GR-8.1 CBB Approval

              • GR-8.1.1

                As specified in Article 50 of the CBB Law, an insurance licensee wishing to cease to provide or suspend any or all its regulated insurance services, completely or at any of its branches and/or liquidate its business must obtain prior written approval from the CBB.

                Amended: October 2011
                Amended: July 2007

              • GR-8.1.2

                If the insurance licensee wishes to effect a business transfer, it must also comply with the requirements contained in Chapter GR-4.

                Amended: July 2007

              • GR-8.1.3

                In the case of a Bahraini insurance licensee, Chapter GR-8 applies both to its business booked in Bahrain and in the licensee's overseas branches. In the case of an overseas insurance licensee, Chapter GR-8 applies only to business booked in the licensee's Bahrain branch.

                Adopted: July 2007

              • GR-8.1.4

                Insurance licensees seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a covering letter together with any supporting attachments. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:

                (a) Full details of the business to be terminated;
                (b) The rationale for the cessation;
                (c) If applicable, an assessment of the impact of the cessation on any customers directly affected by the cessation, and any mitigating factors or measures;
                (d) If applicable, an assessment of the impact of the cessation on the licensee's remaining business and customers, and any mitigating factors or measures;
                (e) Evidence that the proposed cessation has been duly authorised by the licensee (such as a certified copy of a Board resolution approving the cessation);
                (f) How the licensee proposes to cease business;
                (g) Notice of an Extraordinary Meeting setting out the agenda to discuss and approve the cessation, and inviting the CBB for such meeting;
                (h) Formal request to the CBB for the appointment of a liquidator acceptable to the CBB;
                (i) A cut-off date by which the licensee will stop its operations;
                (j) If the insurance licensee wishes to cease its whole business, confirmation that the licensee will not enter into new business with effect from the cut-off date;
                (k) The audited accounts of the licensee as of the last date on which it stopped operations. The commencement of the period covering these final accounts should be the beginning of the financial year of the licensee; and
                (l) The final liquidator's report of the licensee.
                Amended: October 2011
                Adopted: July 2007

              • GR-8.1.5

                Licensees intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-8.1.4 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact on customers.

                Amended: October 2011
                Adopted: July 2007

              • GR-8.1.6

                Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected customers. The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

                Adopted: July 2007

              • GR-8.1.7

                When the CBB has given its approval to an application to cease business, the licensee must publish a notice of its intention to cease business in two local newspapers (one in Arabic, the other in English). Notices must also be displayed in the premises (including any branch offices) of the licensee concerned. These notices must be given not less than 30 calendar days before the cessation is to take effect, and must include such information as the CBB may specify. If the insurance licensee had entered into direct contracts of insurance relating to risks situated in a jurisdiction other than Bahrain, a notice must also be published in two national newspapers in the jurisdiction concerned.

                Amended: October 2011
                Amended: October 2007
                Adopted: July 2007

              • GR-8.1.8

                If the insurance licensee wishes to go into run-off or liquidate its business, the CBB will revise its license to restrict the firm from entering into new contracts of insurance. The insurance licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged and that it may surrender its license.

                Amended: October 2011
                Amended: July 2007

              • GR-8.1.9

                An insurance firm in run-off must continue to meet its contractual and regulatory obligations to policyholders.

                Amended: July 2007

              • GR-8.1.5

                Effective up to Jun 30 2007.

                Once the insurance firm believes that it has discharged all its remaining contractual obligations to policyholders, it must publish a notice in two national newspapers in Bahrain approved by the BMA (one being in English and one in Arabic), stating that is has settled all its dues and wishes to leave the market. If the insurance firm had entered into direct contracts of insurance relating to risks situated in a jurisdiction other than Bahrain, a notice must also be published in two national newspapers in the jurisdiction concerned.

              • GR-8.1.10

                The notices referred to in Paragraph GR-8.1.7 must include a statement that written representations concerning the cessation of business may be sent to the CBB before a specified day, which shall not be earlier than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.

                Amended: October 2011
                Amended: July 2007

              • GR-8.1.11

                If no objections to the cessation of business are upheld by the CBB, then the CBB will issue a written notice of approval for the cessation of business and where the insurance licensee is leaving the market such notice will also provide for the surrender of the license and for the return of the insurance licensee's statutory deposit.

                Amended: July 2007

              • GR-8.1.12

                As per Article 49 of the CBB Law, the CBB shall publish its approval to cancel or amend a license in the Official Gazette as well as in two local daily newspapers (one in Arabic, and the other in English), once this decision has been implemented. The publication costs of these notices are to be met by the licensee concerned.

                Adopted: July 2007
                Amended: October 2007

              • GR-8.1.13

                Upon application, the CBB may grant exemptions to the disclosure requirements of Paragraphs GR-8.1.7 for captive insurers. However, all other provisions of Chapter GR-8 apply in full to captive insurers.

                Amended: July 2007

              • GR-8.1.14

                Upon satisfactorily meeting the requirement set out in GR-8.1.4, the insurance licensee must surrender the original license certificate issued by the Licensing & policy Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry, Commerce and Tourism.

                Added: October 2016

          • GR-9 Appointed Representatives

            • GR-9.1 Key Provisions

              • GR-9.1.1

                An insurance firm may appoint as its representative for its Bahrain business a person who is not licensed by the CBB, known as an appointed representative. However, appointed representatives must be registered with the CBB. Insurance firms that appoint appointed representatives are called licensed principals.

                Amended: October 2009
                Amended: July 2007

              • GR-9.1.1A

                This Chapter does not apply to insurance firms whose business is limited to reinsurance.

                Adopted: October 2009

              • GR-9.1.1B

                Insurance licensees, other than insurance firms, may not appoint appointed representatives. More specifically, insurance brokers may not appoint representatives acting on their behalf.

                Adopted: October 2009

              • GR-9.1.1C

                The requirements for registration and minimum qualifications of appointed representatives are effective 1st January 2010 (refer to ES-2.5.4).

                Adopted: October 2009

              • GR-9.1.2

                Appointed representatives are persons acting on behalf, and under the overall control of a licensed principal. They are effectively an extension of the licensed principal. The licensed principal takes full responsibility for the actions of their appointed representatives vis-à-vis the CBB. Note that only insurance firms may act as licensed principals.

                Amended: July 2007

              • GR-9.1.3

                An appointed representative may be a natural or corporate person. An appointed representative may be a CBB licensed firm (e.g. a bank) that does not hold any of the permissions of insurance firm, insurance broker, or insurance consultant. Where the appointed representative is a corporate entity, its memorandum and articles of association must include the activities of the appointed representative of the CBB licensed insurance firm, as required under Resolution 11 issued as per Article 74 of the CBB Law.

                Amended: October 2009
                Amended: July 2007

              • GR-9.1.3A

                An appointed representative must be registered with the CBB in accordance with Paragraph AU-1.3A.

                Adopted: October 2009

              • GR-9.1.4

                An appointed representative may have agencies with no more than one licensed principal per type of business. For the purposes of this requirement the types of business are as follows:

                (a) General insurance as defined in Paragraph AU-1.4.9; and
                (b) Long-term insurance (as defined in Paragraph AU-1.4.8).
                Amended: October 2009
                Amended: July 2007

              • GR-9.1.4A

                An appointed representative that is authorised to conduct both Islamic and conventional business by virtue of its license provided by the CBB, may have different agencies per type of business, for both Islamic and conventional insurance business.

                Adopted: October 2009

              • GR-9.1.5

                An appointed representative may only undertake the types of business for which the licensed principal is authorised to undertake by the CBB.

                Amended: July 2007

              • GR-9.1.5A

                An insurance firm can only nominate appointed representatives that meet minimum qualifications and fit and proper requirements of the CBB.

                Adopted: October 2009

              • GR-9.1.5B

                For purposes of Paragraph GR-9.1.5A, the minimum qualifications of appointed representatives recognised by the CBB are:

                (a) For general insurance, the Award in General Insurance from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF); and
                (b) For long-term insurance, the Award in Financial Planning from the Chartered Insurance Institute (CII) and the Bahrain Institute of Banking and Finance (BIBF).
                Adopted: October 2009

              • GR-9.1.5C

                Upon written application to the CBB, equivalent or higher qualification from an internationally recognised insurance institute may be acceptable, provided it substantially covers the core syllabuses of the minimum qualifications outlined in Paragraph GR-9.1.5B.

                Adopted: October 2009

              • GR-9.1.5D

                Where the appointed representative is a retailer of goods, including motor vehicles, or a travel agent selling insurance policies or helping customers make a claim under the policy and the insurance services provided are complementary to the main activity conducted by the appointed representative, an exemption from the requirements of Paragraph GR-9.1.5B may be sought by the licensed principal. A request for such exemption must be submitted in writing to the Director, Insurance Supervision outlining what alternative training has been provided to the appointed representative to ensure that potential policyholders are treated in a fair and equitable manner and that the provision of insurance coverage complies with all the requirements outlined in Module BC, and in particular with Chapter BC-2, The Insurance Code of Practice.

                Adopted: October 2009

              • GR-9.1.6

                In the case where an appointed representative acts as agent for more than one licensed principal, it must arrange its business to achieve reasonable segregation between principals to allow each licensed principal to carry out monitoring of its business under its agency agreement.

              • GR-9.1.7

                An appointed representative must maintain separate bank accounts for any monies relating to premiums and claims handled on behalf of each licensed principal.

              • GR-9.1.8

                An appointment by an insurance firm of an appointed representative must be the subject of a written contract of agency. This contract must state, inter alia:

                (a) The name of the appointed representative;
                (b) The name of the licensed principal;
                (c) That the licensed principal is responsible for the actions and conduct of the representative concerned when acting or purporting to act under it (without prejudice to any rights to bring actions for damages by the licensed principal against the appointed representative or vice versa);
                (d) The type(s) of business for which the agency is granted;
                (e) That the appointed representative allows full access to the CBB, the licensed principal and the licensed principal's external auditors, given reasonable notice, to all records relating to the business falling within its agency;
                (f) The terms and conditions for the handling of and accounting for client money, including a statement that the appointed representative is acting solely as agent of the licensed principal in the handling of such money;
                (g) The conditions for cancellation, which cannot alter or cancel the continuing responsibility of the licensed firm to take responsibility for the representative's action and conduct (without prejudice to any rights to bring actions for damages by the licensed firm against the representative or vice versa); and
                (h) That the appointed representative is prohibited from carrying on agencies with other licensed principals for the same type of business, in accordance with Paragraph GR-9.1.4, or may do so in accordance with Paragraph GR-9.1.4A, for conventional and Takaful insurance.
                Amended: October 2009
                Amended: July 2007

              • GR-9.1.9

                The powers of access given to the CBB and the licensed principal's auditors by Sub-paragraph GR-9.1.8 (e) are in order to ensure that the agency between the licensed principal and the appointed representative does not impede the effective supervision of the licensed principal by the CBB.

                Amended: July 2007

              • GR-9.1.10

                Once appointed, the licensed principal must take full responsibility for the actions and conduct of the appointed representative, in respect of any matters of compliance with, or breach of, the requirements of the CBB Rulebook that relate to activities of the appointed representative acting within the real or implied authority of the licensed principal. This is without prejudice to any rights of redress the licensed principal may have at law against the appointed representative.

                Amended: July 2007

              • GR-9.1.11

                The licensed principal must ensure that the appointed representative complies with the provisions of the CBB Rulebook applicable to the activities being undertaken in accordance with the agency, including, but not limited to:

                (a) Record-keeping;
                (b) Business conduct; and
                (c) Financial crime requirements.
                Amended: July 2007

              • GR-9.1.12

                The licensed principal must ensure that periodic monitoring of the appointed representative is undertaken to ensure the adequacy of the systems and controls in place. The licensed principal or an appropriately qualified independent party may undertake this monitoring.

              • GR-9.1.13

                All appointments of appointed representatives, variations in terms of appointment and cancellations of appointment must be notified in writing to the CBB no later than 5 working days after they have taken place. Such notifications must be addressed to the Director, Licensing & Policy Directorate.

                Amended: October 2009
                Amended: July 2007

              • GR-9.1.14

                An appointed representative must at all times act within the limits of his authority in the conduct of activities covered by the terms of the agency agreement.

              • GR-9.1.15

                An appointed representative must disclose to clients the relationship that he has with the licensed principal and any other parties that could reasonably be considered material to the insurance contract.

          • GR-10 Professional Indemnity Coverage

            • GR-10.1 Insurance Brokers and Insurance Consultants

              • GR-10.1.1

                Insurance brokers and insurance consultants must maintain professional indemnity coverage, acceptable to the CBB, with a minimum limit of indemnity for any one claim and in any one insurance period of 12 months. Insurance brokers and insurance consultants must provide, upon request, evidence to the CBB of the coverage in force.

                Amended: July 2007

              • GR-10.1.1A

                In accordance with Paragraph EN-B.3.1, insurance licensees may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in Module EN.

                Added: April 2008

              • GR-10.1.2

                The requirements for professional indemnity coverage will normally be met by the insurance broker or insurance consultant obtaining an insurance policy from an insurance firm. However, upon written application to the CBB, coverage may be met by the insurance broker or insurance consultant depositing with a retail bank licensed to operate in the Kingdom of Bahrain, an amount, specified by the CBB, to be held in escrow against future claims. This amount will not be less than the minimum required policy limit.

                Amended: July 2007
                Amended: April 2008

              • GR-10.1.3

                The minimum limit of indemnity is BD 100,000 for insurance brokers and BD 75,000 for insurance consultants.

              • GR-10.1.4

                Other than in the case of Paragraph GR-10.1.2, the maximum excess or deductible allowable under the policy shall be BD 15,000.

              • GR-10.1.5

                Branches of insurance brokers or insurance consultants of a company incorporated under the laws of its territory of incorporation must provide evidence of professional indemnity coverage maintained by their company and specifically indicating that the coverage of the professional indemnity extends to the operations of the branch resident in Bahrain.

              • GR-10.1.6

                Unless the licensee has access to the professional indemnity cover meeting the minimum requirements of Paragraphs GR-10.1.3 and GR-10.1.4 provided to its parent company, separate professional indemnity cover will need to be provided.

                Amended: July 2007

              • GR-10.1.7

                Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior approval of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.

                Amended: July 2007

              • GR-10.1.8

                If an insurance broker or insurance consultant applies to the CBB for a voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage to continue in respect of any unreported claims arising from past sales or advice.

                Amended: July 2007

              • GR-10.1.9

                The CBB will not allow a voluntary surrender of authorisation to take effect until the insurance licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities to its customers. See also Section AU-5.5, on the cancellation of authorisation.

                Amended: July 2007

              • GR-10.1.10

                Except as provided for by Paragraph ES-2.5.3, professional indemnity coverage requirements must be met by insurance brokers and insurance consultants by 31 December 2005 (refer to ES-2.5.2).

                Amended: July 2007

              • GR-10.1.11

                Unincorporated Bahraini insurance brokers licensed prior to 1 June, 2005 must meet the professional indemnity coverage requirements by 31 December 2006 (refer to ES-2.5.3).

                Amended: July 2007

              • GR-10.1.12

                Insurance brokers and insurance consultants must prominently display in their premises a notice stating that they have in place professional indemnity coverage that meet the minimum requirements of the CBB and the period of coverage, such that claims relating to the period during which the policy was in force may subsequently still be reported.

                Amended: July 2007

              • GR-10.1.13

                The above notice may be either issued by the insurance firm providing the coverage on behalf of the insurance licensee, or by the licensee itself. The notice should specify the main features of the coverage maintained (or, where relevant, the amount of funds placed in escrow, in accordance with Paragraph GR-10.1.2). It should also specify the procedures for submitting a claim under the coverage maintained.

                Adopted: July 2007

      • Business Standards

        • CA Capital Adequacy

          • CA-A Introduction

            • CA-A.1 Purpose

              • CA-A.1.1

                This Module presents requirements that have to be met by insurance licensees, 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 licensees 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 licensee concerned, the volume of business undertaken and its inherent risk. The purpose of such requirements is to ensure that insurance licensees 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 licensees 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 firms 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 licensees, 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 licensees.

                  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 firms
                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

          • CA-B Scope of Application

            • CA-B.1 Bahraini Insurance Licensees and Overseas Insurance Licensees

              • CA-B.1.1

                This Module applies to both Bahraini insurance licensees and overseas insurance licensees.

              • CA-B.1.2

                While the solvency requirements for Bahraini insurance firms and for overseas insurance firms are identical (as per Chapter CA-2), the calculation of the capital available varies based on the legal structure of the licensee, i.e. whether it is a locally incorporated company or a branch operation.

                Amended: January 2007

              • CA-B.1.3

                Bahraini insurance firms must calculate their capital available based on the shareholder's equity of the licensee (and other allowable elements of regulatory capital, as specified in Chapter CA-1). Overseas insurance firms must calculate their capital available based on their audited net assets, determined in accordance with accounting standards that would be applicable if they were a joint stock company incorporated in Bahrain.

                Amended: January 2007

            • CA-B.2 Single Insurance Entity and Consolidated Insurance Entity

              • Single Insurance Entity (Unconsolidated)

                • CA-B.2.1

                  Insurance licensees must apply the requirements of this Module as a single insurance entity, i.e. at the level of the unconsolidated company or branch. Any insurance activities of branches of Bahraini insurance licensees are included in the single insurance entity and are not subject to separate capital and solvency requirements.

                  Amended: January 2007

              • Consolidated Insurance Entity

                • CA-B.2.2

                  Overall capital and solvency requirements must be calculated for the consolidated Bahrain group (including the Bahrain insurance parent and subsidiaries). Bahraini insurance licensees must in addition apply the requirements of this Module at the consolidated level.

                  Amended: January 2007

                • CA-B.2.3

                  For purposes of Paragraph CA-B.2.1, where branches and subsidiaries are operating in jurisdictions outside of Bahrain, and are subject to capital requirements in these other jurisdictions that are equivalent or more stringent than the Bahrain requirements, these licensees will be considered to be in compliance with the requirements of this Module.

                  Amended: January 2007

                • CA-B.2.4

                  In instances where insurance licensees are uncertain as to the equivalency of the capital requirements of other jurisdictions where they operate, they should discuss these requirements with the CBB.

                  Amended: January 2007

          • CA-1 Capital Requirements

            • CA-1.1 General Requirements

              • CA-1.1.1

                In accordance with Principle of Business 9, insurance licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

              • CA-1.1.2

                In the event that an insurance licensee fails to meet the capital and solvency margin requirements outlined in this Module, it must, on becoming aware that it has breached these Rules, notify the CBB immediately and within 25 calendar days submit a plan to the CBB demonstrating how its capital available will be restored and the timeframe for that restoration to occur.

                Amended: January 2007

              • CA-1.1.3

                Should the insurance licensee fail to meet the requirements of this Module, the CBB may impose enforcement measures outlined in Module EN.

                Amended: January 2007

              • CA-1.1.4

                Unless otherwise indicated, all insurance licensees must implement the requirements of Module CA, effective 31 December 2005 (Refer to ES-2.5.1).

                Amended: January 2007

            • CA-1.2 Calculation of Capital Available for Insurance Firms

              • CA-1.2.1

                A Bahraini insurance firm must maintain sufficient capital to enable it to meet at all times its insurance and other obligations. The minimum Tier 1 capital for Bahraini insurance firms is BD 5 million, except for those firms whose business is limited to reinsurance. Bahraini insurance firms whose business is limited to reinsurance must have minimum Tier 1 capital of BD 10 million. Overseas insurance firms and captive insurers are not subject to a minimum Tier 1 capital but must comply with the Required Solvency Margin and minimum fund, as defined in Chapter CA-2. In addition, all insurance firms must at all times maintain a capital available in excess of the greater of the Required Solvency Margin and the minimum fund, as defined in Chapter CA-2.

                Amended: January 2007
                Amended: October 2007

              • CA-1.2.2

                Bahraini insurance firms licensed prior to 1 April 2005 that do not meet the requirements of Paragraph CA-1.2.1, will be required to meet the requirements for minimum Tier 1 capital by 31 December 2007. In addition, the requirements to maintain a capital available in excess of the greater of the Required Solvency Margin and minimum fund must be met by insurance firms by 31 December 2005. Insurance firms who are in run-off and whose license is restricted from entering into new contracts of insurance as per Paragraph GR-8.1.8, are grandfathered and not required to apply the requirements of Paragraph CA-1.2.1 (refer to ES-2.6.2).

                Amended: January 2007
                Amended: October 2007

              • CA-1.2.3

                An insurance firm must ensure that at all times its capital available does not fall below the minimum fund. In the event that an insurance firm's capital available does fall below the minimum fund, the insurance firm must inject capital and must notify the CBB immediately. Further, the insurance firm must cease to effect any new contracts of insurance, including renewals of existing contracts unless explicitly permitted to do so by the CBB.

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

              • Limitation on Valuation of Capital Instruments

                • CA-1.2.4

                  For the purposes of determining an insurance firm's capital available, no value is attributed to any other instrument or resource of an insurance firm other than those identified in Paragraphs CA-1.2.8, CA-1.2.12 and CA-5.1.24 without the consent in writing of the CBB. Without limiting the generality of this Rule, no value is attributed to any of the following:

                  (a) Any implicit items (which relate to future profits, zillmerising and hidden reserves); and
                  (b) The unpaid element of any issued shares some or all of which are not 'fully paid' shares.
                  Amended: October 2009
                  Amended: January 2007

              • Capital Available: Tier 1 and Tier 2

                • CA-1.2.5

                  An insurance firm's capital available, for the purposes of this Module, comprises two tiers. Tier 1, or core capital, comprises the highest quality capital elements that fully meet all the essential characteristics of capital. Tier 2, or supplementary capital, comprises other instruments that, to varying degrees, fall short of the quality of Tier 1 capital but nonetheless contribute to the overall financial strength of the insurance firm. Insurance firms may hold Tier 2 capital in excess of the limits in Paragraph CA-1.2.7, but any such excess is not counted as capital available for the purposes of the requirements in this Module.

                  Amended: January 2007

                • CA-1.2.6

                  The capital available of an insurance firm comprises the sum of its Tier 1 and Tier 2 capital resources, subject to the limits in Paragraph CA-1.2.7.

                  Amended: January 2007

                • CA-1.2.7

                  Total Tier 2 capital cannot exceed 100% of total Tier 1 capital. Lower Tier 2 capital of the type identified in Paragraph CA-1.2.12 (f), (g) and (h) cannot exceed more than 50% of total Tier 1 capital.

                  Amended: January 2007

              • Tier 1 Capital

                • CA-1.2.8

                  Tier 1 capital comprises:

                  (a) Paid-up ordinary shares (net of treasury shares);
                  (b) Share premium reserve;
                  (c) Perpetual non-cumulative preference shares.
                  (d) All disclosed reserves brought forward, that are audited and approved by the shareholders, in the form of legal, general and other reserves created by appropriations of retained earnings, excluding fair value reserve;
                  (e) Unappropriated retained earnings, excluding cumulative unrealised fair value gains, brought forward;
                  (f) Audited current year's earnings net of unrealised fair value gains and before taxes; and
                  (g) In the case of an overseas insurance firm, the audited net assets (excluding any unrealised fair value gains and the surplus assets of long-term funds), determined in accordance with accounting standards that would be applicable if it were a joint stock company incorporated in Bahrain.
                  Amended: January 2007

                • CA-1.2.9

                  Tier 1 capital elements included in Subparagraph CA-1.2.8 (a) to (c) can only be so included if:

                  (a) It is issued by the insurance firm;
                  (b) It is fully paid, and only that portion of the shares for which payment has been received is otherwise included; and
                  (c) It:
                  (i) Cannot be redeemed at all or can only be redeemed on a winding up of the insurance firm; or
                  (ii) Is only redeemable at the option of the insurance firm and complies with any conditions applicable to joint stock companies in Bahrain;
                  (d) Any coupon is non-cumulative;
                  (e) It is able to absorb losses;
                  (f) It ranks for repayment upon winding up no higher than a share of a company incorporated under the Joint Stock companies law of Bahrain;
                  (g) Coupons on it can only be paid out of accumulated realised profits;
                  (h) No coupon is payable at a time when the insurer is in breach of Paragraph CA-1.2.1 and no coupon is payable to the extent that, after paying it, the insurance firm would breach that Rule; and
                  (i) The proceeds of issue are immediately and fully available to the insurance firm.
                  Amended: January 2007

                • CA-1.2.10

                  Tier 1 capital has the following characteristics:

                  (a) It is able to absorb losses;
                  (b) It is permanent;
                  (c) It ranks for repayment upon winding up after all other debts and liabilities; and
                  (d) It has no fixed costs, that is, there is no inescapable obligation to pay dividends or interest.
                  Amended: January 2007

                • CA-1.2.11

                  An insurance firm must not redeem any tier 1 instrument that it has included in its Tier 1 capital resources for the purpose of Chapter CA-1 unless it has notified the CBB of its intention at least one month before it does so.

                  Amended: January 2007
                  Amended: October 2007

              • Tier 2 Capital

                • CA-1.2.12

                  Tier 2 capital includes the following liabilities of an insurance firm, to the extent permissible by Paragraph CA-1.2.7:

                  (a) Interim net income, excluding 55% of any unrealised fair value gains arising from investments held to maturity as per IAS 39, reviewed by the external auditors in accordance with International Standards on Auditing (ISA);
                  (b) Perpetual cumulative preference shares;
                  (c) Mandatory convertible notes and similar capital instruments;
                  (d) Perpetual subordinated debt;
                  (e) Any other hybrid (debt/equity) capital instruments of a permanent nature;
                  (f) Dated subordinated debt with an original term of at least 5 years;
                  (g) Limited life redeemable preference shares with an original term of at least 5 years;
                  (h) Any other similar limited life capital instruments with an original term of at least 5 years; and
                  (i) Investment fair value reserve (IAS 39) on investments held available for sale, discounted to 45%.
                  Amended: January 2007

                • CA-1.2.13

                  Tier 2 capital includes forms of capital that do not meet the requirements for permanency and absence of fixed servicing costs that apply to Tier 1 capital. Tier 2 capital resources are split into upper and lower tiers, based on the permanency of the instruments. For example:

                  (a) Capital which is perpetual (that is, has no fixed term) but cumulative (that is, servicing costs cannot be waived at the issuer's option, although they may be deferred — for example cumulative preference shares) may be included in upper Tier 2 capital; and
                  (b) Capital which is dated, i.e. not perpetual (that is, it has a fixed term) and which may also have fixed servicing costs that cannot generally be either waived or deferred, such as subordinated debt, are included in lower Tier 2 capital. Such capital should normally be of a medium to long-term maturity (that is, an original maturity of at least five years).
                  Amended: January 2007

                • CA-1.2.14

                  Lower Tier 2 capital instruments (ref CA-1.2.12 (f) to (h)), must have a minimum fixed term to maturity in excess of 5 years. During the last 5 years to maturity, a cumulative discount (or amortisation) factor of 20% per year must be applied to reflect the diminishing value of these instruments as a continuing source of strength.

                  Amended: January 2007

              • Tier 2: Hybrid Capital Instruments

                • CA-1.2.15

                  Hybrid capital instruments are instruments that combine the features of debt and equity in that they are structured like debt, but exhibit some of the loss absorption and funding flexibility features of equity.

                • CA-1.2.16

                  A hybrid capital instrument must meet the following conditions before it can be included in an insurance firm's upper Tier 2 capital resources:

                  (a) It must meet the general conditions described in Paragraph CA-1.2.17;
                  (b) It must have no fixed maturity date;
                  (c) The contractual terms of the debt agreement must provide for the insurance firm to have the option to defer any interest payment on the debt; and
                  (d) The contractual terms of the debt agreement must provide for the loss-absorption capacity of the debt and unpaid interest, whilst enabling the insurance firm to continue its business.
                  Amended: January 2007

                • CA-1.2.17

                  A hybrid capital instrument cannot form part of the capital resources of an insurance firm unless it meets the following conditions:

                  (a) The claims of the creditors must rank behind those of all unsubordinated creditors;
                  (b) No amounts due may be payable:
                  (i) At a time when the insurance firm is in breach of Paragraph CA-1.2.1; or
                  (ii) If the payment would mean that the insurance firm would be in breach of Paragraph CA-1.2.1;
                  (c) The only events of default must be non-payment of any amount falling due under the terms of the instrument or the winding-up of the insurance firm;
                  (d) The remedies available to the subordinated creditor in the event of non-payment or other breach of the written agreement or instrument must be limited to petitioning for the winding up of the insurance firm or proving the debt in a liquidation of the insurance firm;
                  (e) Any events of default and any remedy described in (d) must not prejudice the matters in (a) and (b);
                  (f) In addition to the requirements about repayment in (a) and (b), the debt must not become due and payable before its stated final maturity date (if any) except on an event of default complying with (c);
                  (g) The debt agreement or terms of the instrument are governed by the laws of Bahrain;
                  (h) To the fullest extent permitted under the laws of the relevant jurisdictions, creditors must waive their right to set off amounts they owe the insurance firm against subordinated amounts included in the insurance firm's capital resources owed to them by the insurance firm;
                  (i) The terms of the instrument must be set out in a written agreement that contains terms that provide for the conditions set out in (a) to (h);
                  (j) The debt must be unsecured and fully paid up; and
                  (k) The insurance firm has obtained an external legal opinion stating that the requirements in (a) to (j) have been met.
                  Amended: January 2007

                • CA-1.2.18

                  Subparagraph CA-1.2.17 (g) does not apply if the insurance firm has obtained an external legal opinion confirming that a degree of subordination has been achieved under the law that governs the debt and the agreement that is equivalent to that which would have been provided under the laws of Bahrain.

                  Amended: January 2007

                • CA-1.2.19

                  An insurance firm must not amend the terms of the debt and the documents referred to in Subparagraph CA-1.2.17 (i) unless:

                  (a) At least one month before the amendment is due to take effect, the insurance firm has given the CBB notice in writing of the proposed amendment; and
                  (b) That notice includes confirmation that the legal opinion referred to in Subparagraph CA-1.2.17 (k) continues in full force and effect in relation to the terms of the debt and the documents as proposed to be so amended.
                  Amended: January 2007

                • CA-1.2.20

                  An insurance firm must notify the CBB of its intention to repay a hybrid capital instrument that is included in its capital resources before its contractual repayment date (if any) at least six months before the date of the proposed repayment, providing details of how it will meet its capital available requirement after such repayment.

                  Amended: January 2007

              • Determination of Capital Available

                • CA-1.2.21

                  Every insurance firm must determine its capital available in accordance with this Rule:

                  Determination of Insurance Firm's Capital Available
                    Tier 1 Capital
                    Paid-up ordinary shares (net of treasury shares)
                    Share premium reserve
                    Perpetual non-cumulative preference shares
                    All disclosed reserves brought forward, that are audited and approved by the shareholders, in the form of legal, general and other reserves created by appropriations of retained earnings, excluding fair value reserve
                    Unappropriated retained earnings, excluding cumulative unrealised fair value gains, brought forward
                    Audited current year's earnings net of unrealised fair value gains and before tax expenses
                    Overseas Insurance Firms Only: audited net assets, excluding any unrealised fair value gains and surplus assets in long-term funds.
                  (A) Total Tier 1 Capital
                    Tier 2 Capital — Upper Level
                    Interim net income, excluding any unrealised fair value gains, reviewed by the external auditors in accordance with International Standards on Auditing (ISA)
                    Perpetual cumulative preference shares
                    Mandatory convertible notes and similar capital instruments
                    Perpetual subordinated debt
                    Other hybrid (debt/equity) capital instruments of a permanent nature
                    Investment fair value reserve (IAS 39) and any unrealised fair value gains included in retained earnings, both discounted to 45%.
                  (B) Total Tier 2 Capital — Upper Level
                    Tier 2 Capital — Lower Level
                    Limited life redeemable preference shares with an original term of at least 5 years.
                    Dated subordinated debt with an original term of at least 5 years.
                    Any other similar limited life capital instruments with an original term of at least 5 years.
                  (C) Total Tier 2 Capital — Lower Level: before excess deduction
                  (D) Total Tier 2 Capital (B plus C)
                  (E) Excess Tier 2 Capital — Lower Level = (C) − [(A) times 50%)] (if negative, excess is 0)
                  (F) = (D) − (E) Total Tier 2 Capital — Lower Tier adjusted
                  (G) Excess Tier 2 Capital = (F) − [(A) times 100%)] (if negative, excess is 0)
                  (H) = (F) − (G) Total Tier 2 Capital
                    Deductions from Capital
                    Valuation asset differences
                    Inadmissible assets by asset category
                    Inadmissible assets in excess of counterparty limits
                    Required margins of solvency for branches in other jurisdictions.
                    Current year's losses, before any tax expenses
                    Dividends paid and declared
                    Assets pledged or provided as collateral where there is no offsetting liability.
                    Tax expenses
                    Other appropriations not included as charges to profit and loss statement (e.g. Directors' remuneration, donations)
                    Other
                  (I) Total Deductions from Capital
                  (A)+(H)−(I) CAPITAL AVAILABLE
                  Amended: January 2007

                • CA-1.2.22

                  In Paragraph CA-1.2.21, under 'Deductions from Capital' the deductions for:

                  (a) Inadmissible assets by asset type; and
                  (b) Inadmissible assets in excess of counterparty limits

                  only apply to those amounts in respect of assets, other than those assets from linked long-term insurance.

                  Amended: January 2007

                • CA-1.2.23

                  [This Paragraph was deleted in April 2014.]

                  Deleted: April 2014
                  Amended: January 2007

            • CA-1.3 Capital Requirements for Insurance Brokers

              • CA-1.3.1

                Bahrain insurance brokers must maintain at all times the greater of:

                (a) A minimum net assets value of BD 50,000;
                (b) 4% of fiduciary liabilities; and
                (c) 4% of annual income from global insurance broking activities.
                Amended: April 2012
                January 2007

              • CA-1.3.1A

                For semi-annual reporting under Form IBRS (see Section BR-1.4A), with regards to Subparagraph CA-1.3.1(c), the calculation of the annual income must be done on a moving average year basis. As an example, for the reporting period ending 30th June 2011, annual income from global insurance broking activities covers the period of 1st July 2010 to 30th June 2011.

                Added: April 2012

              • CA-1.3.2

                There are no minimum capital and net asset requirements for overseas insurance brokers. However, for overseas insurance brokers, financial statements of the parent company must be submitted to the CBB for review, in order to assess the financial stability of the group on a global basis.

                Amended: January 2007

              • CA-1.3.3

                For purposes of Paragraph CA-1.3.1, global insurance broking activities refers to annual income of a Bahrain incorporated brokerage firm including any income being generated by any of the firm's brokerage subsidiaries and/or branches operating in other jurisdictions.

                Amended: January 2007

              • CA-1.3.4

                In respect of licensees who were carrying out activities that fall within the definition of the regulated activity of insurance broker prior to 1 April 2005, the requirements of Paragraph CA-1.3.1 will apply from 1 January 2007 (refer to ES-2.4.2 for transition rules).

                Amended: January 2007

              • CA-1.3.5

                For the purposes of this section, 'net assets' means the excess of assets over liabilities. The minimum net assets value is to be determined by excluding all intangible assets and in accordance with accounting principles generally accepted in Bahrain.

                Amended: January 2007

              • CA-1.3.6

                The value of debtors taken into account as assets available to support financial requirements must not exceed the amount which the insurance broker expects to receive net of any significant costs associated with making the recovery.

              • CA-1.3.7

                Insurance brokers must make adequate provisions for any debts which are unlikely to be received or recovered from the debtors.

            • CA-1.4 Capital Requirements for Insurance Consultants and Insurance Managers

              • CA-1.4.1

                Insurance consultants and insurance managers must possess financial resources commensurate with the scale and nature of their insurance consultancy or management activities.

                Amended: January 2007

              • CA-1.4.2

                In determining the adequacy of the financial resources of insurance consultants and insurance managers, the CBB will consider, amongst other things:

                (a) The volume of business undertaken by the licensee;
                (b) The licensee's capacity to meet its financial obligations towards all clients in a timely and professional manner; and
                (c) The licensee's future business plans considering the capital available to meet all obligations and additional sources of capital when and if required.
                Amended: January 2007

              • CA-1.4.3

                There are no minimum capital and net assets requirements applicable to insurance consultants and insurance managers. However, Section AU-2.5 (Licensing Conditions: Financial Resources) requires all licensees to maintain adequate financial resources and to conduct their business in a prudent manner.

          • CA-2 Solvency Margin Requirements

            • CA-2.1 Solvency Margin Requirements

              • CA-2.1.1

                Every Bahraini insurance firm must calculate a required solvency margin in accordance with the requirements in this Chapter. The solvency margin must include the operations of all branches of the insurance firm, whether these undertake operations within Bahrain or in another jurisdiction.

                Amended: January 2007
                Amended: October 2007

              • CA-2.1.2

                Every overseas insurance firm, other than a pure reinsurer, must calculate a 'Bahrain Required Solvency Margin' in accordance with the requirements in this Chapter.

                Amended: October 2007

              • CA-2.1.3

                All overseas insurance firms, including pure reinsurers, must provide an equivalent or substantially equivalent solvency margin calculation, submitted to a supervisor in another jurisdiction for the company as a whole, in accordance with Chapter CA-7. In instances where pure reinsurers are not subject to supervisory requirements in another jurisdiction, they must calculate a Required Solvency Margin in accordance with this Chapter for the company as a whole.

                Amended: January 2007
                Amended: October 2007

              • CA-2.1.4

                For insurance firms licensed prior to 1 April 2005 and allowed to carry on both long-term insurance business and general insurance business (refer to Paragraph AU-1.1.15), the insurance firm must calculate a separate Required Solvency Margin or a Bahrain Required Solvency Margin in respect of the two different types of insurance business and maintain separate solvency margins.

                Amended: January 2007
                Amended: October 2007

              • Minimum Fund

                • CA-2.1.5

                  For the purposes of this Module 'minimum fund' means for:

                  (a) Category 1 Insurer: BD 300,000;
                  (b) Category 2 Insurer: BD 500,000;
                  (c) Category 3 Insurer: BD 400,000;
                  (d) Category 4 Insurer: The relevant minimum fund 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 insurance firm;.
                  (e) Category C1 Insurer: BD 75,000; and
                  (f) Category C2 Insurer: BD 300,000.
                  Amended: January 2007

                • CA-2.1.6

                  For purposes of Paragraph CA-2.1.5, the following definitions apply:

                  (a) Category 1 insurer: an insurance firm whose license is limited to any of the following types of insurance: fire; damage to property; and miscellaneous financial loss;
                  (b) Category 2 insurer: an insurance firm whose license includes any of the following types of insurance: marine cargo and marine hull; aviation; motor; engineering; liability; and any other general insurance class not specifically mentioned. These may only be in addition to any Category 1 activities;
                  (c) Category 3 insurer: an insurance firm whose license includes any of the following types of insurance: life insurance of all types; personal accident whose term is over 1 year; and savings fund accumulation insurance;
                  (d) Category 4 insurer: an insurance firm, licensed prior to 1 April 2005 and whose license includes any of the types of insurance specified in Category 3 and in Category 1 or 2, or both;
                  (e) Category C1 insurer: an insurance firm whose business is restricted to insuring only the insurance risks (other than liability risk) of its shareholder(s) or those of subsidiary or associated companies of its shareholder(s); and
                  (f) Category C2 insurer: an insurance firm whose business is restricted to insuring only the risks of its shareholder(s) or of subsidiary or associated companies of its shareholder(s) and whose business may include liability risks, subject to the CBB being satisfied that the activity, capital structure and management provide sufficient protection to potential third party claimants.
                  Amended: January 2007

              • Calculation of Solvency Margin

                • CA-2.1.7

                  The Required Solvency Margin to be calculated by an insurance firm subject to any of the requirements in Paragraphs CA-2.1.1 to CA-2.1.4 must be determined:

                  (a) As regards long-term insurance business, in accordance with Paragraph CA-2.1.9, and
                  (b) As regards general insurance business, in accordance with Paragraph CA-2.1.12.
                  Amended: January 2007

                • CA-2.1.8

                  The Bahrain Required Solvency Margin for overseas insurance firms must be calculated by applying Paragraph CA-2.1.7, but only to business booked in the Bahrain overseas insurance firm.

                  Amended: January 2007

                • CA-2.1.8A

                  The Required Solvency Margin for companies whose business is limited to reinsurance, except for reinsurance of linked business, is to be calculated in accordance with Paragraph CA-2.1.12.

                  Adopted: January 2007

              • Long-term Insurance Business

                • CA-2.1.9

                  For long-term insurance business the solvency margin must be determined by taking the aggregate of the results arrived at by applying the calculations described in Paragraph CA-2.1.10 ('the mathematical reserves basis calculation') and Paragraph CA-2.1.11 ('the capital sum at risk basis calculation'). Where the aggregate falls below the minimum fund, it must be substituted by the amount of the minimum fund.

                  Amended: January 2007

                • CA-2.1.10

                  The mathematical reserves are defined as the provision made by an insurer to cover liabilities (excluding liabilities which have fallen due) arising under or in connection with long-term insurance business. The mathematical reserves basis calculation for:

                  (a) Traditional long-term insurance business must be either 2% of mathematical reserves before deduction for reinsurance cessions or 4% of mathematical reserves after deduction for reinsurance cessions whichever produces the higher result;
                  (b) The mathematical reserves basis calculation for linked long-term insurance business where the company bears an investment risk must be as in Subparagraph CA-2.1.10 (a); and
                  (c) The mathematical reserves basis calculation for linked long-term insurance business where the company bears no investment risk must be either 0.5% of mathematical reserves before deduction for reinsurance cessions or 1% of mathematical reserves after deduction for reinsurance cessions whichever produces the higher result.

                  No negative value can be used as the mathematical reserve under any policy.

                  Amended: January 2007

                • CA-2.1.11

                  The capital sum at risk is defined as the benefit amounts payable as a consequence of the happening of the contingency covered by the policy contract less the mathematical reserves in respect of the relevant contract. The capital sum at risk calculation is the greater of:

                  (a) 0.15% of the capital sum at risk before deduction for reinsurance cessions; or
                  (b) 0.30% of the capital sum at risk after deduction for reinsurance cessions.

                  In either case no negative value can be used as the capital sum at risk under any policy.

                  Amended: January 2007

              • General Insurance Business

                • CA-2.1.12

                  For general insurance business, the solvency margin must be determined by taking the higher of the two results arrived at by applying the calculations described in Paragraph CA-2.1.13 ('the premium basis calculation') and Paragraph CA-2.1.14 ('the claim basis calculation'). Where the higher of the two results falls below the minimum fund, it must be substituted by the amount of the minimum fund.

                  Amended: January 2007

                • CA-2.1.13

                  The premium basis calculation for general insurance business is determined by applying the following formula:

                  Gross Premium Written X Reinsurance Allowance X Risk Factor (for each class of business)

                  Where:

                  Gross Premium Written =

                  Premium written in the financial year (or annualised where the financial year is other than 12 months)

                  Reinsurance Allowance (Premium basis) = (calculated on total business)

                  the higher of 0.5 or (Total Net Premium Written /Total Gross Premium Written)

                  Risk Factor =

                  Class of insurance Risk Factor (general insurance) Risk Factor (Category C1 captive) Risk Factor (Category C2 captive)
                  (a) Fire 15% 12% 12%
                  (b) Damage to property 15% 12% 12%
                  (c) Miscellaneous financial loss 15% 12% 12%
                  (d) Marine cargo, marine hull 20% 20% 20%
                  (e) Aviation 20% 20% 20%
                  (f) Motor 20% 20% 20%
                  (g) Engineering 20% 20% 20%
                  (h) Liability 20% 20% (Category C2) 20%
                  (i) Medical (short term ≤ 1 year) 20% 20% 20%
                  (j) Other 20% 20% 20%
                  Amended: January 2007

                • CA-2.1.14

                  The claim basis calculation for general insurance business is determined by applying the following formula:

                  Average Gross Claims Incurred in the reference period X Reinsurance Allowance X Risk Factor (for each class of business)

                  Where:

                  Average Gross Claims Incurred =

                  Gross Claims Incurred in the reference period (see CA-2.1.15) divided by the number of years covered by the reference period (or annualised where any financial year in the reference period is other than 12 months)

                  Reinsurance Allowance (Claim basis) = (calculated on total business)

                  the higher of 0.5 or (Total Average Net Claims Incurred in the reference period/Total Average Gross Claims Incurred in the reference period)

                  Risk Factor =

                  (a) Fire 20%
                  (b) Damage to property 20%
                  (c) Miscellaneous financial loss 20%
                  (d) Marine cargo, marine hull 25%
                  (e) Aviation 25%
                  (f) Motor 25%
                  (g) Engineering 25%
                  (h) Liability 25%
                  (i) Medical (short term ≤ 1 year) 25%
                  (j) Other 25%
                  Amended: January 2007

                • CA-2.1.15

                  For the purposes of Paragraph CA-2.1.14 the reference period for all classes of business must be the three most recent financial years up to and including the current financial year.  In instances where the insurance firm has been in business for less than three years, the claims basis calculation shall be equal to 0.

          • CA-3 Long-Term Insurance Business

            • CA-3.1 Long-Term Insurance Business

              • CA-3.1.1

                Where an insurance firm carries on long-term insurance business, including traditional long-term insurance business or linked long-term insurance business or both:

                (a) It must maintain a separate account and separate books of accounts in respect of each kind of business and unit fund; and
                (b) The receipts of each kind of business must be entered in the account maintained for that business and must be carried to and form a separate long-term insurance fund with an appropriate name.
                Amended: October 2009
                Amended: October 2007
                Amended: January 2007

              • CA-3.1.1A

                Where the bonus policy of the with-profits business explicitly mentions that the profit (or bonuses) are determined by the performance of the life fund, separate accounting for such funds must be maintained.

                Adopted: October 2009

              • CA-3.1.1B

                The requirement in Paragraph CA-3.1.1A is to ensure that sources of profits arising from with-profits block of business will be distributed according to the agreed profit sharing mechanisms (which may include a proportion to the shareholders) and sources of profits arising purely from non-profits business will be allocated to shareholders.

                Adopted: October 2009

              • CA-3.1.2

                An insurance firm which carries on long-term insurance business or linked long-term insurance business must maintain such accounting and other records as are necessary for identifying:

                (a) The assets representing the fund maintained by it under Paragraph CA-3.1.1 above; and
                (b) The liabilities attributable to each kind of business which it carries on.
                Amended: January 2007

              • CA-3.1.3

                Other than the explicit exceptions included in Paragraphs CA-3.1.4 and CA-3.1.5 of this Module, an insurance firm's long-term insurance business assets must only be applied for the purposes of its long-term insurance business and must not be made available for any other purpose of the insurance firm. This does not however prevent the reimbursement of expenditure borne by other assets (in the same or the preceding financial year) in discharging liabilities wholly or partly attributable to the long-term insurance business.

                Amended: January 2007

              • CA-3.1.4

                Where an actuarial investigation shows that the value of the long-term insurance business assets exceeds the amount of the liabilities attributable to the long-term insurance business, the restriction does not apply to those assets that represent the excess.

                Amended: January 2007

              • CA-3.1.5

                Paragraph CA-3.1.3 above does not prevent an insurance firm from exchanging, at fair market value, long-term insurance business assets for other assets of the insurance firm.

                Amended: January 2007

              • CA-3.1.6

                A long-term insurance firm must not enter into a financial transaction, and must take reasonable steps to ensure that any subsidiary company or associate company does not enter into such a transaction, with any related party where the aggregate of the value of any assets and liabilities arising out of such transactions exceeds 5% of the total amount standing to the credit of the insurer's long-term insurance funds.

                Amended: January 2007

              • CA-3.1.7

                An insurance firm which carries on long-term insurance business in Bahrain must have adequate arrangements for securing that transactions affecting assets of the insurance firm (other than transactions outside of its control) do not operate unfairly between the long-term insurance fund or funds and the other assets of the insurance firm or, in a case where the insurance firm has more than one 'identified fund', between those funds.

                Amended: January 2007

              • CA-3.1.8

                An identified fund means assets representing the insurance firm's receipts from a particular part of its long-term insurance business that can be identified as such by virtue of accounting or other records maintained by the insurance firm.

                Amended: January 2007

              • CA-3.1.9

                Where the CBB imposes a financial penalty on an insurance firm or requires an insurance firm to compensate policyholders for any wrongful act of the insurance firm (including any wrongful act committed by an appointed representative of the insurance firm) it must not pay that compensation or financial penalty from any long-term insurance fund. Such penalties can only be paid out of the shareholder (or company) fund.

                Amended: January 2007

          • CA-4 Valuation and Admissibility of Assets

            • CA-4.1 General Requirements

              • CA-4.1.1

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

                Amended: January 2007

              • CA-4.1.2

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

                Amended: January 2007

              • CA-4.1.3

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

                Amended: January 2007

              • CA-4.1.4

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

                Amended: January 2007

              • CA-4.1.5

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

                Amended: January 2007

              • CA-4.1.6

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

                Amended: January 2007

              • CA-4.1.7

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

                Amended: January 2007

              • CA-4.1.8

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

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

            • CA-4.2 General Asset Valuation Rules

              • Asset Limits per Category of Assets

                • Investments in Non-Insurance Subsidiaries and Associates

                  • CA-4.2.1

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

                    Amended: January 2007

                  • CA-4.2.2

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

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

                  • CA-4.2.3

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

                    Amended: January 2007

                  • CA-4.2.4

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

                    Amended: January 2007

                • Real Estate Assets

                  • CA-4.2.5

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

                    Amended: January 2007

                  • CA-4.2.6

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

                  • CA-4.2.7

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

                • Debt Securities

                  • CA-4.2.8

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

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

                  • CA-4.2.9

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

                    Amended: January 2007

                  • CA-4.2.10

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

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

                  • CA-4.2.11

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

                    Amended: January 2007

                  • CA-4.2.12

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

                    Amended: January 2007

                • Equity Shares

                  • CA-4.2.13

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

                    Amended: January 2007

                  • CA-4.2.14

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

                    Amended: January 2007

                  • CA-4.2.15

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

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

                  • CA-4.2.16

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

                    Amended: January 2007

                • Unit Trust or Mutual Funds

                  • CA-4.2.17

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

                    Amended: January 2007

                  • CA-4.2.18

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

                    Amended: January 2007

                • Traded Derivative Contract

                  • CA-4.2.19

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

                    Amended: January 2007

                • Loan

                  • CA-4.2.20

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

                  • CA-4.2.21

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

                  • CA-4.2.22

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

                  • CA-4.2.23

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

                • Other Assets

                  • CA-4.2.24

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

                  • CA-4.2.25

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

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

                  • CA-4.2.25A

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

                    Inserted: October 2008

                  • CA-4.2.26

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

                    Amended: January 2007

                  • CA-4.2.27

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

                  • CA-4.2.28

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

                    Amended: January 2007

                  • CA-4.2.29

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

                  • CA-4.2.30

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

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

                  • CA-4.2.31

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

                    Amended: January 2007

                  • CA-4.2.32

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

                    Amended: January 2007

                • Counterparty Exposure Limits

                  • CA-4.2.33

                    The admissible value for counterparty exposure limit is:

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

                  • CA-4.2.34

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

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

                  • CA-4.2.35

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

                    Amended: January 2007
                    Amended: October 2007

            • CA-4.3 Linked Asset Valuation Rules

              • CA-4.3.1

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

                Amended: January 2007

              • CA-4.3.2

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

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

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

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

              • CA-4.3.3

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

                Amended: January 2007

              • CA-4.3.4

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

                Amended: January 2007

          • CA-5 Valuation of Liabilities

            • CA-5.1 Valuation of Liabilities

              • CA-5.1.1

                The Valuation of Liabilities Rules apply with respect to the determination of the amount of liabilities of an insurance firm.

                Amended: January 2007

              • CA-5.1.2

                Subject to the specific provisions of this Chapter, the amount of liabilities of an insurance firm in respect its long-term insurance business, general insurance business and any other activities directly arising from that business must be determined in accordance with generally accepted accounting and actuarial concepts, using generally accepted methods appropriate for insurance firms.

                Amended: January 2007

              • CA-5.1.2A

                Where an insurance licensee writes long term insurance with guaranteed level premiums, the reserving and solvency requirements must follow the requirements for long term insurance. However, where a life policy or an extension of a life policy with has a policy term of less than or equal to one year, the valuation of these liabilities should follow the requirements of Paragraph CA-5.1.3 to CA-5.1.10.

                Adopted: October 2009

              • General Insurance Business

                • CA-5.1.3

                  The amount of insurance liabilities that are general insurance business liabilities must be determined in accordance with International Accounting Standards applicable to insurance business or until such a standard or standards come into effect, with the provisions of Paragraphs CA-5.1.4 to CA-5.1.10.

                  Amended: January 2007

                • CA-5.1.4

                  Unearned premiums and unearned commission income in respect of the general insurance business must be calculated by a method which has due regard to the period of the policy and the incidence of risk throughout that period. Time apportionment of the premium over the period of policy cover is normally appropriate unless there is a marked unevenness in the incidence of risk over that period, in which case a basis which reflects the profile of risk must be used.

                  Amended: January 2007

                • CA-5.1.5

                  Where a time apportionment method is used that method must be at least as accurate as the '24ths basis' of premium income recognition, except for reinsurers for which transactions are only recorded every quarter where the method used must be at least as appropriate as the 1/8th basis. Where a time apportionment method is deemed inappropriate due to uncertainty in the period of insurance, such as for marine cargo, the method used must be disclosed in the actuarial report required as per Chapter AA-4.

                  Amended: October 2009

                • CA-5.1.6

                  Unearned reinsurance premiums ceded must be calculated on the basis of the principles specified in Paragraphs CA-5.1.4 and CA-5.1.5.

                • CA-5.1.7

                  Unexpired risk reserves (URR) should be calculated as the prospective estimate of expected future payments arising from future events insured under policies in force as at the valuation date and also include allowance for insurance firm's expenses including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and must allow for any expected future premium refund. Where the unearned premium less unearned commission calculated in Paragraphs CA-5.1.4to CA-5.1.6 above is less than the unexpired risk reserves, the company must set up a suitable additional provision for unexpired risks to cover this deficiency (premium deficiency). This premium deficiency provisions must be calculated at a prudent level.

                  Amended: October 2009
                  Amended: January 2007

                • CA-5.1.7A

                  In calculating the URR as required under Paragraph CA-5.1.7, the actuary report must clearly disclose if the URR has been calculated on and individual class basis or on total company basis and must justify the approach taken in the adopted method.

                  Adopted: October 2009

                • CA-5.1.8

                  Provision must be made for the expected ultimate cost of settlement of all claims incurred in respect of events up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid. This provision should be calculated at a prudent level. This should include a provision for claims reported, claims incurred but not reported (IBNR), claims incurred but not enough reserved (IBNER) and direct and indirect claims handling expenses such as investigation fees, loss adjustment fees, legal fees, labour charges and the expected internal costs that the insurer expects to incur when settling these claims. If a liability is known to exist but there is uncertainty as to its eventual amount, a provision should nevertheless be made.

                  Amended: October 2009
                  Amended: January 2007

                • CA-5.1.8A

                  The IBNR includes the IBNER. The distinction between IBNR and IBNER is made for a consistent approach to matching of income and expenses.

                  Adopted: October 2009

                • CA-5.1.9

                  The level of claims provisions must be set such that:

                  (a) No adverse run-off deviation is envisaged;
                  (b) The provision is determined having regard to the range of uncertainty as to the eventual outcome for the category of business in question; and
                  (c) In circumstances where there exists considerable uncertainty concerning future events, a degree of caution is exercised such that liabilities are not understated.
                  (d) If it is less than the aggregate case-by-case provision for claims reported set up by the claims manager, the insurance firm must disclose in writing to the CBB the justification for such a release of reserves.
                  Amended: October 2009
                  Amended: January 2007

                • CA-5.1.10

                  In determining the sufficiency of evidence and the ability to measure claims costs, an insurance firm must take all reasonable steps to ensure that it has appropriate information with regard to its claims exposures.

              • Long-term Insurance Business

                • CA-5.1.11

                  The amount of insurance liabilities which are long-term insurance business liabilities must be determined in accordance with International Accounting Standards applicable to insurance business or until such a standard or standards come into effect, with the provisions of Paragraphs CA-5.1.12 to CA-5.1.33 below.

                  Amended: January 2007

                • CA-5.1.12

                  The determination of the amount of long-term liabilities (other than liabilities which have fallen due for payment before the valuation date) must be made on actuarial principles with due regard to the reasonable expectations of policyholders and must make proper provision for all liabilities on prudent assumptions with appropriate margins for adverse deviation of the relevant factors.

                  Amended: January 2007

                • CA-5.1.13

                  The determination must take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking due credit for premiums payable after the valuation date.

                • CA-5.1.14

                  The determination must take into account all guarantees including but not limited to:

                  (a) Guaranteed benefits;
                  (b) Guaranteed surrender values;
                  (c) Guaranteed annuities or annuity options; and
                  (d) Any other guarantees, commitments or options however described that the insurance firm has contracted to provide to a policyholder.
                  Amended: January 2007

                • CA-5.1.15

                  The determination must take into account all bonuses contractually added to each policy.

                • CA-5.1.16

                  The determination must take into account expenses including commission.

                • CA-5.1.17

                  Subject to Paragraphs CA-5.1.18, CA-5.1.19 and CA-5.1.20, the amount of the long-term liabilities must be determined separately for each contract by a prospective calculation.

                • CA-5.1.18

                  A retrospective calculation may be applied to determine the liabilities where a prospective method cannot be applied to a particular type of contract or benefit.

                • CA-5.1.19

                  Where necessary, additional amounts must be set aside on an aggregated basis for general risks that are not individualised.

                • CA-5.1.20

                  The method of calculation of the amount of liabilities and the assumptions used must not be subject to discontinuities from year to year arising from arbitrary changes and must be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.

                • CA-5.1.21

                  The distribution of surplus as bonus to participating policies must consider the level of premiums under these contracts, the assets held in respect of these contracts and the custom and practice of the company in the manner and timing of the distribution of profits.

                • CA-5.1.22

                  The liability under a contract (other than a linked long-term contract) must be calculated using the net premium valuation method using rates of interest and rates of mortality or morbidity considered appropriate by the actuary appointed as per the requirements of Paragraph AA-4.1.1, at a prudent level.

                  Amended: October 2009
                  Amended: October 2007
                  Amended: January 2007

                • CA-5.1.22A

                  The value of unit liabilities and non unit liabilities must be calculated separately for a unit linked policy. The value of unit liabilities is taken as the net asset value of the units at the valuation date. Non-unit liabilities must be valued by projecting future cash flows to ensure that all future outgoes can be met without recourse to additional capital support at any future time during the duration of the unit linked contracts at a prudent level.

                  Adopted: October 2009

                • CA-5.1.23

                  Other suitable alternative methods may be employed where it can be demonstrated that the alternative methods employed result in reserves no less, in aggregate, than would result from the net premium valuation method.

                • CA-5.1.24

                  In order to take account of the acquisition expenses, the net premium to be valued for the purpose of Paragraph CA-5.1.22 above may be increased by an amount not greater than the equivalent, taken over the whole period of premium payments and calculated according to the rates of interest and rate of mortality and morbidity employed in valuing the contract, of 3.5 percent of the relevant capital sum under the contract.

                  Amended: January 2007

                • CA-5.1.25

                  The increased net premium as computed in Paragraph CA-5.1.24 must not exceed the premium actually payable by the policyholder under the contract.

                  Amended: January 2007

                • CA-5.1.26

                  For the purposes of Paragraph CA-5.1.24 'relevant capital sum' means:

                  (a) The sum assured at the date of valuation for whole life assurances;
                  (b) The sum payable at the end of the contract term for endowment assurance contracts;
                  (c) The capitalised value of the annuity at the vesting date (or cash option if greater) for deferred annuities;
                  (d) The sum assured or the value of the fund for linked long-term contracts whichever is less notwithstanding (a) to (c) above, where the value of the fund means the aggregate of the value allocated to the contract in the form of units or any other measure and the total amount of premiums remaining to be paid over the term of the contract.

                  excluding in all cases any vested reversionary bonus and any capital sums for temporary assurances.

                  Amended: January 2007

                • CA-5.1.27

                  The rate of interest employed for the valuation must be determined prudently with due regard to the yield on the existing assets attributable to the life business as well as the yields expected to be obtained on sums to be invested in the future.

                • CA-5.1.28

                  The amount of the liability in respect of any category of contracts must, where relevant, be determined on the basis of prudent rates of mortality and morbidity which in the opinion of the actuary are appropriate for that category.

                  Amended: January 2007
                  Amended: October 2007

                • CA-5.1.29

                  Provision of expenses whether implicit or explicit must not be less than the amount required, on prudent assumptions, to meet the total cost that would be incurred in fulfilling the existing contracts if the company were to cease to transact new business twelve months from the valuation date. This provision must consider the company's actual expenses in the last twelve months before the valuation date and the expected level of inflation on future expenses.

                • CA-5.1.30

                  Provision must be made on prudent assumptions to cover any increase in liabilities caused by policyholders exercising options under their contracts including options for guaranteed cash payments.

                  Amended: January 2007

                • CA-5.1.31

                  The liability under a contract for life business must not be less than zero.

                • CA-5.1.32

                  No allowance must be made in the valuation for the voluntary discontinuance of any contract if the amount of liability so determined is less than the corresponding amount without the allowance for voluntary discontinuance.

                • CA-5.1.33

                  The determination of the amount of long-term liabilities must take into account the nature and term of the assets representing those liabilities and the value placed upon them and must include prudent provision against the effects of possible future changes in the value of the assets on:

                  (a) The ability of the company to meet its obligations arising under contracts for long-term business as they arise, and
                  (b) The adequacy of the assets to meet the liabilities as determined by this Chapter.
                  Amended: January 2007

                • CA-5.1.34

                  For a life policy or an extension to a life policy with a policy term of less than or equal to one year, the valuation of these liabilities must follow Paragraphs CA-5.1.3 to CA-5.1.10.

                  Adopted: October 2009

          • CA-6 Currency Matching and Localisation Requirements

            • CA-6.1 Currency Matching and Localisation Requirements

              • CA-6.1.1

                The provisions of this Chapter do not apply to:

                (a) Insurance business carried on by an insurance firm outside Bahrain;
                (b) Reinsurance business (unless it is facultative reinsurance written by an insurer who also carries on insurance business that is not reinsurance business); or
                (c) To unit-linked business.
                Amended: January 2007
                Amended: April 2009

              • CA-6.1.2

                Where an insurance firm's 'liabilities' in any particular currency exceed 10% of its total 'liabilities', the insurance firm must hold sufficient 'assets in that currency' to cover at least 80% of its 'liabilities' in that currency.

              • CA-6.1.3

                For the purposes of Paragraph CA-6.1.2 'assets in that currency' is extended to include the currency itself (Currency A) and any other currency (Currency B) where Currency A is officially linked to Currency B.

                Amended: January 2007

              • CA-6.1.4

                Where an insurance firm carries on both long term insurance business and general insurance business, the requirements of Paragraph CA-6.1.1 apply to the 'assets' and ' liabilities' of each kind of business separately.

                Amended: January 2007

              • CA-6.1.5

                Where a contract of insurance expresses any 'liability' in terms of a particular currency, that 'liability' must be regarded as a 'liability' in that currency.

              • CA-6.1.6

                For the purposes of the Rules in this Chapter:

                (a) Assets means admissible assets valued in accordance with Chapter CA-4 General Assets Valuation Rules;
                (b) Liabilities means provision, net of reinsurance recoveries, made by an insurance firm to cover liabilities arising under (or in connection with) contracts of insurance, excluding those liabilities exempted by Paragraph CA-6.1.1;
                (c) References to assets in a currency (or similar expressions) are construed as references to 'assets' expressed in or capable of being realised (without exchange risk) in that currency; and
                (d) An 'asset' is capable of being realised (without exchange risk) in a currency if it is reasonably capable of being realised in that currency without risk that changes in exchange rates would reduce the cover of 'liabilities' in that currency.
                Amended: January 2007
                Amended: October 2007

              • CA-6.1.7

                The currency of an insurance firm's general insurance business liabilities must, for the purposes of Paragraph CA-6.1.2 be determined as follows:

                (a) Where the 'liabilities' are not expressed as 'liabilities' in terms of a particular currency, they must be treated as 'liabilities' in the currency of the country in which the risk is situated or, if the insurance firm on reasonable grounds so decides, in the currency in which the premium payable under the contract is expressed;
                (b) Where a claim has been notified to an insurance firm and the insurance firm's 'liability' in respect of that claim is payable in a currency other than one which would result from the application of the above provisions, the insurance firm must regard its 'liability' as a 'liability' in the currency in which the insurance firm is actually obliged to pay it;
                (c) Where a claim is assessed in a currency that is known to the insurance firm in advance but which is different from a currency that would result from the application of the above provisions, the insurance firm may regard its 'liability' as a 'liability' in that currency.
                Amended: January 2007

              • CA-6.1.8

                'Assets' held pursuant to Paragraph CA-6.1.2 above must be held:

                (a) If they cover 'liabilities' in Bahrain Dinars, in Bahrain;
                (b) If they cover 'liabilities' in any other currency, in Bahrain or in the country of that currency, unless they cover liabilities in Bahrain in which case they must be held in Bahrain.
                Amended: January 2007

          • CA-7 Whole Firm and Group Solvency

            • CA-7.1 Whole Firm and Group Solvency

              • CA-7.1.1

                In addition to the capital adequacy and solvency requirements imposed on Bahraini insurance firms and overseas insurance firms, the CBB may require whole firm and/or group solvency information. The requirement under this Chapter apply to the following categories:

                (a) Overseas insurance firms;
                (b) Bahraini insurance firms with subsidiaries and branches, operating within Bahrain and/or in other jurisdictions; and
                (c) Bahraini insurance firms that are subsidiaries and whose parent companies may or may not be an insurance firm.
                Amended: January 2007

              • CA-7.1.2

                Captive insurers are exempted from the requirements to report on their group solvency position.

                Amended: January 2007

              • CA-7.1.3

                As part of the requirements of the Group Insurance Firm Return (Form GIFR) referred to in Section BR-1.3, the CBB may require an insurance firm to provide:

                (a) A statement of the consolidated financial position of any group of which the insurance firm is either the holding company, a subsidiary or a branch 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 firm.
                Amended: January 2007

              • CA-7.1.4

                In considering the application of Paragraph CA-7.1.3, the CBB will take into account where the balance of the insurance business is undertaken. Where a high-level of the business undertaken by the group is done from Bahrain, the requirements of CA-7.1.3 may apply.

                Amended: January 2007

              • CA-7.1.5

                The consolidated financial position referred to in Paragraph CA-7.1.3 must be determined on the basis that the assets and liabilities of that group are valued in accordance with the requirements of this Module.

              • CA-7.1.6

                An insurance licensee subject to the requirements of Paragraph CA-7.1.3 may, with the consent of the CBB, provide equivalent or substantially equivalent solvency margin information submitted to a supervisor in another jurisdiction.

                Amended: January 2007

              • CA-7.1.7

                In addition to consolidated information on the group, for Bahraini insurance firms, aggregate information detailing the solvency requirements of the major insurance subsidiaries in the group must also be submitted to the CBB as part of the Group Insurance Firm Return.

                Amended: January 2007

              • CA-7.1.8

                Where the licensee's group or parent reports its own solvency position to its regulatory authority (on a group or 'solo' basis) a copy of this calculation must be provided to the CBB within 30 calendar days from the due date to the other regulatory authority, in accordance with Paragraph RM-8.1.6.

                Amended: January 2007

          • CA-8 Takaful and Retakaful

            • CA-8.1 General Capital Requirements

              • CA-8.1.1

                This Chapter of CA applies only to those firms licensed to conduct the regulated activity of Takaful and Retakaful.

                Amended: January 2007
                Amended: October 2008

              • CA-8.1.2

                The specific Rules and Guidance in this Chapter are additional to Chapters CA-B to CA-7. The Rules and Guidance in Chapters CA-B to CA-7 apply to Takaful firms unless those Rules have been specifically modified or waived by this Chapter.

                Amended: January 2007
                Amended: October 2008

              • CA-8.1.3

                The CBB acknowledges that Takaful/Retakaful insurance is different in some respects from conventional insurance. The specific Rules and Guidance set out in this Chapter aim to allow Takaful firms to operate in Bahrain within the CBB's insurance regulatory regime on a basis consistent with that imposed on conventional insurers. That is, the CBB's regulatory regime does not favour one form of insurance over another, allowing for both types of structures, Takaful and conventional, to operate in a competitive environment.

                Amended: January 2007
                Amended: October 2008

              • CA-8.1.4

                For the purposes of applying the rules in Chapters CA-B to CA-7 to Takaful firms, references to 'long-term insurance business' should be read as 'family Takaful business' and 'general insurance business' should be read as 'general Takaful business'.

                Amended: January 2007
                Amended: October 2008

            • CA-8.2 Basis of Operating a Takaful Business

              Amended: October 2008

              • CA-8.2.1

                All Takaful firms 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 participants' fund(s), the shareholders of the Takaful firm must receive a specific consideration (Wakala fee). For the insurance assets invested on behalf of participants' funds, the Takaful operator must use the al Mudaraba model, and must receive a set percentage of the profits generated from the investment portfolio. No performance/incentive fees are allowed to be paid to the shareholders/Takaful operator of the Takaful firm; the only fees that can be paid are the Wakala fees and the set percentage of the profits generated from the investment portfolio.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.2.2

                The Wakala fee charged in respect of a Takaful contract must be directly proportional to the costs associated with establishing and maintaining that contract. Both the Wakala and Mudaraba fees must be clearly disclosed to the participants of the Takaful fund(s).

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • Wakala Fee

                • CA-8.2.2A

                  The Wakala fee must be a fixed upfront fee, which may be expressed as a percentage of contributions. The Wakala fee, once fixed, must not be adjusted during the reporting period, and must be clearly stated in the Takaful contract and agreed to by the participant.

                  Added: April 2014

                • CA-8.2.2B

                  The Wakala fee must cover the total sum of the following components:

                  (a) The management expenses;
                  (b) The distribution expenses including intermediaries' remuneration, agents' commission and other expenses involved in making Takaful products available to the public; and
                  (c) A reasonable and appropriate margin of operational profit.
                  Added: April 2014

                • CA-8.2.2C

                  The Takaful operator must ensure that the management and distribution expenses referred to under Paragraph CA-8.2.2B are paid from the shareholders' fund and not from the participants' fund(s).

                  Added: April 2014

                • CA-8.2.2D

                  The Wakala fee must be certified by the Takaful firm's actuary (see Paragraph AA-4.3A.2) and must be considered and subsequently approved by the Shari'a Supervisory Board.

                  Added: April 2014

                • CA-8.2.3

                  The Takaful operators must establish an equitable basis for determining the consideration charged for managing Takaful business.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.2.3A

                  In the case of general Takaful contracts, it would normally be expected that the fee would be the same for all contracts of a particular duration, risk and type. In the case of family Takaful, contracts that may be in force for several years, it would normally be the case that the consideration in the initial years would be relatively high due to the costs of establishing the contract but be substantially lower in later years reflecting only the costs of maintaining the contract.

                  Added: April 2014

              • Mudaraba Fee

                • CA-8.2.4

                  For the insurance assets invested on behalf of the participants' fund(s), the Takaful operator collects a Mudaraba fee based on a fixed percentage of the net investment income from the fund and approved by the Shari'a Supervisory Board.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.2.4A

                  Net investment income noted in Paragraph CA-8.2.4 refers to gross investment income less any investment expenses, but excluding any Mudaraba fee paid to the Takaful operator.

                  Added: April 2014

              • Managing Operating Costs

                • CA-8.2.5

                  The Takaful operator must establish effective policies and procedures to manage the costs of the Takaful operations. In addition, the board of directors must ensure that effective controls are in place in order that the actual management and distributions expenses are in line with the Wakala fee and do not affect the viability of the Takaful operator.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.2.6

                  Only direct expenses related to claims or investments can be paid out of participants' fund(s). The direct expenses related to claims and investments, charged to the participants' fund(s) must be approved by the Shari'a Supervisory Board and must be limited to the amount of expenses incurred.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.2.7

                  The Shari'a Supervisory Board (SSB) is not expected to approve each and every claims related and/or investment related expenses. However, the policy established dealing with the direct expenses related to claims and investments, charged to the participants' fund(s), should be approved by the SSB.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.2.8

                  Paragraphs CA-8.2.5 to CA-8.2.7 are transitional provisions to enable existing Takaful firms to discharge their obligations under pre-existing contracts according to the basis of operating the Takaful funds at the time participants entered into those contracts. Whilst it would be simpler to require all pre-existing contracts to be maintained in separate Takaful funds to those established for contracts written after these Rules come into effect, the CBB considers this may not be in the best interests of participants. It is for this reason that the transitional rules enable Takaful firms to either establish subfunds for pre-existing contracts or offer participants the option of switching their policies to the al Wakala model. Whilst ultimately it would be at the discretion of the Courts to decide, the CBB would generally be prepared to support Court applications as outlined in Paragraph CA-8.2.6 where more than 75% of participants (by number and value) had indicated their preparedness to switch to the al Wakala model.

                  Amended: January 2007
                  Amended: October 2008

            • CA-8.3 Segregation of Funds

              • CA-8.3.1

                Where an insurer carries out Takaful business:

                (a) In the case of family Takaful business, it must comply with Chapter CA-3 of the Capital Adequacy Module;
                (b) It must maintain separate books of account in respect of each kind of business;
                (c) It must maintain any additional books of account required by this Module for either its general Takaful or family Takaful business; and
                (d) The transactions relating to each kind of business must be maintained separately for that business and must be carried to and form a separate fund or funds.
                Amended: January 2007
                Amended: October 2008

              • CA-8.3.2

                A Takaful firm must maintain such accounting and other records as are necessary for:

                (a) Identifying the assets representing the fund or funds maintained by it under Paragraph CA-8.3.1 above for each kind of business that it carries on;
                (b) Identifying the liabilities attributable to fund or funds maintained by it under Paragraph CA-8.3.1 above for each kind of business that it carries on; and
                (c) Complying with the accounting standards established by the 'Accounting and Auditing Organisation for Islamic Financial Institutions' ('AAOIFI').
                Amended: January 2007
                Amended: October 2008

              • CA-8.3.3

                Other than the explicit exceptions included in Paragraphs CA-8.3.4 and CA-8.3.5, a Takaful firm's assets allocated to the participants' fund(s) must only be applied for the purposes of the fund to which it is attributed as required by Paragraph CA-8.3.2 and must not be made available for any other purpose of the Takaful firm. This does not however prevent the reimbursement of expenditures borne by the shareholders (in the same or the preceding financial year) in discharging liabilities wholly or partly attributable to a fund or funds.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.3.4

                Paragraph CA-8.3.3 does not apply to the payment of management fees by the fund or funds to the Takaful manager even where the manager is the shareholder provided that the Shari'a Supervisory Board has approved those fees.

                Amended: January 2007
                Amended: October 2008

              • CA-8.3.5

                Paragraph CA-8.3.3 does not prevent a Takaful firm from exchanging, at fair market value, insurance business assets of any fund for other assets of the insurer including assets held by another fund or the shareholder.

                Amended: January 2007
                Amended: October 2008

              • CA-8.3.6

                A Takaful firm which carries on insurance business in Bahrain must have adequate arrangements for securing that transactions involving assets of the Takaful firm (other than transactions outside its control) do not operate unfairly between any of the participants' fund(s) and the shareholder assets of the Takaful firm or, in a case where the Takaful firm has more than one 'identified fund', between those funds.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.3.7

                Where the CBB imposes a financial penalty on a Takaful firm or requires a Takaful firm to compensate participants for any wrongful act of the firm (including any wrongful act committed by an appointed representative of the firm), it must not pay that compensation or financial penalty from any participants' fund(s) and it must not seek to have that compensation or financial penalty reimbursed as part of its management fees.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.3.8

                The Rules in this Chapter in respect of the segregation of funds by a Takaful firm are similar to the Rules set out in Chapter CA-3 relating to long-term insurance business. In the case of a family participants' fund(s) this similarity is most pronounced. However, the Rules set out in Chapter CA-3 still apply even if the participants' fund(s) is a family participants' fund(s), in particular the requirement to separate linked family Takaful business into a separate fund.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

            • CA-8.4 Capital Adequacy and Solvency

              • CA-8.4.1

                All Takaful firms are subject to capital available and solvency requirements.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • Determination of Available Capital

                • CA-8.4.2

                  The determination of available capital eligible to meet the solvency requirements is the total of:

                  (a) The participants' fund(s) net admissible assets as defined under Paragraph CA-8.4.3 in all funds; and
                  (b) The capital available of the shareholder fund as determined under Section CA-1.2, excluding any assets of the participants' fund(s).
                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.3

                  Every participants' fund must calculate its net admissible assets to meet the solvency requirements of the Takaful firm. The admissible assets are calculated in accordance with Chapter CA-4 and are reduced by any of the participants' fund(s) liabilities (including any Qard Hassan payable to the shareholder fund) and excluding 55% of any unrealised gains to arrive at the net admissible assets.

                  Amended: April 2014
                  Amended: October 2008

                • CA-8.4.4

                  For the purpose of calculating the admissible assets of the participants' fund(s) referred to under Paragraph CA-8.4.3, the insurance business amount referred to in Paragraph CA-4.2.34 means:

                  (a) In the case of general Takaful business, the general Takaful insurance business amount is the value of the general participants' fund(s)'s assets (other than family participants' fund(s) assets) and allocated earmarked assets to the insurance business amount (see Paragraphs AA-4.3A.6 to AA-4.3A.11 for actuarial requirements) from the shareholder fund and excluding any reinsurance/retakaful recoveries as determined in accordance with Chapter CA-4; and
                  (b) In the case of family Takaful business, the family Takafulinsurance business amount is the value of the family participants' fund(s)'s assets (other than general participants' fund(s) assets) and allocated earmarked assets to the insurance business amount from the shareholder fund and excluding reinsurance/retakaful recoveries and assets required to match property-linked liabilities in accordance with Chapter CA-4.
                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.5

                  Any earmarked assets used under Paragraph CA-8.4.4 must be adjusted to account for any Qard Hassan that may be granted as outlined under Paragraph CA-8.4A.2

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.6

                  For purposes of Paragraph CA-8.4.4, earmarked assets must meet the following criteria:

                  (a) Availability: the asset is available and can be called on demand to meet any liquidity requirement where a Qard Hassan may be extended (see Section CA-8.4A);
                  (b) Permanency: the asset is not callable and cannot be withdrawn;
                  (c) Free of encumbrances: the asset is free of any encumbrances or mandatory payments; and
                  (d) Highly liquid: the asset must be readily convertible to cash equivalent to a minimum of 90% of its reported value on the shareholder's fund statement of financial condition.
                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.7

                  Earmarked assets must comply with the criteria outlined in Paragraph CA-8.4.6 and refer to the following allocated assets from the shareholder fund to the each of the participants' fund:

                  (a) Cash and unencumbered current accounts with financial institutions;
                  (b) Placements with financial institutions which can be liquidated within one month;
                  (c) Readily marketable securities;
                  (d) GCC government securities;
                  (e) Other sovereign securities, other than in Paragraph CA-8.4.7(c) and Paragraph CA-8.4.7(d) above, up to one year maturity, carrying an S&P minimum rating of A (or equivalent); and
                  (f) Accounts receivable due within one month, excluding any past due accounts.
                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.8

                  Earmarked assets from the shareholder fund must be allocated for each participants' fund in the calculation of the insurance business amount of each participants fund and as determined by the actuary under Paragraph AA-4.3A.7.

                  Added: April 2014

              • CA-8.4.6A

                Effective from Oct 1 2008 - Mar 31 2014.

                In cases where Paragraph CA-8.4.5 applies, any income generated from the assets forming part of the free loan, will be solely for the benefit of the Takaful fund, and should be recorded as investment income of the Takaful fund. The total investment income being generated by the Takaful fund will however be subject to a mudaraba fee as approved by the Shari'a Board.

                Inserted: October 2008

              • Solvency Requirements

                • CA-8.4.9

                  The solvency requirements only apply to the insurance activities of the participants' fund(s) and are calculated in accordance with Chapter CA-2 for each of the participants' fund(s). The solvency required is the total of the solvency requirements for all participants' funds.

                  Amended: April 2014
                  Amended: April 2009
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.10

                  Where the capital available as defined under Paragraph CA-8.4.2 does not meet the solvency requirements of Paragraph CA-8.4.9, a capital injection must be made by the shareholders to meet the solvency required.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.11

                  Should the Takaful firm fail to meet its required solvency margin, it will be restricted from writing any new Takaful business until such time as the Takaful firm is in compliance with the solvency margin requirements.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

              • Other Requirements

                • CA-8.4.12

                  In cases where a Qard Hassan has been granted to the participants' fund(s), any income generated from the assets forming part of the Qard Hassan (free loan), will be solely for the benefit of the participants' fund, and should be recorded as investment income of the participants' fund. The total investment income being generated by the participants' fund will however be subject to a Mudaraba fee as approved by the Shari'a Board (see Paragraph CA-8.2.4).

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.13

                  A participants' fund is prohibited from providing any form of credit by way of loan, guarantee or other instrument to another participants' fund or to any other party, including but not limited to:

                  (a) The Takaful operator (i.e. the shareholder fund);
                  (b) A person in a controlled function;
                  (c) A participant (policyholder) except as provided under Paragraph CA-8.4.14; and
                  (d) A controller or close link of the Takaful firm.
                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.14

                  In the case of Family Takaful, a participant credit facility (policyholder loan) may be granted should the contract of insurance allow for such event to take place and the contract outlines the various conditions attached to such credit.

                  Amended: April 2014
                  Amended: October 2008
                  Amended: January 2007

                • CA-8.4.15

                  The Rule under Paragraph CA-8.4.13 does not restrict the participants' funds from providing any form of commitment associated with investment projects/funds.

                  Added: April 2014

              • CA-8.4.13A

                Effective from Oct 1 2008 - Mar 31 2014.

                Following the Takaful fund's first year of operation, the fund will be expected to meet the solvency margin requirements, but the calculation of its capital available (participants' equity) will still be subject to valuation rules but will not be subject to deductions resulting from inadmissible assets (by category or counterparty) as outlined in Section CA-4.2:

                (a) For a period not exceeding 5 years from the start of the Takaful fund; or
                (b) When the asset base of the fund reaches a minimum asset level of BD 5 million,

                whichever of (a) or (b) occurs first.

                Inserted: October 2008

              • CA-8.4.13B

                Effective from Oct 1 2008 - Mar 31 2014.

                Once a Takaful fund has reached conditions (a) or (b) stated in Paragraph CA-8.4.13A, it will be expected to calculate its capital available as per Paragraph CA-1.2.21, including all deductions related to inadmissible assets due to category or counterparty limits.

                Inserted: October 2008

              • CA-8.4.13C

                Effective from Oct 1 2008 - Mar 31 2014.

                During the transition phase outlined in Paragraph CA-8.4.13A, while category and counterparty limits do not apply, proper diversification of the assets of the Takaful funds should be followed, focusing on low risk and income producing assets.

                Inserted: October 2008

              • Qard Hassan Transition Rules

                • CA-8.4.16

                  Where a Qard Hassan has been granted for solvency purposes under the Rules in place at that time, the amount of Qard Hassan will be written off and/or repaid over a period not exceeding 5 years and disclosed as an off-balance sheet item (see Paragraph PD-1.1.13A) and not included as part of available capital for solvency purposes.

                  Added: April 2014

                • CA-8.4.17

                  Where Paragraph CA-8.4.16 applies, should the participants' fund for which the Qard Hassan was originally granted generate a surplus during the course of the write-off period, such surplus may be used to repay any part of the portion of the Qard Hassan that has not been written off, subject to the CBB's prior written approval.

                  Added: April 2014

            • CA-8.4A Liquidity of Participants' Funds

              • CA-8.4A.1

                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 by the shareholder fund. The cash being sought by the participants' fund must be physically transferred from the shareholder fund to cover the cash deficit of the participants' fund.

                Added: April 2014

              • CA-8.4A.2

                Where a Qard Hassan has been extended for liquidity purposes, the calculation of the earmarked assets allocated to the insurance business amount for the participants' fund(s) as outlined under Paragraph CA-8.4.4, must consider the impact of the reduction in earmarked assets.

                Added: April 2014

              • CA-8.4A.3

                Where the shareholders' fund of Takaful firms provide Qard Hassan (free loan) to the participants' fund as available for the purposes of meeting a participants' fund's liquidity needs and where the earmarked assets are to be reassessed as a result, the Takaful firm must notify the CBB immediately.

                Added: April 2014

              • CA-8.4A.4

                Where a Qard Hassan has been granted for liquidity purposes, the statement of financial position of the shareholders' fund must reflect the reduction in earmarked assets to fund the Qard Hassan as an asset and for the participants' fund(s), the amount of Qard Hassan must be shown as a liability. In addition, the CBB requires, as a minimum, that the Takaful firm include a specific note in the financial statements of the Takaful firm explaining the circumstances of the arrangement (Qard Hassan) and the implications for shareholders and participants.

                Added: April 2014

              • CA-8.4A.5

                Where a Qard Hassan has been extended, it must be repaid from future surpluses from the participants' fund(s).

                Added: April 2014

              • CA-8.4A.6

                The Takaful operator must have a clear written policy on the mechanism to rectify the cash deficit of the participants' fund(s), duly approved by the Board. The policy must address the manner in which Qard Hassan will be repaid and specify Qard impairment testing mechanism. The Qard Hassan must be tested for impairment at least annually. Whenever there is a need for Qard Hassan, the Takaful operator must determine the time period for the repayment of Qard Hassan.

                Added: April 2014

            • CA-8.5 Determining and Allocating Surplus or Deficit

              • CA-8.5.1

                Every Takaful firm must develop a policy for determining the surplus or deficit arising from Takaful operations, the basis of determining and allocating that surplus or deficit to the participants and the shareholders, and the method of transferring any surplus or deficit to the participants. The policy developed must consider all relevant AAOIFI standards including Financial Accounting Standard No. 13 'Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies'. The policy must be approved by the Shari'a Supervisory Board as well as the board of directors of the Takaful firm.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.5.2

                More than one policy may be developed where the Takaful firm offers different types of insurance products. In any event, the company must have separate policies in respect of its general business and its long-term business and any surplus or deficit allocation must be in line with the policy developed under Paragraph CA-8.5.1.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.5.3

                On an annual basis, every Takaful firm must determine any surplus or deficit arising on each separate participants' fund. The surplus distribution or remedial action for deficit reduction must be recommended by the actuary (see Paragraphs AA-4.3A.4 and AA-4.3A.5) and endorsed by the Shari'a Supervisory Board and the board of directors of the Takaful firm.

                Amended: April 2014
                Amended: October 2008
                Amended: October 2007
                Amended: January 2007

              • CA-8.5.4

                The policy developed in accordance with Paragraph CA-8.5.1 must not be amended or changed without the approval of the Shari'a Supervisory Board.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

              • CA-8.5.4A

                Distribution of surpluses from the Participants' fund(s) is subject to the CBB's prior written approval.

                Added: April 2014

              • CA-8.5.5

                No Takaful firm is permitted to make any distributions to participants if either the participants' fund(s) does not, or through the payment of the distribution, would not meet all the capital available and solvency requirements set out in Chapters 1 and 2 of the Capital Adequacy Module. In addition the surplus distribution must not cause adverse financial implications or a deficit in the participants' fund(s) and the Takaful operator must ensure that the participants' fund(s) is sufficiently liquid to cover any proposed surplus distribution.

                Amended: April 2014
                Amended: October 2008
                Amended: January 2007

        • BC Business and Market Conduct

          • BC-A Introduction

            • BC-A.1 Purpose

              • Executive Summary

                • BC-A.1.1

                  This Module presents requirements that have to be met by insurance licensees with regards to their dealings with customers. Reinsurance business is exempted from the scope of these requirements.

                • BC-A.1.2

                  The requirements contained in this Module aim to ensure that insurance licensees deal with their customers in a fair and open manner, and address their customers' information needs.

                  Amended: January 2007

                • BC-A.1.3

                  The requirements build upon several of the Principles of Business (see Module PB (Principles of Business)). Principle 1 (Integrity) requires insurance licensees to observe high standards of integrity and fair dealing, and to be honest and straightforward in their dealings with customers. Principle 7 (Customer Interests), requires insurance licensees to pay due regard to the legitimate interests and information needs of their customers, and to communicate with them in a fair and transparent manner.

                  Amended: January 2007

                • BC-A.1.4

                  The requirements contained in this Module are largely principles-based and focus on desired outputs rather than on prescribing detailed processes. This gives insurance licensees flexibility in how to implement the basic standards prescribed in this Module.

                  Amended: January 2007

              • Legal Basis

                • BC-A.1.5

                  This Module contains the Central Bank of Bahrain's ('CBB') (as amended from time to time) Directive relating to business conduct 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 licensees (including their approved persons).

                  Amended: January 2011
                  Added: January 2007

                • BC-A.1.6

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

                  Added: January 2007

            • BC-A.2 Module History

              • BC-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 been 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

              • BC-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

              • BC-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
                BC-3.4 01/07/05 Clarified language of takaful disclosure.
                BC-A.1.5 01/2007 New Rule introduced, categorising this Module as a Directive.
                BC-A.1.5 01/2011 Clarified legal basis
                BC-2.11 and BC-4 10/2011 Replaced Complaints Section BC-2.11 with new Chapter BC-4 Customer Complaints Procedures.
                BC-4.2 and BC-4.3 01/2012 Minor corrections to correct typos and clarify language.
                BC-4.3.9 01/2012 Paragraph deleted as it repeats what is in Paragraph BC-4.3.7.
                BC-4.1.3A 10/2012 Added guidance on the appointment of the customer complaints officer.
                BC-4.7 07/2013 Additional details provided on reporting of complaints.
                BC-2.9 04/2016 Added requirements for insurance firms when dealing with medical insurance.

              • BC-A.2.3 [Deleted]

                Deleted: January 2007

              • BC-A.2.4

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

                Amended: January 2007

          • BC-B Scope of Application

            • BC-B.1 Insurance Licensees

              • BC-B.1.1

                Except as noted in this section, the requirements in this Module apply to all insurance licensees, with respect to their direct insurance activities carried on from the Kingdom of Bahrain with a person who is a resident of Bahrain ('domestic business').

                Amended: October 2011

              • BC-B.1.2

                The requirements of this Module therefore apply to insurance firms and insurance intermediaries who are selling, intermediating or advising on direct insurance contracts from their offices in Bahrain, with respect to customers who are resident of Bahrain. The requirements in this Module do not, therefore, apply to direct insurance activities carried on from overseas branches and subsidiaries of Bahraini insurance licensees, or to activities carried on with non-residents.

              • BC-B.1.3

                Reinsurance business is exempted from the requirements of this Module because the reinsurance market is limited to dealings between insurance market professionals.

              • BC-B.1.4

                The activities of insurance managers and operators of insurance exchanges do not fall within the scope of this Module. However, the CBB expects the insurance manager to consider the requirements of this Module in relation to the service provided, on behalf of the captive insurer or insurance firm, to its 'clients', namely insured members of the group.

                Amended: January 2007

              • BC-B.1.5

                Although the requirements of this Module apply in full to all direct insurance activities in relation to domestic business, the CBB recognises that customers' needs vary. For example, because a captive insurer is insuring the risks of its parent group, it would be acceptable for the level of sales documentation and written disclosure to be less than would be required for retail customers. Large corporate customers may also require less extensive written disclosures than retail customers. The requirements in this Module give insurance licensees the flexibility to adapt their processes to suit the different needs of different customer types.

                Amended: January 2007

          • BC-1 General Requirements

            • BC-1.1 General Rules

              • BC-1.1.1

                This Module applies to the direct insurance activities of all licensees in relation to domestic business.

              • BC-1.1.2

                This Module aims to encourage high standards of business conduct, which are broadly applicable to all licensees, all types of direct insurance business (i.e. excluding reinsurance), and all types of customers. However, it is recognized that some types of licensees or business (such as captive insurance or commercial insurance) may present lower regulatory risks in relation to business conduct. For these types of business, the CBB therefore accepts that less detailed arrangements are likely to be sufficient to implement the principles contained in this Module. The CBB will monitor the regulatory performance of the market, and may in due course allow for specific exemptions or relaxations for certain types of business or licensees (see also BC-1.1.11 and BC-1.1.12).

                Amended: January 2007

              • BC-1.1.3

                Where packaged investment products include insurance elements, this Module applies to the insurance elements.

              • BC-1.1.4

                It is recognised that investment products represent different features and risks that require separate regulatory treatment. Specific rules applying to business conduct in relation to investment products will be developed over time.

                Amended: January 2007

              • BC-1.1.5

                All licensees must comply with the Insurance Code of Practice for business conduct with customers, which sets out the minimum standards of good practice for market conduct in relation to direct insurance activities.

              • BC-1.1.6

                The Code comprises a number of overarching principles and a number of principles-based requirements rules in relation to the conduct of direct insurance business with customers. The structure of the Insurance Code of Practice for Business Conduct with customers reflects the key stages and activities over the lifetime of the customer relationship for insurance products and services (see Illustration 1).

                Illustration 1: Structure of Insurance Code of Practice for Business Conduct

                Amended: January 2007

              • BC-1.1.7

                Licensees must maintain compliance with the Code throughout the lifetime of their relationships with all of their customers.

              • BC-1.1.8

                The Code focuses on desired outcomes, rather than prescribing in detail measures required to achieve those outcomes. Licensees therefore have the flexibility to design arrangements that implement the Code, in a way that suits the particular nature of their business.

              • BC-1.1.9

                Insurance licensees must take responsibility for compliance with the Code of all persons carrying out direct insurance activities on their behalf (including, but not limited to, appointed representatives and insurance managers).

                Amended: October 2007

              • BC-1.1.10

                Licensees must put in place appropriate measures across all their business operations and distribution channels to ensure compliance with the Code. Licensees must maintain adequate records to demonstrate compliance with the Code.

              • BC-1.1.11

                The CBB will monitor compliance with the Code and standards of business conduct. If required, the CBB may develop more detailed rules and guidance to supplement the existing Code.

                Amended: January 2007

              • BC-1.1.12

                The CBB will apply these requirements in a way that allows them to be adapted to fit the circumstances of licensees' businesses, to be achieved through a pragmatic approach to supervision. However, in exceptional circumstances, it may be appropriate for the CBB to consider and grant waivers where strict compliance would be unduly burdensome or would not achieve the purpose for which the requirement was intended. Each application for waiver will be considered on its individual merits. The fact that a waiver has been granted to a particular licensee should not be regarded as an indication that similar waivers will be issued to any other licensee.

                Amended: January 2007

          • BC-2 The Insurance Code of Practice

            • BC-2.1 Overarching Principles

              • BC-2.1.1

                In the course of direct insurance activities, licensees must:

                (a) Act with due skill, care and diligence in all dealings with customers;
                (b) Act fairly and reasonably in all dealings with customers;
                (c) Identify customers' specific requirements in relation to the products and services about which they are enquiring;
                (d) Ensure that any advice to customers is aimed at the customers' interests and based on adequate standards of research and analysis;
                (e) Provide sufficient information to enable customers to make informed decisions when purchasing insurance products and services offered to them;
                (f) Provide sufficient and timely documentation to customers to confirm that their insurance arrangements are in place and provide all necessary information about their products, rights and responsibilities;
                (g) Maintain fair treatment of customers through the lifetime of their insurance products and customer relationships, and ensure that customers are kept informed of important events;
                (h) Handle claims fairly and promptly;
                (i) Ensure that all information provided to customers is clear, fair and not misleading, and appropriate to customers' information needs; and
                (j) Take appropriate measures to safeguard any money and property handled on behalf of customers and maintain confidentiality of customer information.
                Amended: January 2007
                Amended: October 2007

            • BC-2.2 Marketing and Promotion

              • BC-2.2.1

                Licensees must ensure that all advertising and promotional material is clear, fair and not misleading.

            • BC-2.3 Initial Customer Information about Service

              • BC-2.3.1

                At the initial point of contact, before any contract is concluded between the customer and the insurance licensee, licensees must advise customers of the nature of the service they can offer and their relationship with the customer, including:

                (a) The types of services that can be provided;
                (b) The choice of products and services that can be offered; and
                (c) Whether the licensee acts on behalf of an insurer or insurers, or acts independently on behalf of the customer in arranging insurance.
                Amended: January 2007

            • BC-2.4 Identification of Customer Requirements

              • BC-2.4.1

                Licensees must identify customers' requirements by seeking from customers such information about their circumstances and objectives as might reasonably be expected to be relevant in establishing their specific insurance needs in relation to the products and services about which they are enquiring.

            • BC-2.5 Advice and Recommendations

              • BC-2.5.1

                Any recommendations made must be appropriate to the customer's needs. The recommendation must include an explanation as to how the recommended product suits the customer's identified needs. Where more than one product is recommended as appropriate to the customer's needs, the recommendation must include an explanation of the differences in and relative costs in the alternative options.

                Amended: January 2007

              • BC-2.5.2

                In the case of compulsory insurance, such as third party motor liability insurance, the explanation of the product's suitability may be limited to a brief explanation of the obligation to hold such insurance, and the options available to satisfy the obligation.

              • BC-2.5.3

                The objective of Paragraph BC-2.5.1 is to ensure that a customer is provided with sufficient information with which to make an informed decision. An insurance firm is able to rely on the customer's explanation of his insurance needs and is not otherwise required to verify the customer's own assessment of his needs. Given the customer's stated needs, the insurance firm must explain how the proposed contract(s) would meet those needs, and provide sufficient information regarding the different options so that the customer is able to make an informed decision.

                Amended: January 2007

            • BC-2.6 Customer Information before Commitment to the Contract

              • BC-2.6.1

                Before customers make their final commitment to enter into a contract of insurance, licensees must provide to the customer sufficient information on the key features of the product being proposed to enable the customer to make an informed purchasing decision, including:

                (a) The identity of the insurance licensee;
                (b) All the important details of cover and benefits;
                (c) Any significant or unusual restrictions or exclusions, conditions or obligations attaching to the customer; and
                (d) The period of cover.
                Amended: January 2007
                Amended: October 2007

              • BC-2.6.2

                Before customers make their final commitment to enter into a contract of insurance, licensees must provide to the customer full details of costs of the insurance products and services being offered, including:

                (a) The level of insurance premiums, the periodicity of payment and any grace periods allowed for payment;
                (b) The consequences of discontinuing the payment of any premium; and
                (c) Any fees and charges other than the insurance premium.
                Amended: January 2007
                Amended: October 2007

              • BC-2.6.3

                While an insurance broker may not approach every possible underwriter for each risk, he should make reasonable efforts to make his selection from a panel of insurance firms. An insurance broker's submission of quotations should incorporate the reasons for recommending or choosing an insurance firm.

              • BC-2.6.4

                Except for clients with turnover exceeding BD 1 million per year, an insurance intermediary must draw the client's attention to the status of the insurance firm: i.e. whether or not the insurance firm is locally licensed (as a Bahraini insurance firm or overseas insurance firm) and, if not, the reasons for recommending or choosing that insurance firm. In respect of these clients, this advice must be delivered in writing.

                Amended: January 2007

              • BC-2.6.5

                An insurance intermediary should recommend, in the first instance, a policy from a CBB licensed insurer (which, for the avoidance of doubt, may be an overseas insurance firm) that he considers best suited to the needs of his client, and offering ease of client service, claims handling, etc. Paragraph BC-2.6.4 covers the situation where an insurance intermediary proposes use of an overseas insurer not licensed or incorporated in Bahrain, because of the lack of availability of local cover.

                Amended: January 2007

              • BC-2.6.6

                Insurance intermediaries acting on behalf of customers in arranging their insurance must, on request, disclose the amount of commission payable to them from the insurance premium, and any other remuneration received for arranging the insurance contract.

              • BC-2.6.7

                Before customers make a final commitment to enter into a contract of insurance, licensees must inform the customer of their key obligations and rights with regard to the transaction, including:

                (a) The customer's duty of disclosure to the insurance licensee;
                (b) Cancellation rights and conditions;
                (c) The licensee's internal complaints procedure; and
                (d) The licensee's obligations in respect of this Code.
                Amended: January 2007
                Amended: October 2007

              • BC-2.6.8

                There are no specific requirements prescribing customers' cancellation rights or required standards of cancellation terms for insurance products and customers. It is expected that licensees will put in place cancellation terms that are fair, reasonable and appropriate with respect to their customers and the products provided, in line with the overarching principles requiring fair dealings with customers (see Paragraph BC-2.1.1). The CBB will monitor the regulatory performance of the market in this area, and may make amendments over time (see Paragraphs BC-1.1.11, BC-1.1.12).

                Amended: January 2007

            • BC-2.7 Confirmation of Cover and Policy Documentation

              • BC-2.7.1

                On the conclusion of contracts, licensees must provide customers with prompt written confirmation and details of the insurance that has been effected, including:

                (a) The date when cover starts and the period of cover;
                (b) Any certificates or documents which the customer is required to have by law;
                (c) Details of how the customer can make a claim, and their responsibilities in relation to making claims;
                (d) The address of the insurer to which all communications in respect of the policy should be sent; and
                (e) Proof of payment where applicable.
                Amended: January 2007

              • BC-2.7.2

                Licensees must provide full policy documentation promptly following the conclusion of contracts, unless this has already been issued with the confirmation of cover.

            • BC-2.8 Service after the Point of Sale

              • BC-2.8.1

                Licensees must respond to and administer customers' requests for amendments to their insurance policies in a timely manner. In particular, licensees must:

                (a) Provide written confirmation of any changes/amendments to the policy;
                (b) Provide full details of any additional premium or charges to be paid by or returned to the customer;
                (c) Provide any certificate or documentation which the customer is required to have by law;
                (d) Provide proof of payment of additional premium or charges where applicable; and
                (e) Remit any refunds of premiums or charges due to customers without undue delay.
                Amended: January 2007

            • BC-2.9 Claims

              • BC-2.9.1

                In addition to the requirements under Paragraph BC-2.9.2, where licensees' insurance activities include the handling of claims, they must:

                (a) Respond promptly when claims are first notified, and provide customers with an explanation about how the claim will be handled and any actions required of the customer;
                (b) Provide reasonable guidance to customers in pursuing their claim;
                (c) Consider and handle claims fairly and promptly, and keep the customer informed of progress;
                (d) Inform customers in writing, with an explanation, if the licensee is unable to deal with all or any part of the claim; and
                (e) Forward settlement of claims without undue delay, once settlement has been agreed.
                Amended: April 2016
                Amended: October 2007
                January 2007

              • BC-2.9.2

                Where an insurance firm deals with medical insurance and handles all the claim processing activities directly, i.e. without using a TPA:

                (a) It must process and settle all medical claims with policyholders within 15 calendar days from the receipt of all necessary documents; and
                (b) It must process and settle claims from healthcare service providers within 30 calendar days from the receipt of all necessary documents from the healthcare service providers.
                April 2016

              • BC-2.9.3

                Insurance firms must comply with Paragraph BC-2.9.2 by 30th September 2016 at the latest.

                April 2016

            • BC-2.10 Renewal, Expiry and Cancellation

              • BC-2.10.1

                Licensees must notify customers of the renewal or expiry of their policy in time to allow the customer to consider and rearrange any continuing cover they may need, including:

                (a) Details of the renewal terms, if offered; and
                (b) Details of any changes to the cover, service or insurance firm being offered.
                Amended: January 2007

              • BC-2.10.2

                On expiry or cancellation of insurance policies, at the request of the customer, licensees must make available all documentation and information to which the customer is entitled in a timely manner.

            • BC-2.11 [This section was deleted in October 2011]

              • BC-2.11.1

                [This paragraph was deleted in October 2011]

                Deleted: October 2011

              • BC-2.11.2

                [This paragraph was deleted in October 2011]

                Deleted: October 2011
                Amended: January 2007

              • BC-2.11.3

                [This paragraph was deleted in October 2011]

                Deleted: October 2011
                Amended: January 2007

              • BC-2.11.4

                [This paragraph was deleted in October 2011]

                Deleted: October 2011
                Amended: January 2007

              • BC-2.11.5

                [This paragraph was deleted in October 2011]

                Deleted: October 2011
                Amended: October 2007
                Amended: January 2007

            • BC-2.12 Information Conditions

              • BC-2.12.1

                Licensees must ensure that all information presented to customers in accordance with this Code shall be clear, fair and not misleading, and comprehensible to the customer having regard to the complexity of the products and services being offered and the customer's knowledge.

              • BC-2.12.2

                Licensees must ensure that customer information presented to customers in accordance with this Code is provided in an appropriate format with regard to the complexity of the product being discussed. In particular:

                (a) As a general rule, all information to be provided to the customer in accordance with this Code is to be in writing, on paper or other durable medium available and accessible to the customer. If the information is initially presented orally, supporting written information must be provided in addition;
                (b) In the case of telephone selling and other forms of selling where it is impractical to provide information to the customer in writing at the point of sale, information shall be provided to the customer in accordance with Subparagraph BC-2.12.2(a) immediately following conclusion of the contract; and
                (c) By way of derogation from Subparagraph BC-2.12.2(a), information may be provided orally without supporting written information where the customer requests it, or where immediate cover is necessary.
                Amended: January 2007

            • BC-2.13 Fair Treatment and Conflicts of Interest

              • BC-2.13.1

                Licensees must avoid conflicts of interest, or if conflicts are unavoidable, must explain the position fully and manage the situation so as to avoid prejudice to any party. In particular, licensees who act on behalf of their customers must not put their own interests above their duty to any customers for whom they act.

              • BC-2.13.2

                Insurance intermediaries must disclose in writing to the client any relationship that he may have with an insurance firm that he is recommending to his client and which may result in a potential conflict of interest including, but not limited to, disclosure in writing any association arising from common shareholder/controller/Director.

                Amended: January 2007

            • BC-2.14 Confidentiality and Security of Customer Assets

              • BC-2.14.1

                Licensees must ensure that any information obtained from customers must not be used or disclosed except in the normal course of negotiating, maintaining or renewing insurance for that customer, unless:

                (a) They have the customer's consent;
                (b) Disclosure is made in accordance with the licensee's regulatory obligations; or
                (c) The licensee is legally obliged to disclose the information.
                Amended: January 2007

              • BC-2.14.2

                Licensees must take appropriate steps to ensure the security of any money, documents, other property or information handled or held on behalf of customers.

          • BC-3 Takaful Firms

            • BC-3.1 General Requirements

              • BC-3.1.1

                This Chapter applies only to those insurance firms licensed to conduct insurance business under takaful principles.

                Amended: January 2007

              • BC-3.1.2

                The CBB acknowledges that the nature of takaful and the operation of a takaful business are not entirely equivalent to and in some respects different from a conventional insurance business. The specific requirements set out in this Chapter aim not only to allow takaful firms to operate in Bahrain within the CBB's insurance regulatory regime on a basis consistent with conventional insurers but a