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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > High Level Standards > HC High-Level Controls > HC-9 Takaful and Retakaful Companies
  • 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 licenseeG 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 BoardG 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 BoardG 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 firmsG 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 BoardG at the parent entity level, of sufficient expertise and credibility.

        January 2011

      • HC-9.2.4

        An insurance firmG 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 firmsG , 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 functionG : 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 firmsG 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'sG 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 directorG 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 directorG 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

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