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Location: Central Bank of Bahrain Volume 3—Insurance > Part A > Business Standards > CA Capital Adequacy > CA-8 Takaful and Retakaful > CA-8.4A Liquidity of Participants' Funds
  • 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 assetsG allocated to the insurance business amountG for the participants' fund(s) as outlined under Paragraph CA-8.4.4, must consider the impact of the reduction in earmarked assetsG .

      Added: April 2014

    • CA-8.4A.3

      Where the shareholders' fund of Takaful firmsG 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 assetsG are to be reassessed as a result, the Takaful firmG 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 assetsG 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 firmG include a specific note in the financial statements of the Takaful firmG 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

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