CBB Volume 3: Contents
PB Principles of Business
The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain (‘CBB’)
insurance licenseesand 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
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.
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
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
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
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
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
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
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
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
groupof which the licensee is a member.Amended: October 2007
Principles 1 to 8 apply to
approved personsin respect of the controlled functionfor which they have been approved.
Principles 1 to 8 do not apply to behaviour by an
approved personwith respect to any other functions or activities they may undertake. However, behaviour unconnected to their controlled functionduties may nonetheless be relevant to an assessment of that person's fitness and propriety.
The CBB's requirements regarding
approved personsand controlled functionsare located in Module AU (Authorisation).Amended: January 2007
PB-B.2 Non compliance
Breaching a Principle of Business makes the
insurance licenseeor approved personconcerned 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
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
Insurance licenseesand approved personsmust 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
Insurance licenseesand approved personsmust 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-1.4 Principle 4 — Confidentiality
Insurance licenseesand approved personsmust 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
Insurance licenseesand approved personsmust observe proper standards of market conduct, and avoid action that would generally be viewed as improper.
PB-1.6 Principle 6 — Customer Assets
Insurance licenseesand approved personsmust take reasonable care to safeguard the assets of customersfor which they are responsible.Amended: January 2007
PB-1.7 Principle 7 — Customer Interests
Insurance licenseesand approved personsmust pay due regard to the legitimate interests and information needs of their customersand communicate with them in a fair and transparent manner. Insurance licenseesand approved persons, when dealing with customerswho 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
Insurance licenseesand approved personsmust 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
Insurance licenseesmust maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.
PB-1.10 Principle 10 — Management, Systems & Controls
Insurance licenseesmust 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