CBB to amend capital requirements for foreign insurers

The proposed amendment gives recognition to the support provided to the branches from their overseas parent company. As such, the CBB is proposing that branches of overseas insurance firms not be required to maintain a minimum amount as capital. The branches would, however, continue to be required to maintain solvency margins as set by the CBB, i.e. BD500,000 (US$1.3 million) for general insurance and BD400,000 (US$1.1 million) for life business.

The CBB is currently consulting the industry and relevant market players on the proposed new requirements. Once finalized, the new capital requirements would be effective at the end of this year and will be applicable to all overseas insurance firms operating in Bahrain.

"The CBB has revisited the rules determining how much minimum fund overseas insurance firms should hold," said Mr. Abdul Rahman Al Baker, Executive Director, Financial Institutions Supervision, at the CBB.

"We feel the new approach would be more equitable as it takes into account the support provided to the branch by its parent company overseas, while recognizing that a minimum net asset value must be maintained in relation to the volume of business undertaken in Bahrain."

The review follows discussion and feedback from key market players since the issuance in 2005 of the CBB Insurance Rulebook, which included new capital requirements for all insurance firms, both local and overseas.

The capital requirements for local insurers writing direct insurance business in Bahrain, as contained in the CBB Insurance Rulebook, will remain unchanged. These require direct insurance firms to maintain a minimum Tier 1 capital of BD5 million (US$13.3 million), in addition to meeting the minimum solvency margin requirements.

"We welcome comments from industry and other interested parties to the proposed amendment, contained in a consultation paper which has gone out to the industry," said Mr. Al Baker.

The deadline for comments is 10 July 2007. The consultation paper is available on the CBB website.