MANAMA, 25 June 2007 — The Central Bank of Bahrain (CBB) is proposing amendments to capital requirements for branches of foreign insurance firms operating in Bahrain, wherein recognition would be given to the support provided to the branches from their overseas parent company.
CBB is recommending that branches of overseas insurance firms will 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 CBB at BD500,000 ($1.3 million) for general insurance and BD400,000 ($1.1 million) for life business. However, 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 ($13.3 million), in addition to meeting the minimum solvency margin requirements.
The review followed 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 CBB is currently consulting the industry and relevant market players over the newly proposed requirements. Once finalized, the new capital requirements would be effective at the end of 2007 and would be applicable to all overseas insurance firms operating in Bahrain.
Abdul Rahman Al-Baker, executive director of Financial Institutions Supervision at CBB, said: “CBB has revisited the rules determining how much minimum fund overseas insurance firms should hold. 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.”