Bahrain to introduce new and improved Takaful regulatory framework - IFN

Bahrain to introduce new and improved Takaful regulatory framework

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BAHRAIN: Following a two-year consultation process with industry players, the Central Bank of Bahrain (CBB) is reportedly prepared to release a new regulatory framework for the Takaful sector this quarter. In an effort to attract new businesses, the new set of rules regulates the operations and solvency of Takaful firms. In a report by Reuters Abdul Rahman Mohammed Al Baker, CBB’s executive director of financial institutions supervision, elaborated on the upcoming regulations. “We are in the final process of the new solvency framework for Takaful. This will not only enhance the industry in Bahrain but also have an impact around the world.” The rules are expected to increase the ability of Takaful operators to distribute surpluses to policyholders and dividends to shareholders. “Bahrain’s rules call for a new way of calculating capital and replacing Qard Hasan with capital injections. Under the proposed rules, total capital would include both the available capital of the shareholders’ funds and the net admissible assets of the policyholders’ funds,” explained Abdul Rahman. It was further elucidated that in order to determine excesses or deficiencies of capital, the amount will be compared to the solvency requirements for policyholders’ funds; and any deficiency therein will be addressed by capital injections from shareholders instead of Qard Hasan. The new rules are also said to impose a financial reporting requirement on Takaful firms on an annual basis; to restrict the use of performance fees; and to introduce the concept of earmarked assets.