Query:
A large insurance/re-insurance brokerage firm in Dubai is seeking firm ABC Bahrain to set
up a branch of its insurance/reinsurance business and handle all tasks including getting
approval, share capital receipt/bank account opening all till making it operational. Draft
detailed steps involved in getting the approval, min share capital requirement, various
regulatory obligations at different time intervals for such brokerage firms etc?
Answer:
Setting up an Insurance/Reinsurance Brokerage Branch in Bahrain
1. Introduction
This response outlines the detailed steps and requirements for a large Dubai-based
insurance/reinsurance brokerage firm to establish a branch in Bahrain. The process
involves obtaining regulatory approval, meeting capital requirements, and fulfilling various
regulatory obligations as mandated by the Central Bank of Bahrain (CBB).
2. Relevant Standard/Law References
a. The primary legislation governing insurance brokers in Bahrain is the Insurance Control
Law (Royal Decree No. M/32 of 2003) and its implementing regulations Bahrain
Commercial Law, Article 346, page 146.
b. The Central Bank of Bahrain (CBB) Rulebook, specifically Volume 3 (Insurance),
provides detailed regulations for insurance intermediaries Bahrain Insurance Entire Section
A _ Rulebook, page 2.
c. The Commercial Companies Law of Bahrain No. 21 of 2001 and its amendments provide
regulations for establishing foreign company branches amended Procedures Guide for
Establishments and Commercial Companies (002)_0, page 76.
3. Detailed Explanations
3.1 Approval Process
1. Obtain Prior License:
2. Submit Application:
3. CBB Review:
4. Commercial Registration:
3.2 Minimum Capital Requirements
1. Statutory Cash Deposit:
2. Minimum Capital:
3. Net Assets Value:
3.3 Regulatory Obligations
1. Professional Indemnity Coverage:
2. Systems and Controls:
3. Client Accounts:
4. Reporting Requirements:
5. Record Keeping:
6. Compliance with Anti-Money Laundering Requirements:
7. Economic Substance Reporting:
8. Ultimate Beneficial Owner (UBO) Assignment:
Alternative strategy
Given the complexity of establishing a full branch, an alternative strategy could be to set up
a representative office initially:
1. Representative Office Approach:
º Set up a representative office in Bahrain instead of a full branch initially.
º This allows for market research and promotion without direct business
transactions.
º Requires less capital and has fewer regulatory requirements.
2. Pros:
º Lower initial capital requirements
º Simpler regulatory compliance
º Opportunity to understand the local market before full entry
º Easier to establish and manage
3. Cons:
º Limited scope of activities (cannot conduct direct business)
º May require upgrading to full branch later, incurring additional costs
º Potential loss of early market opportunities
4. Implementation Strategy:
5. Compliance Considerations:
º Ensure clear separation between representative office activities and the parent
company’s operations
º Maintain proper records of all activities
º Regular reporting to CBB on office activities
This alternative allows for a phased entry into the Bahraini market, reducing initial risk and
investment while allowing the firm to gain market insights and establish a presence.
4. Used Cases/Interpretations & Disclosures by the listed entities
Arab Banking Corporation B.S.C. (Bank ABC) – 2021:
Bank ABC, while not an insurance broker, provides insights into regulatory capital
management in Bahrain:
1. Capital Management Approach: The bank maintains capital based on strategic
business plans, considering economic conditions and risk characteristics of activities.
The objective is to maintain a strong capital base to support inherent risks in businesses
and markets, meeting both local and consolidated regulatory capital requirements Arab
Banking Corporation B.S.C. AR 2021, page 57.
2. Capital Adequacy Ratio: As of 31 December 2021, Bank ABC’s total capital adequacy
ratio was 16.9%, compared to the minimum regulatory requirement of 12.5%. The Tier 1
ratio was 15.9% Arab Banking Corporation B.S.C. AR 2021, page 57.
3. Regulatory Compliance: The bank ensures adherence to CBB requirements by
monitoring capital adequacy against internal limits detailed in the Board-approved Risk
Appetite Statement Arab Banking Corporation B.S.C. AR 2021, page 57.
Bahrain Kuwait Insurance Company B.S.C. – 2022:
This company, being an insurance entity in Bahrain, provides relevant insights:
1. Regulatory Capital: The company maintains a total capital of AED 150,000,000, which
is above the minimum regulatory capital of AED 100,000,000 required by the Central
Bank of UAE Bahrain Kuwait Insurance Company B.S.C. AR, page 4.
2. Compliance with Local Laws: The company ensures compliance with UAE Federal
Law No. (48) of 2023 concerning Financial Regulations of Insurance Companies issued
by the Central Bank of United Arab Emirates Bahrain Kuwait Insurance Company B.S.C.
AR, page 4.
3. Capital Management Objectives: The company’s capital management objectives
include complying with insurance capital requirements, protecting policyholders’
interests, safeguarding the ability to continue as a going concern, and providing
adequate returns to shareholders Bahrain Kuwait Insurance Company B.S.C. AR, page
4.
5. Summary
To establish an insurance/reinsurance brokerage branch in Bahrain, the Dubai-based firm
must:
1. Obtain a prior license from the CBB by submitting a comprehensive application
including a business plan, controller details, and professional indemnity coverage
information.
2. Register the branch with the Commercial Registry after obtaining CBB approval.
3. Meet minimum capital requirements, including maintaining a statutory cash deposit
and meeting net asset value requirements.
4. Comply with ongoing regulatory obligations such as maintaining professional
indemnity coverage, implementing adequate systems and controls, keeping separate
client accounts, and fulfilling reporting requirements.
5. Adhere to record-keeping standards, anti-money laundering regulations, and
economic substance reporting requirements.
6. Consider the alternative strategy of initially setting up a representative office for
market entry, which involves lower capital requirements and simpler regulatory
compliance, but limits business activities.
The firm should carefully evaluate its resources, market entry strategy, and long-term
objectives in Bahrain to decide between establishing a full branch or starting with a
representative office. Compliance with CBB regulations and maintaining adequate capital
are crucial for successful operation in the Bahraini insurance market.
6. Attribution
The information provided in this response is based on the Bahrain Commercial Companies
Law and CBB Rulebook Volume 3 (Insurance) as issued by the Central Bank of Bahrain.
The specific rules referenced are from the CBB Rulebook and Commercial Companies
Law. For complete and authoritative guidance, please refer to the full CBB Rulebook and
Bahrain Commercial Companies Law available through the Central Bank of Bahrain’s
official website.
Insurance Brokerage Approval
