A Chapter From - Regional Guidance - Insurance - Bahrain
Transport & Insurance Focus
This guide provides an overview of key regulatory elements including licensing, reinsurance controls, intermediary approvals, outsourcing rules, foreign branch regulation, capital requirements, and dispute resolution mechanisms.
Law Update: Issue 376 – Transport & Insurance
Anand SinghSenior Counsel, Transport & Insurance
Melody HuangAssociateTransport & Insurance, China Group
This article is part of a regional regulatory guide for the insurance sector and includes sample questions and responses specific to the Kingdom of Bahrain. It outlines the regulatory framework governing insurance, reinsurance, Takaful, and Retakaful businesses, which are all supervised by the Central Bank of Bahrain (CBB) under Decree No. (64) of 2006 and the CBB Volume 3 Rulebook (the “CBB Insurance Rules”). The CBB regulates all insurance licensees operating in Bahrain and enforces both prudential and conduct of business standards aimed at safeguarding the interests of policyholders.
This guide provides an overview of key regulatory elements including licensing, reinsurance controls, intermediary approvals, outsourcing rules, foreign branch regulation, capital requirements, and dispute resolution mechanisms—offering valuable insight for stakeholders operating or planning to operate in Bahrain’s insurance market.
What is the name of the main regulator(s) governing insurance in this jurisdiction?
The insurance and reinsurance business including takaful and retakaful firms in Bahrain is regulated and supervised by the Central Bank of Bahrain (“CBB”) under the provisions of Decree No. (64) of 2006 with Respect to Promulgating the Central Bank of Bahrain and Financial Institutions Law (“CBB Law”). In addition, the CBB has issued a Volume 3 rulebook which acts as the primary source of insurance legislation in Bahrain that governs insurance operations (the “CBB Insurance Rules”).
What are the main areas which they regulate?CBB’s primary objective with respect to the insurance sector is to regulate insurance licensees i.e. those CBB licensees that solely undertake regulated insurance services. CBB Insurance Rules contains prudential requirements (such as rules on minimum capital and risk management) and conduct of business requirements (such as rules on providing insurance services and treatment of policyholders). Collectively, these requirements are aimed at ensuring an appropriate level of protection for policyholders.
Does Bahrain have any other independent jurisdiction that function separate from the onshore jurisdiction? The concepts of onshore and freezone do not exist in Bahrain.
Are there any restrictions on the way reinsurance operates in this jurisdiction? The CBB Insurance Rules permit the local licensed insurers in Bahrain to reinsure its risk with overseas reinsurers, and the concept of “fronting arrangement” is recognised under the insurance framework of CBB. There are no provisions under Bahrain regulatory framework setting out a mandatory level of risk retention or local reinsurance cession.
Specifically, however, RM-2.1.7 of the CBB Insurance Rules requires a licensed insurance firm to monitor its exposure, defined as sums insured, to an individual reinsurer and provide details of its reinsurance programme to the CBB. It must notify the CBB if its total aggregate exposure, on a premium basis, to one reinsurer (or group of related reinsurers) exceeds 25% of individual or aggregate risks and why it considers that this exposure does not pose a credit risk for which a provision should be made.
Additionally, RM-2.1.9 and RM-2.1.10 require a licensed insurance firm to evaluate the credit worthiness of individual reinsurers, with reference to ratings provided by international rating agencies, at the time of ceding business and on an on-going basis.
Are there limits or requirements for outsourcing operations to third-party vendors, particularly for critical functions?CBB Insurance Rules regulates outsourcing requirements under RM-7 which defines “outsourcing” to mean an arrangement whereby a third party performs on behalf of a licensee an activity which commonly would have been performed internally by the licensee. Rule RM-7.1.4 does not permit outsourcing functions such as compliance, AML/CFT, financial control, risk management and business line function offering regulated services directly to the customer. Rule RM-7.1.7 further sets out detailed requirements on outsourcing including that prior CBB approval is required on any outsourcing to a third party outside Bahrain and post notification to the CBB within 5 working days from the date of signing the outsourcing agreement for any outsourcing to a third party with Bahrain.
How are foreign branches regulated in Bahrain?CBB regulates foreign branches of insurance companies and insurance brokers in Bahrain. CBB Insurance Rules are applicable to these foreign branches under the naming convention of “overseas insurance firms” and “overseas insurance brokers”.
What are capital requirements in Bahrain? Rule CA-1.2.1 sets out the capital requirement as applicable for insurance companies. The minimum capital requirement for a locally incorporated Bahraini insurance company is BD 5,000,000 and if the insurance company is carrying our reinsurance business the minimum capital requirement is BD 10,000,000.
Is there a statute of limitations on insurance claims? Article 722 of the Civil Code confirms that cases arising from the insurance contract shall not be heard upon the lapse of three years from the occurrence of the incident from which such cases arise unless the law otherwise provides, or an exception as outlined under the Civil Code applies.
What mechanism do insurance policies usually provide for resolution of coverage disputes?CBB requires the licensees to have appropriate customer complaints handling procedures and systems for effective handling of complaints including coverage disputes.
CBB requires the customer complaints procedures to be documented appropriately, and their customers must be informed of their availability. These procedures are typically provided in the policy document itself issued to the customers. If the licensees are unable to resolve a complaint, insurance licensees are required to outline the options that are open to that customer to pursue the matter further, including, where appropriate, referring the matter to the Consumer Protection Unit at the CBB.
Bahrain’s insurance regulatory framework, governed by the Central Bank of Bahrain, offers a stable and well-defined environment for conventional and Islamic insurers, reinsurers, and intermediaries. The CBB’s detailed Insurance Rules address all aspects of licensing, risk management, solvency, outsourcing, and customer protection, with a clear emphasis on corporate governance and transparency. While Bahrain does not have a free zone insurance regime, its centralised regulation provides clarity and consistency across the market.
Our insurance lawyers in Bahrain regularly advise local and international clients on CBB licensing requirements, corporate structuring, insurance support services, intermediary registration, compliance obligations, and policyholder disputes. Whether you are looking to enter the Bahraini market, expand your offerings, or navigate regulatory changes, our team is here to assist. Please reach out for tailored legal support on any insurance-related matters in Bahrain.
Bahrain’s insurance regulatory framework, governed by the Central Bank of Bahrain, offers a stable and well-defined environment for conventional and Islamic insurers, reinsurers, and intermediaries.
For further information,please contact Anand Singh andMelody Huang.
Published in April 2025
