Bahrain, Country Focus

The Kingdom Of Bahrain

A small but sophisticated market that awaits the implementation of a compulsory health insurance scheme to fuel further growth.

Market size
Bahrain may be the smallest GCC country, but boasts a flourishing insurance market. Total market premiums stood at BHD183.3m in 2008.

Growth has been driven by a 38 per cent increase in long-term insurance (life and savings products) to BHD51.9m, which now represents the largest class of business in the market (28 per cent share of total premium), followed by motor (BHD50.9m). Fire, property and general liability accounts for 17 per cent of the market (BHD30.9m), followed by medical (12 per cent or BHD21.2m) and engineering (seven per cent or BHD12.9m).

A report from Business Monitor International forecasted total market premium in the kingdom to hit BHD345m by 2012. Total gross takaful contributions have grown to BHD27.2m.

As a leading Islamic financial centre, Bahrain boasts the largest concentration of Islamic banks and takaful companies in the Middle East. The combined assets of insurance firms stood at BHD986.2m in 2008, with the combined investment income of Bahraini insurers down 10 per cent to BHD328.8m that same year. Bahrain’s insurance sector employed 1,394 employees in 2008.

Competitive conditions
For reporting purposes, the CBB segregates the onshore market into Bahraini insurance companies (comprising 11 conventional insurers and seven takaful operators) and eight overseas insurance companies. Big players in the market by gross written premium include Bahrain Kuwait Insurance (2008 GWP: BHD23.3m), Life Insurance Corporation (International) and Takaful International.

Bahrain National Insurance (BNI) is the major personal lines insurer in Bahrain and falls under the umbrella of the Bahrain National Holding Group. Recent entrants to the market include Legal & General Gulf and Legal & General Gulf Takaful; the two new companies were granted licenses to offer life insurance and takaful services.

Recent developments
The CBB has become the first regulator in the region to introduce minimum qualification requirements for representatives of insurance companies. To underpin this initiative, the Bahrain Institute of Banking & Finance (BIBF) and the Chartered Insurance Institute (CII) have introduced an internationally recognised qualification (in English and Arabic) with a regional emphasis.

Insurance agents can also turn to the Bahrain-based Gulf Insurance Institute (GII) for training. Further regulatory reform is expected from the CBB as it cements Bahrain’s reputation for having one of the most sophisticated insurance supervisory frameworks in the region. An anticipated future development is the introduction of a compulsory health insurance scheme for expatriates.

Legislation could be introduced through parliament this year, according to Abdul Rahman Al Baker, executive director of financial institutions supervision at the Central Bank of Bahrain. “There are several benefits for introducing compulsory health insurance, the most important of which is that it will reduce government expense of about BHD20m per year spent for healthcare for expats. This represents almost six per cent of total government expenditure on healthcare,” said Al Baker.

Should a compulsory scheme be introduced, the CBB estimates that GWPs for health insurance could soar from BHD21.2m (2008) to at least BHD90m by 2015. At an industry level, the Bahrain Insurance Association (BIA) is spearheading a number of initiatives including the set-up and launch of a minor motor accident company.

“We are quite well advanced in this project. An expert house is the final stages of concluding an information memorandum for the company. At the same time we are finalising the necessary legal documentation with the Ministry of Finance for the outsourcing of this government service to the new company. We believe the project should see the light in 2010,” said Ashraf Bseisu, chairman of the Bahrain Insurance Association.

Regulatory overview
Insurance regulator: Central Bank of Bahrain.
Governing legislation: CBB Rulebook Volume 3 – Insurance.
Capital requirements: Branch – reduced capital requirements apply depending on the type of insurance business.

Locally domiciled insurer – tier 1 capital of BHD5m (US$13m) for insurers and BHD10m (US$26m) for reinsurers.

Foreign ownership restrictions: Branch and locally domiciled insurer – 10 per cent foreign ownership permitted.

Only insurers licensed by the CBB can write/direct Bahraini risks. There is no restriction on foreign companies writing reinsurance of Bahraini cedants. An insurer can obtain a direct licence allowing access to both retail and commercial customers/risks in Bahrain.

Insurers can undertake general insurance or life insurance, but composite insurance is not permitted in Bahrain. Insurers are also not permitted to issue both takaful products and conventional insurance products.

Regulatory Overview provided by Clyde & Co