As the gateway to the Gulf, Bahrain’s location and well-developed financial sector make it an attractive prospect for captive insurers. Ayman Al Ajmi, CEO of Braxtone, explains
Why is Bahrain an attractive domicile for prospective captives?
With zero corporate and personal tax, Bahrain is the most liberal tax regime in the Gulf, its financial sector is well-developed and diversified, consisting of a wide range of conventional and Islamic financial institutions and markets, including retail and wholesale banks, specialised banks, insurance companies, finance companies, investment advisors, money changers, insurance brokers, securities brokers and mutual funds.
Bahrain is the natural gateway to the Gulf, with particularly favourable access to Saudi Arabia, the region’s single largest market and economy, as well as the $1.5 trillion market of the Gulf region.
With a track record of pioneering under its belt, the domicile continues to move forward with policies and reforms that empower businesses and industries to establish themselves and grow.
The government works closely with businesses and regulators to explore opportunities to enhance the business environment and nurture optimum commercial conditions. This collaboration has seen Bahrain take solid steps towards introducing initiatives that create an enabling and innovative ecosystem, which allows businesses to thrive.
By the end of 2015, Bahrain’s domestic insurance market comprised of 25 locally incorporated firms and 11 overseas insurance firms (branches of foreign companies) carrying out insurance, reinsurance, takaful, retakaful and captive business in the domicile.
The industry has been growing steadily in recent years, mirroring the growth of Bahrain’s financial sector, as the increased access to financial services and products has led to demand for insurance services. Industry growth has also been fostered by the presence of a robust framework for regulation and supervision of insurance.
What are the advantages of Bahrain as a captive domicile?
In 2015, a KPMG report showed that doing business in Bahrain costs approximately 30 percent lower than Dubai, the main other domicile in the region. The Bahraini insurance industry is well served by a number of ancillary service providers such as brokers, actuaries, insurance consultants, loss adjusters and insurance managers.
A notable development in recent years has been international insurers developing their regional operations, many of whom have chosen the country as their regional base. Local Bahrainis are the top talent in the Middle East and North Africa’s (MENA) with both a strong knowledge base and an exceptional array of skills.
The country ranks as one of the best places to live globally, and is highly regarded for its job opportunities, career satisfaction, as well as its friendly and welcoming culture.
What are the regulatory conditions in Bahrain?
The Central Bank of Bahrain (CBB) acts as the sole regulatory authority for the domicile’s financial sector, including the licensing and supervision, insurance, investment and other financial services.
The CBB also regulates Bahrain’s licensed exchanges and clearing houses, acts as the listing authority for companies and financial instruments listed on the exchanges, and is also responsible for regulating conduct in capital markets.
Under the Central Bank of Bahrain and Financial Institutions Law 2006 the Central Bank is obliged to consult formally before issuing any regulations, unless the regulation in question is urgently required. No such obligation exists in the case of directives, however, the CBB has a general policy of involving the industry and other stakeholders in developing all its requirements, and publicly consulting on these, wherever possible.
The Bahrain Government and the US Government agreed on the establishment of free trade to promote clear and mutually advantageous rules governing their trade, complementing the high standards for protection of investment established by the treaty between the two concerning the encouragement and reciprocal protection of investment.
Bahrain is part of the Financial Action Task Force (FATF) through the full membership of the Gulf Cooperation Council and is committed to the implementation of all international standards in this area. Bahrain is also a founding member of the regional MENA-FATF and hosts its secretariat.
What makes the CBB regulatory and supervisory approach different from other domiciles in the region?
The CBB supervises its licensees in accordance with relevant international standards. For banks, insurance service providers, and investment business service providers, this means that CBB requirements address the core principles and other standards of the Basel Committee, the International Association of Insurance Supervisors and the International Organisation of Securities Commissions. Bahrain was last assessed against these standards by the IMF in 2005-06, as part of a financial sector assessment programme review.
CBB requirements are risk focused and principles-based, as well as tailored to different categories of licensee and the variable nature of supervisory risks that they pose. The requirements cover both prudential standards and conduct of business. Insurance companies are subject to solvency margin requirements (similar to existing EU requirements), and investment firms are subject to risk-based capital requirements that include position, counterparty and foreign exchange risk, as well as an expenditure requirement.
Who are Braxtone?
Braxtone is the independently owned official representative of AIG operations in Bahrain, and offers its clients the rewards of effective risk management, by turning risk into profit.
We were founded in 2015 to support the formation and management of captive insurance companies in the region. Building strategic alliances and partnerships allows us to design solutions that are purpose-built for our client’s financial goals and risk protection needs, allowing their focus to be on their own core business strategies.
Braxtone is recognised in the insurance and reinsurance industry for its extensive knowledge of local and regional regulatory frameworks and requirements. We work with leading experts and consultants, as well as the regulators in the region, to ensure each project receives the attention and skill set it requires.
Braxtone is the sole company in the MENA that manages the entire run-off operations of three insurance companies; Arabian American Insurance Company (operating in KSA), Chartis Takaful Enaya, and New Hampshire Insurance Company.
What does Braxtone offer for prospective captive owners, or owners considering moving their captive?
Braxtone offer the whole spectrum of insurance management services including underwriting, policy administration, claims handling, company accounting and captive regulatory compliance. We specialise in providing professional services to prospective captive owners, insurance and reinsurance firms, including captive management, portfolio management, run-off management, claims management, credit control, receivables management, operational support and consulting.
Our team has expertise in alternative risk transfer solutions and a proven track record in managing startups, overturning loss-making portfolios into profitable ones, and managing companies with unique challenges such as run-off operations, and forming and managing captives.
In addition, our captive management services include creating feasibility studies, business plans, forecasting, captive applications, as well as manage captive operations, regulatory requirements, captive board meetings. Finally, we also arrange actuarial, audit and tax services.
