The company shouldn’t cede its reinsurance business to another insurance company unless the other company is licensed by the competent regulatory and supervisory authority to practice the type and class of insurance entrusted to it to reinsure.

The reinsurance relationship between a local insurance company and a reinsurer may not be a (FINITE Reinsurance) type, where the relationship between the ceding company and the reinsurer is similar to that of a lender and borrower.

1. The reinsurers with whom the insurance company established in the State is dealing shall be classified according to the classification stipulated in Article (18) above, taking into consideration the exceptions contained in the Article.

2. A foreign insurance company operating in the State through a branch shall annually submit a certified certificate from its head office in the home country in which it supports that the insurance business subscribed within the State and which exceeds its retention is covered by reinsurance covers with reinsurers who have the classification stipulated in Article (18) of these Regulations, taking into consideration the exceptions contained in the Article.

3. The following entities shall not be subject to the classification requirement stipulated in the preceding two paragraphs.

a. Insurance companies incorporated in the State and licensed by the Authority, when acting as reinsurers.

B. Insurance or reinsurance pools and insurance underwriting Syndicates.

C. Reinsurers exempted from Sub-Article (1) of this Article, by the DirectorGeneral for technical, regional or International purposes.

1. The Company shall prepare a three-year plan and submit it to the Board of Directors for approval concerning the Retention and Reinsurance for each type and class of insurance types and classes that company carries out, based on the nature of the underwritten risks, the number of companies and their accumulation and based on available statistical data on loss ratios in each class of insurance and its trends and future projections affecting those potentials.
    
2. The plan shall be reviewed annually during the three months prior to the commencement of each year in order to amend whatever is required to be amended in light of the experience achieved during the previous period.
    
3. The Plan (and the amendments made to it at the time of review) shall be submitted to the Board of Directors of the company for approval.
    
4. The plan shall include at least the following main lines:
    
   1. Retention and Reinsurance treaties limits and the ceded Facultative Reinsurance operations.
       
   2. The type of reinsurance treaties (proportional: quota-share or surplus, non- proportional: Excess of loss or stop loss) or a program combining the aforementioned types.
       
   3. Facultative reinsurance ceded locally and abroad and facultative obligatory reinsurance covers.
       
   4. The leading reinsurer and follower reinsurers, their credit rating and monitoring the accumulation cases.
       
   5. The Reinsurance brokers to be contracted with the Company and the reasons for their selection.
       
   6. How to protect the company's retention in cases of accumulation or catastrophes and in cases of unknown accumulation.
       
   7. The Commissions payable to the Company and whether they are flat or variable according to the loss ratios and profit commissions and rules of their calculation.
   
    
5. In the case of unforeseen events that require amendment of the plan during the year, the company's management shall take and implement the necessary procedures, provided that those procedures and their causes and results shall be presented to the company's board of directors at the first subsequent meeting.

The Company shall include a condition in its reinsurance treaty with the reinsurer that binds the reinsurer to maintain the provisions of its unearned premiums for reinsurance premiums ceded by it.

In case the liability of the Company in a particular class of direct insurance is unlimited, the reinsurance treaty that the Company will conclude to protect its liability should also be unlimited.

The company may cede to the insurance or reinsurance pool after obtaining the prior approval of the Director General. It may also cede the reinsurance business to the insurance underwriting syndicates without the need for a prior approval.

The company shall obtain approval before submitting its offer from a leading reinsurer that meets the conditions stipulated in Article (18) of these regulations, in case of its participation in tenders to obtain insurance covers, and in case the insurance cover of the tender is one which the company does not have a reinsurance treaty that covers the surplus liabilities of its retention or the company can not cede to its reinsurance treaties because of its special conditions, provided that the company completes the cover of its liabilities before the effective date of the insurance coverage in case of winning the tender.

The Takaful Insurance Company, when ceding its business to a reinsurer, that practices both reinsurance and Takaful reinsurance, shall request that reinsurer to provide provision which has to be Islamic Sharia compliant in all parts of its funds to meet the payments that may be required to pay to the Company.

1. The management of the insurance company shall immediately inform its board of directors and the Authority if there is a probability of a problem in reinsurance arrangements which may affect its capability to meet its obligations with the necessary clarifications and procedures to remedy the situation. The Director General shall hold a meeting with the company management to discuss the matter and ways to find a suitable solution, especially in the following cases:

1. The Company's inability to complete the coverage of its reinsurance treaties before the date of renewal;
    
2. Having the information that indicates that one of the reinsurers is unable to meet its obligations;
    
3. The reinsurer's failure to pay what he owes to the company despite of submitting claims.
    
4. The discovery of a liability that the Company has taken exceeding its capacity of retention and has not been covered by reinsurance;
    
5. Exhaustion of reinsurance covers capacity due to excess of losses and amounts as stipulated in the reinsurance treaty;
    
6. The reinsurer's classification rating becomes lower than the acceptable minimum.

2. The Director General shall direct the Company to cease dealing with a particular reinsurer in case the Authority has a confirmed information concerning the reinsurer default financial position or its failure to pay its obligations, provided that the cease time from dealing with the company is determined by a deliberation with the company management.

3. The Director General may request that no renewal shall be made with any reinsurer who has lost the conditions stipulated in these regulations and that no new business shall be ceded to it.

1. The insurance company incorporated in the State and licensed by the Insurance Authority shall bind in the preparation of its annual financial statements and its final accounts to allocate an amount equals to 0.5% (five per thousand) of the total reinsurance premiums ceded by them in all classes in order to create a provision for the probability of failure of any of the reinsurers with whom the Company deals to pay what is due to the company or default in its financial position. These provisions shall be accumulated year after year and may not be disposed of without the written approval of the Director General.

2. The Director General may agree to cease these allocations when the accumulated amount reaches an acceptable limit.

1. The Company shall inform the Authority of the name of the responsible officer for the reinsurance business, its qualifications and practical experience. This officer should not be assigned to any other duties in the Company.

2. In the case the Company is practicing two types of insurance (property and liabilities on the one hand and the insurance of persons and funds accumulation on the other hand) then it is permissible to have a single reinsurance officer; provided that the records are separated.

3. The reinsurance department shall prepare quarterly reports on the results of reinsurance treaties, reinsurance covers and facultative reinsurance operations and the reports shall be submitted to the company’s Board of Directors.

The Company shall provide the Authority though Electronic Means or other means adopted by the Authority within 30 days from the commencement of each underwriting year with the information relating to the following ceded reinsurance businesses:-

1- The name of the leading reinsurer of the company’s reinsurance treaties or the name of the reinsurer who holds the largest share thereof.

2. A statement indicating that it has completed the coverage of its liabilities pursuant to the reinsurance policy adopted by the company and in the case of remaining uncovered shares, explaining the reasons for this and the actions taken by the company to complete coverage and protect its interests.

3. The Classification of reinsurers mentioned in paragraph (1) of this Article.