BAHRAIN Law and Practice Contributed by: Mohamed Shaban, Mohsin Al Alawi and Qassim Al Fardan, Hassan Radhi & Associates
tions, causation analysis or interpretation adopted by the insurer’s adjuster. Neither party’s private expert report is necessarily determinative. Once litigation begins, the dispute fre- quently becomes a combination of technical assess- ment and legal interpretation. The court must deter- mine the policy’s legal effect while evaluating the competing factual and technical conclusions. 4.5 Sanctions and Illegality Issues Insurance companies operating in Bahrain are regulat- ed by the Central Bank of Bahrain and are subject to financial crime, sanctions-screening, anti-money laun- dering and counter-terrorist financing requirements. The CBB’s Compliance Directorate disseminates rel- evant blacklists and supervises licensees’ compliance with financial crime requirements. An insurer may therefore be unable to make a pay- ment where payment to the claimant, beneficiary, intermediary or relevant financial institution is prohib- ited by an applicable sanctions measure. Depending on the circumstances, the insurer may need to sus- pend or block the transaction, conduct enhanced due diligence, report the matter or seek regulatory authori- sation. The existence of sanctions may affect the abil- ity to pay without necessarily determining, by itself, whether the underlying claim falls within the policy. Illegality exclusions must also be drafted carefully. Article 698 of the Civil Code treats as invalid a clause that generally excludes activities contrary to laws and regulations unless the excluded activity is specifically identified. Public policy may also prevent enforce- ment of an insurance obligation that would require an unlawful act or defeat a mandatory rule of Bahraini law. 4.6 Late Payment and Claims Handling Practices Claims handling and delay remain important regula- tory and litigation issues. Article 712 of the Civil Code requires the insurer, once the insured risk has materi- alised, to pay the amount due within 30 days from the date on which the entitled person submits the details and documents necessary to establish the right to payment. However, the article does not provide any
liability on the insured if the amount is not paid during the 30 days. The CBB Rulebook also requires insurers handling claims to respond promptly, explain how the claim will be processed, identify any action required from the customer and handle claims fairly. Under the CBB complaints procedure, a non-life insurer’s complaints team should acknowledge a complaint on the same day and provide a written response within one week; longer periods apply to life insurance complaints. Motor claims are subject to a particularly structured framework under the unified compulsory third-party and comprehensive policies. These rules, together with CBB complaint escalation, encourage insurers to adopt documented claims procedures rather than dealing with claims on an informal or inconsistent basis. 4.7 ESG and Climate-Related Coverage ESG and climate-related coverage disputes have not yet developed into a distinct or significant category of insurance litigation in Bahrain. Climate-related losses are generally dealt with under conventional property, engineering, marine, business interruption or liability policies rather than through a separate body of ESG- related policy wording or case law. The principal issues are therefore likely to remain whether the relevant physical event is insured, wheth- er an exclusion applies, whether the insured complied with risk-management requirements and how the loss is valued. Insurers may address heightened envi- ronmental exposure through underwriting surveys, deductibles, sublimits, geographical risk assessment, maintenance conditions and exclusions for gradual pollution or deterioration. ESG considerations may increasingly influence insur- ers’ investment, governance and underwriting pro- cesses, but there has not yet been a corresponding material increase in Bahraini coverage disputes alleg- ing ESG misrepresentation, greenwashing or breach of climate-related obligations. The position may change as sustainability disclosure and environmental compli- ance requirements become more detailed.
16 I NSURANCE L I T IGATI O N 2026
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